*with apologies to Roger Waters
On a number of real estate blogs, they talk about house hacking as a way to jump start your investment. In a nutshell, the idea is to buy something that is “habitable”, but still needs some work. Having done this for a while, I thought I’d share a few thoughts in case readers are considering this technique.
General advice
Everyone in the family doesn’t have to be a master carpenter, but they will have to be actively involved.
The first and most important part is that hacking has to be “all in” for everyone in the household. If your partner is hoping you’ll handle the construction and they can just go to work every day, this is not going to work. Likewise, a job site is not a safe environment if you have young children. Even the family pet needs a safe place to sleep. Everyone in the family doesn’t have to be a master carpenter, but make sure everyone not only supports the concept, but will be actively *involved* in the hacking process.
Have realistic timelines. I don’t recommend hacking if you’ve never done home renovation. It’s just too hard to figure out how long the various tasks will take to get done. This leads to fatigue when it’s hard to see a completion date on the horizon. If you haven’t already completed some significant renovation work from start to finish, you’re going to be guessing at durations for every subtask. In that case, I’d suggest that you start small- maybe just renovate one bathroom through to completion so you get a sense of your own abilities before you take on a full back-to-the-studs overhaul. (Note: if your guidance is a 30-minute fix-it program on HGTV, fair warning: It’s going to take a LOT longer than you think.)
Also, it may seem minor, but clean your job site every night. Particularly if you’re living on site, you need to be safe. This means putting up temporary railings, sweeping the floors, stacking materials out of the way, and generally make the place safe each night. Nothing is worse than a 2 am trip to the bathroom that evolves into an ER visit.
Pros
Undoubtedly, the biggest upside to hacking is that you have a place to live and can conserve some money. If you’re currently paying rent, that is “lost money”- you aren’t building equity in something you own. So, by moving out of a rental, every dollar you spend is on something that you’ll own, so it’s money back into your own pocket.
Another nice plus is that your time is more focused. If you’re living in the building you’re working on, it’s easy to squeeze in a task here or there. This is particularly true if you have a “day job”, and fixing up the building isn’t the sole focus of your life. When you come home from a shift at the fire house, or you find yourself with a couple of hours between conference calls, it can be convenient to knock one more thing off the to-do list. (This is good as long as it doesn’t distract you from making a living. If you start missing work meetings because you were neck deep in a plumbing task, that can be bad too.)
Related to the previous point, if you’re living in the building, it is a lot easier to schedule meetings with subcontractors. I’ve been working on buildings for a couple of decades now, and I can tackle most of the trades, but I still subcontract out some of the work. If you’re living in the building, you probably have some flexibility to have a roofer stop by on short notice to put together a bid.
You also get to know the building really well. If you buy it and don’t live there, you’re relying on the pre-purchase inspection report to tell you what to do next. Living in the building brings a whole different level of intimacy with the furnace, plumbing, and other major systems.
Security: Construction sites are often targeted by thieves, sad to say. Having a pile of copper pipe laying around makes an attractive target for those who might be inclined to steal. If you’re sitting there in the evenings, though, with a light on in the living room, it helps discourage this type of activity.
Cons
It isn’t all sunshine and roses. There are definitely some down-sides to living in the building while you fix it up.
Is it legal? Depending on how much work you’re doing, it may not be legal to stay in the house while you’re working on it. I’m currently evaluating a condemned building as a project, and it would definitely NOT be a hacking candidate. Your mortgage company and insurance may also have restrictions, so check the fine print and be completely transparent with these important business partners. (My insurance actually went *down* once I was living in the building, so that’s an upside.)
Disaster scenarios: Big construction can mean big risks. The roof is torn off and it starts to rain. The furnace quits (or never worked) and it is a record cold snap. Make sure you have a fall-back place to crash if it all goes sideways. Also, talk to those fallback folks in advance so you aren’t knocking on their door unexpectedly, only to find that they have in-laws visiting from out of town.
Fix-it fatigue: Even if the big things don’t fail, there’s a mental cost to living in a construction zone. You constantly have dust and debris everywhere. Cooking in a microwave for weeks on end really limits the menu. Showering at the gym/ work, etc.- it does get old, I promise. Even after a 13-hour day making great progress, you flop own on the dust-covered couch to watch some Netflix on your phone and you’re still looking at the bare insulation and exposed wires across the room. It takes a mental toll. If you’re doing a major hack (multi-month), I’d suggest making plans to get away for a weekend once a month, just for the change of scenery. Go visit family or friends. Remember what it’s like to turn on the shower and enjoy a plentiful supply of hot water followed by a truly clean towel. This also serves as motivation when you return to the site.
Security: Construction sites are often not secure. If you are replacing windows and doors, or you have open framing, it’s difficult to keep folks from wandering in and out. It’s bad enough if they make off with your new cordless circular saw while you ran to the grocery store, but even worse if they steal your laptop, iPad, and the gym bag with your clean clothes. If you’re going to hack, make sure you have a secure, weather tight place to put your valuables. Ideally this would be a Knaack box or some other large, immovable object. It should also be separate from where your contractors store things. Note that risks also apply even if the perimeter is secure. I’ve been lucky to have really great subcontractors. Even without bad intent, things can be mistakenly removed or even just misplaced.
Is it right for me?
So, you’ve weighed it up and you’re committed to the hack. Here’s my consolidated advice:
- Make sure everyone in the household is committed to be involved in the process on a regular basis. Hacking is an all-consuming undertaking. There are no spectators.
- Be transparent with your lender and insurance company. They’ll help ensure you have the right things in place to cover you through the hack.
- Have a bail-out plan in case of disaster (and talk to them in advance, so you have clear agreement that you can, in fact, crash there if needed).
- Secure everything from damage and theft.
- Clean up every night.
- Don’t let the hack interfere with your day job. Have realistic timelines.
- Get away once in a while to keep yourself fresh.
If you can do these things, you’re on your way to a successful hack.
Hacking can be a rewarding experience, so I am not trying to discourage it- just make sure you know the ups and downs, because it’s not all like “This Old House”. As I mentioned above, I’ve done this a few times already, so I’m open to any questions you might have. Post below, and I’ll be sure to get back to you!
Entropy Properties LLC 