How To Buy Your First House Hack

In order to reap the benefits of house hacking, you’ve got to buy your first house hack.

If you’ve never purchased property before, this process can seem intimidating. This intimidation gets amplified if you attempt to stay up-to-date with real estate news.

Thankfully, the process of buying your first property for house hacking is a lot more simple than it may seem. If you’ve read my House Hacking Guide, you can see that I listed the process of buying your first house hack into several different steps.

So, in this post, I’m going to talk more in detail about how to buy your first house hack.

Get Pre-Approved For A Home Loan

One of the first steps you should do when you’re interested in purchasing a property for house hacking is to get pre-approved for a home loan by a mortgage lender.

Depending on your local market, it’s possible that real estate agents won’t even take you to look at any properties until you can provide a pre-approval letter. Providing that pre-approval letter signifies that you’re serious and not trying to waste their time.

Getting pre-approved for a home loan is a simple process:

1. Find a mortgage lender
2. Contact them
3. Provide them the information they need to pre-approve you

That’s it. And overall, it’s a relatively quick process that hasn’t taken any longer than 1-2 days anytime I’ve gotten a loan pre-approval.

If you haven’t checked out my post on what loan to use for house hacking, I’d recommend you take a look. It provides more information on the different loans you can use for house hacking.

Find A Potential House Hacking Property

For me, looking for a property that could work with house hacking was one of the most enjoyable parts of the process. By looking at many different properties, I was able to learn more about what I wanted and wanted to avoid.

Even though searching for property can be exhausting, especially if your local market is competitive or doesn’t have many potential house hacking properties for sale – take your time (but don’t waste your time).

There are multiple different ways to search for a potential house hacking property:

• Your real estate agent
• Online property listing marketplaces (Redfin, Zillow, etc.)
• Off-market properties
• Properties at auctions

When trying to house hack as a beginner, I would recommend utilizing your real estate agent and the online property listing marketplaces. While you can try to secure off-market properties or go to auctions – it can add unneeded complexity to the entire process.

I’m a big fan of keeping things simple – so I primarily used Redfin. Once I found a property I liked, I sent it to my real estate agent and the rest was history.

Schedule A Showing

Once you find a potential house hacking property that you like, the next step is to have your real estate agent schedule a showing so that you can look at the property in person.

While touring the property, here are a few things to keep in mind:

• How the living situation would be when house hacking
• If the size and layout are acceptable for my current family situation
• If the neighborhood looks like a comfortable place to live
• How the parking situation would be when house hacking
• If the utilities (water, electric, and heat) are shared or metered separately

Showings are relatively quick in my area (30 minutes – 1 hour) but a showing could be even quicker in more competitive real estate markets. And during this short property showing – you’re going to want to constantly think if this is the property for you.

In less competitive real estate markets, you might be able to think about it for a few days (or more). But nowadays, it’s more likely that you will have to make one of the most significant financial decisions of your life on the spot.

Submit An Offer

After you’ve made up your mind about the property you want, the next step is to submit an offer.

Most of this process should be relatively easy on you since your real estate agent will do most of the work. However, it’s important that you talk with your real estate agent and get their advice on what type of offer to submit.

For example, some offers contain some or all of the following:

• Escalation clauses – basically, you’ll match/beat anybody else’s offer up to a certain amount
• Due diligence waivers – this area covers you waiving certain contingencies that would allow you to back out of the deal like bad inspections or not being able to secure financing
• Earnest money – money you give upfront to show your level of seriousness

The list above is not all-encompassing. Your offer is basically a contract that can include many different things.

So, if at any time you feel uncomfortable about what’s in the contract you’re submitting – I’d recommend hiring a real estate attorney to review the contract your real estate agent put together.

However, keep in mind that this may not be possible if you’re in a real estate market that requires you to move quickly.

Your attempt to “cross your T and dot your I” may lead to you losing the property to someone else who’s moving quicker than you.

Do Your Due Diligence

This section is going to assume you had an offer accepted.

Congrats! Now, it’s time to really get to work.

During the due diligence phase, your job is to make sure this potential house hack doesn’t have any major issues or anything that would cause you to reconsider purchasing the property. If you were to find something during the inspections that would cause you to reconsider your purchase, you may have the option of backing out of the deal without losing any earnest money OR you can use the new information you found in the inspection report to ask for credits/reduction in the property’s price.

Here are a few areas I highly recommend getting inspected as a beginner buying their first house hack:

• Sewer system (especially the underground line leading to the city or septic)
• HVAC system
• Plumbing system
• Electrical panel and system
• Foundation (Especially if you have a basement. You want to avoid a wet basement if possible)
• Roof

Most people will first use a general home inspector. These home inspectors have knowledge about most aspects of a home but, since they don’t specialize in one area, they can spot potential problems and will usually recommend you consult with a specialist for whatever potential problem they find.

This is a good approach for a beginner.

Just make sure you fully understand that these inspections are not guaranteed to find all problems. You’re very likely, with any property you purchase, to spot problems and issues that general home inspectors missed.

Thankfully, the goal isn’t to find every problem a potential property has. The goal is to find every major problem and use those issues to negotiate the price or back out of the deal.

Finalize Your Home Loan Application

After doing your due diligence, if everything looks fine – your next step is to finalize your home loan application.

To be honest, it’s not uncommon to work on finalizing your home loan application during your due diligence phase. The bank will need more detailed documents and information from you (such as tax documents, bank statements, etc..). This document can be delivered to them regardless if you have a property in mind or not. So, I’d recommend sending their requested information as soon as you can – even if you’re doing property showings or due diligence.

However, there are some parts of the home loan application that can’t be finalized until you have a specific property in mind. This is what you are guaranteed to have to finalize after moving forward with the property.

This process is usually a simple exchange of back and forth. The bank will ask for documents or clarification on things and your job is to send the documents and provide the clarification.

It’s that simple.

Close On The Home

Once your home loan is approved and finalized, the last step of the process is to “close” on the home. This basically means you will sign all of the paperwork and wire transfer the necessary amount of funds to the title company (they’ll give you exact instructions to follow).

The title company will handle transferring the deed of the property into your name and paying the seller.

For me, this process usually takes less than an hour.

Once you’re done with closing, your real estate agent will get notified once everything is completed by the title company (usually on the same day). From that point forward, you are now the owner of your first house hacking property.

Take Possession

While not officially a step for buying your first house hack, it’s still very important.

Your real estate agent will, after being notified, take you to the property to get the keys.

That’s it. Enjoy this victory.

Then, when you’re ready, start the process of house hacking by doing any renovations/updates needed, making sure all of your “ducks are in a row” so that you’re legally house hacking, and start finding good tenants.