Sunday afternoon, and I’m sitting on the floor in the middle of an empty apartment. A glass of wine in my hand.
A thirty-five-year-old manager at one of the largest IT companies in my city. The only things in my living room are a stack of a dozen boxes, an air mattress and two suitcases.
I lived the consumerism high life. Downtown condo loft, brand new leased convertible sports car. Eating at fancy restaurants, boozing at swanky nightclubs, and shopping at trendy boutiques. Weekends were spent driving to quaint towns and acquiring local treasures – mostly wine. Vacations featured top destinations at luxury hotels, pampering spa treatments and expensive, exotic food and drink.
I lived the upper class dream I worked so hard for.
But I wasn’t happy. Working twelve-hour days, I was just medicating my tired and stressed-out life with heavy food, booze, and travel. And finally, when I lost my dad to cancer, it suddenly hit me.
I was unhappy, and life is too short to waste it on unhappy. Time is our most precious resource, and I was wasting mine.
So I left my loft apartment and my boyfriend, selling him my half of the condo just to get out of the deal. Since we bought all new furniture together, I had almost nothing of my own. Just the books, keepsakes, and clothes that I could fit into a dozen boxes and two suitcases.
And I was happy.
Happier, at least. I sipped the wine while sitting on the carpet in my brand new apartment. Picked up my laptop, scrolling and assessing my accounts. This wasn’t an exercise I was used to. Since I had a steady, high paying job, I was used to glancing at my bank account and credit card statement monthly. Wondering where my money went and always having just enough to get by for the next month.
Now I needed to take back control. Needed to understand how the hell this happened. As a young professional I made $45,000 a year and purchased a house with plenty of money left over for groceries and home improvement projects. I lived in one of the most expensive cities in the world and saving $10,0000 in two years. Then making $90,000 a year, I barely had enough to pay off my living expenses and credit card bill every month. I was a data analyst for fuck’s sake. I spent so much time analyzing everyone else’s data, I forgot to keep an eye on my own.
A half bottle of wine’s worth of data analysis in, and the answer was simple.
Lifestyle creep.
I didn’t know that term at the time, but that sure as hell is what I was looking at. After a couple of hours painstakingly categorizing my expenses, I was staring at unrecognizable expenses.
Over $800 a month on groceries for two. Over $800 a month on restaurants and bars out. My half of mortgage and bills were about $2,000 a month at the fancy condo. And my Amazon habit hit my credit card for a few hundred every month.
I made a ridiculously good salary, and was wise enough to max out my 401(k) contributions. Unfortunately, not wise enough to realize that my monthly living expenses were equal to what I brought home every month.
No wonder I felt broke. Like I could never get ahead.
Moving into this modest one bedroom apartment was already saving me about $700 a month. I knew I could do better. So over the next couple of months, I made some small changes that added up.
That cute sports car I was leasing was the worst money I ever spent. I’m not really much of a car person, but it was a splurge purchase after two years without a car. A nod to my life abroad (mini coop). As luck would have it, my lease was about to expire, so I researched small cars. One that popped up a few times as generally reliable, fuel efficient and cheap maintenance-wise was a Mazda 2.
Over the course of a few weeks, I searched for and found a Mazda 2 right in the sweet spot. A silver 2012 Mazda 2 with about 60,000 miles on it for $5,000. Plenty of life left, in good condition, solid frame, and she was a pleasure to drive. I used some of the loft condo money to pay for my new car.
Another $450 a month in savings. Combined with my “rent and utilities” savings, I had already saved just over a grand a month. I immediately set up a monthly auto withdrawal to move that money into a savings account.
I also changed where I shopped. Instead of the fancy grocery store I used to frequent when I came back from the UK, I drove another five minutes to a standard grocery store. Meal planning helped me shop smart, and eat out less.
Drinks out became almost nonexistent. I needed some downtime, and instead settled on wine and the occasional mixed drink at home. Combine these small changes with now shopping for one, and my savings went up another $800. I was still eating many prepared and packaged foods, savoring fancy meals at home, and enjoying nice wine. But this $800 monthly savings was another easy win… one that went right into that monthly auto withdrawal into savings.
Three months and I had brought my spending way down, now saving over a third of my paycheck every month.
Work was still tough, but with this newfound financial control, I was inspired.
I still had money left over from the “sale” of the condo, and my savings was growing every month thanks to a more modest lifestyle. I thought about buying another condo. Or maybe another home.
I really wasn’t sure what I wanted to do with the money, but knew I wanted to make a wise investment.
The guy I started dating pointed me to a real estate investment group. Since I was comfortable with real estate and had been pretty lucky with those investments in the past, I attended a free weekend seminar. I had actually been to other real estate investment classes and groups. They all pushed ridiculously expensive memberships, and used high pressured sales tactics. This one did not. Over two days I learned about real estate investment. I paid for a cheap annual membership that opened up more classes and local meetings for me. I networked. And I decided on my next move.
House hacking.
I was going to buy a small owner-occupied multifamily property.
House hacking would be the next step towards taking control of my finances and life.
I’d go for a nice property between two to four units that had a vacant unit I could live in. I would look for something where the rents of the other units would cover most or all of the mortgage. And cut my living expenses dramatically.
Juggling a real estate project like this and a demanding job was difficult. Many days after work I’d drive around my city, scoping out listings, asking my agent about the good ones. Driving quickly away from the bad ones. I analyzed local rents for promising properties to understand if they were below market. If so, I had an opportunity to improve the property income over time.
I started learning more about being a good landlord. How to build out a lease, what rights I had as a landlord, what rights my tenants had. And how to keep everyone happy. I had quite a bit to learn to make this house hacking experiment successful.
The property search was a three-month-long journey. Some properties were gorgeous, well kept, with great finishes and in the perfect locations… but the math didn’t work out. Others had amazing returns on investment… but were in bad areas or needed more upgrades than I could afford.
My triplex ticked all the boxes for a successful house hacking experiment.
It was in a nice, mature neighborhood with mostly single family homes, right across from a middle school. The property needed a few updates, but overall in decent shape. Each unit was townhouse style. The kitchen, dining, living, half bath and laundry room were downstairs, and two bedrooms and one bathroom upstairs. “My” unit was in the worst shape, so I seized the opportunity to renovate. And the rents were under market value, so there was room to increase property income. I would be comfortable house hacking in this property, for sure.
And since it was an owner-occupied property, I qualified for a great mortgage deal. Something I learned from my real estate investing network was the type of loans you get for various properties. Single family, multifamily under five units, multifamily with five or more units, and owner-occupied multifamily under five units… each qualifies for a different type of loan.
The small multifamily that I was about to occupy qualified for a 3.5% down payment. This made a property I could not traditionally afford within my price range.
My savings was enough to purchase this reasonably priced triplex, do some modest renovations to my unit, and save away a few thousand dollars for emergency property costs.
And just like that, I was a house hacking landlord.