How to Buy Your First House and Make it an Investment
Many people think to be a real estate investor you need hundreds of houses or hotels that are accumulating wealth while you’re off living in a big mansion. But that’s so far from the case! This common misconception is keeping people from actually taking the first steps to real estate investing. In fact, if you’re already a homeowner, your investor journey has already started!
That’s right - your first home can be an investment property even if it’s your primary residence. It just takes a mindset shift to see how your home can help you MAKE money, all while avoiding wasting income on rent. So how do you do it?
We’ll bust some common real estate myths and show you how to buy your first home with an investor mindset in our free video series.
Now back to the article…
Step 1: Mindset work
Take a moment a think about what scares you most about buying a home. Whether it’s finances, responsibility, time, etc, it’s important to figure out what’s holding you back. It’s totally normal to have fears and worries before buying your first home. Heck, it’s a BIG purchase and a BIG change! But a lot of our fears hold us back and allow us to remain comfortable. And there’s nothing wrong with being comfortable, but when it’s fueled by fear, it often limits our outlook. What if I told you that owning a home can help you live your dream life? That probably sounds a little crazy, but buying my first home gave me the ability to do just that!
By taking the time to figure out your mindset going into buying, you can really determine what your personal hurdles are and how you can get past them. Take a minute to write down any family history you have with real estate and think about the following:
Growing up, did your family buy a house? Multiple houses?
Did your family rent all or part of the time?
Did they complain about the mortgage and costly repairs?
Did your parents live in one house for 30 years?
Imagine having the tools you need to not have the same problems that your family did. Would you still have the same fears or limiting beliefs as you do now?
Once you can figure out what you’ve been trying to protect yourself from, you can think more critically! Your home buying journey doesn’t have to look like your parents - and it often shouldn’t! Times are different, and so is real estate.
Step 2: Pick your house hacking strategy
Let’s talk about house hacking - one of our favorite topics at Open House. If you’re new here, house hacking is supplementing part or all of your mortgage payment with monthly income from tenants or roommates. There are numerous ways to house hack, and we’ll give you a few examples.
Rent spare bedrooms: In this option, you can choose to fill your spare bedrooms with short- or long-term roommates. A long-term rental can be on a month to month basis or for one year. In both options, you would have your tenant/roommate sign a lease agreement. This person would pay you a set amount of money each month that you’ve agreed upon. A short-term rental through a hosting site such as Airbnb allows you to rent out your space for a few days up to a month and sometimes longer (you can determine minimum and maximum days in your booking settings). Long-term rentals provide a steady stream of income with someone in your space for an extended period of time, while short-term rentals mean people come and go, thus more time alone, but maybe less of a guaranteed income stream. Depending on the area you live in, one option also may be preferable to another. For example, if you live in an area that attracts a lot of tourists, you may be able to make more money through short-term rentals than you would renting to a long-term tenant. It really depends on your specific situation!
Sneaky-Duplex: You likely haven’t heard this term because we came up with it! It’s one of our favorite ways to house hack. A sneaky duplex is basically adding an additional unit to your single family home. You can do this by converting a wing of your house, or even your garage, into a livable space. In any scenario, you will definitely need a bathroom added or available. For short term rentals, like Airbnb, you often don’t need a kitchen (maybe just a mini fridge). Many people convert their garages into studios with a bathroom, and end up renting it on Airbnb to make additional income. If you find a home on your house hunt that could easily be converted into a sneaky duplex, consider yourself lucky!
Accessory Dwelling Unit (ADU) aka Tiny Home: An ADU is a smaller, independent residential dwelling unit located on the same lot as a detached single-family home. This is also known as a tiny home. You can choose to rent these out as full or short term rentals, but regardless, you don’t have to share your physical home with other people. This is a great option if you have enough land and some extra money build or buy a tiny home. Many of our clients have turned sheds into tiny homes or used other existing structures to cut down on costs! There are so many ways to get creative.
Step 3: Find a house you can add value to now or eventually
Time to find the house! But first, find a competent realtor you can trust. This is super important! A great realtor does much more than show you homes - they should be your biggest source of information and your biggest advocate along the way! Need help finding an agent in your area? We’ve got you!
They’ll also be able to help you find a home that can gain a lot of value over time, whether that’s due to an up-and-coming location or through updates/renovations you can do later. When looking for a home, it’s important to think strategically about the future. Will the location attract renters if you plan to house hack? Are the homes in the area continuing to appreciate each year? Does the home need extensive repairs or can you take on small updates over time?
Now, if you have enough money saved to buy a house and also money left over to fix it up a bit, we highly recommend buying a fixer upper home. Yes, even as a first time buyer! These types of home are generally more affordable upfront and appreciate value more quickly as you renovate. We’ve helped many of our buyers get through their first reno project in our Homeschool course. If you’re unsure how much money you should have to get started, we can help you there as well!
Step 4: Get organized. Systems with homeownership, house-hacking, contractors.
The difference between a good real estate investor and a mediocre one is systems. Trust us - if you are organized you will be way ahead of the game.
Spreadsheets are basically an investors best friend. When you buy your house, have a spreadsheet that has utilities, mortgage amount, budget, contractors you’ve worked with. Keep everything organized so you can relate back to that information for future investments.
When you’re house hacking, make sure you have systems that will save you time and energy. For example, if you are using Airbnb to rent a room in your house, make sure you have auto messages set up for guests. Set expectations with them ahead of time, and consider hiring a cleaner if you have a full time job. You can also find companies that will manage your rental for you, including guest communication, cleaning, and stocking the space with necessities like soap, toilet paper, etc. While using a service like this helps take some of the stress off of you, it’s another cost to budget for and may not be worth it if you’re only renting the space a couple of times a month.
Step 5: Repeat!
Did you know that you can buy another house to live in with low money down within a year of buying your first house? So, that means you could continue to buy another house every year or 2 if you’d like to continue your real estate investor career in this way. You can also use your first home as leverage and take out a line of credit or do a cash out refi to get funds for the next purchase. So many different ways to get creative with real estate and we will walk you through the entire process.
I’d say about half of our first time buyers only want to buy 1-2 homes at first. Maybe they want a home to live in and a vacation home. Whatever your strategy is, we support you and can guide you through.
Want to learn even more about buying your first home and making it an investment? Enroll in our Nationwide first-time home buyer course, Homeschool!
In this powerfully practical 6-week LIVE course, you'll join a group of first time home buyers just like you on a journey to kick your landlord to the curb and finally have a place of your own to call home.
This is the only online course that teaches you exactly how to successfully purchase your first home and make it an asset. We simplify the information so you feel educated and empowered but not overwhelmed!
With comprehensive tutorials, live coaching, and a supportive community you’ll feel more ready than you ever imagined to buy your first home AND learn exactly how to make that home an investment.
Sign up for our investor track to learn even more about how to become a money making investor! It comes with 12 additional investor videos with insider info to start building your cash-flowing real estate portfolio ASAP!
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See you in class.