Yo, what is up?!

It took me 18 months to find a lender for my first house hack because of my immigration status.

But I didn’t give up. I wanted to collect assets that pay for my bills.

My first house hack in 2014 had a total payment of $1,350 (man, I wish that was still around!). I rented each room for $550—making the gross rent to be $1,650.

Therefore, I could live for free AND use the extra $300 to pay for my car.

I love house hacking so much that I am coming out with an educational email course on how to House Hack in Austin, Texas.

I wanted to share 3 big mistakes new house hackers make that would apply to any market. And later, some important Fannie Mae news…

Mistake #1: Not knowing your finances before investing

Too many people don’t know how much they spend (and it’s usually too much).

You should know how much money is coming in and going out every month. The exact dollar amount and the monthly average.

Set aside a budget for your downpayment & closing costs, first month's mortgage, cash reserves, and renovations. Keeping all of your money in one checking account makes it unclear how much you have for your house hack and the rest of your expenses.

Know your limits.

If you were approved for a $600,000 home, it doesn’t mean you should purchase a home for that price if it’s going to stretch you financially.

You don’t want to buy a house but have no reserves in case you can’t rent the property or there is a big CapEx item.

Mistake #2: Aimlessly scrolling Zillow

There are over 2,000 single-family homes under $1M in Austin right now on Zillow. Good luck going through all of those to find a house hack.

Work with your agent to set your deal criteria.

Set certain price ranges you are able to buy, the best zip codes for your budget, and property type. Better to go even more specific to look for certain bedroom/bathroom counts and features like an ADU or a big yard.

Then your agent can send you these listings directly.

The narrowed criteria make it easier to find exactly what you want—by eliminating 99% of listings that don’t match.

This saves you from wasting time.

Instead of analyzing properties that you don’t know if you want, you can instantly disregard ones that don’t match your criteria. Then when you do find ones that match, it’s easier to figure out if it’s a good deal or not, and what price point you should offer.

When the right deal comes along, you’ll know when to pounce.

Mistake #3: Underestimating rehab cost

I recommend getting 3 different bids when doing a rehab project.

The common blunders here are either going with the lowest-cost provider or getting one estimate. Either blunder could cost you more money.

Multiple estimates will give you more options for rehabbing a property and give you a more accurate scope of what the project should cost.

Ask your local network for great contractors and handymen. If you can get 3 personal recommendations for service workers from other investors, it drastically increases your chances of a better rehab.

But always have some extra cash for a rehab because often they will go over budget.

Fannie Mae’s game-changing update

Starting November 18th, you can now secure a primary residence with just a 5% down payment on a 2-4 unit property.

This is a huge decrease from the previous 15% requirement for a duplex and a 25% downpayment for 3-4 unit properties (instead of an FHA loan).

This gives buyers an alternative to some of the obstacles with FHA financing. It opens up more options for you to house hack.

If you can find a house hack that cash flows when you move out, you are buying an asset that pays your liabilities, just like I did with my car!

Podcast for the week

Replacing your W2 Income With Real Estate Investing: Meet Lindsay Lovell! She is the founder of a short-term rental management company and syndication company. Lindsay went from being in debt, living paycheck to paycheck, and living an unfulfilling life, to immersing herself in her real estate investing business. In that transition, she went from 0-36 doors and is now earning passionate income! You won’t want to miss this one—she’s so relatable!

OK, that’s it for today. Hope you have an awesome weekend!

Best,

Diego

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