House Hacking: A Simple Method to Save and Earn Money
TL;DR - House hacking is an investment method where you use tenants to pay off the mortgage of your primary residence. You just have to start thinking of your home as an investment. With it, you can collect rent and pull out equity capital to finance more investment properties.
When you think of real estate investing…
What comes to mind?
Sitting by the beach while you collect rental income from a property that’s thousands of miles away?
All of the extra time you’ll get to spend with your partner, children, and family?
How about quitting that job you hate so much so you can finally be happy and stress-free?
All of these things can be yours. But you don’t have to take the long route if you don’t want to.
By that I mean…
You don’t have to do it alone. Or rather…
Pay for it alone.
There’s an investing method called house hacking and it’s about to be your new favorite thing.
House Hacking: A Simple Method to Save and Earn Money
What Is House Hacking?
Before owning your own real estate property, chances are that you’ve rented at least one apartment in your lifetime.
On top of that, you’ve probably had roommates that you split the bill with.
This made things financially easier on both you and the people you lived with.
Now imagine taking the concept of roommates and rent, then applying that to a property that you own.
You’d have people living in a place that you’re paying a mortgage for.
They’re paying you rent to stay in your home, which helps you pay back your loan.
And more often than not, the rent you get from your roommates pays for the majority of your mortgage payment.
Heck, sometimes it even covers the whole thing or — better yet — leaves you with a profit.
Imagine getting paid to live in your own home!
That’s the power of house hacking.
And it’s the key to not only building wealth, but doing it smartly and quickly.
Your Home Is an Investment
A big mistake you can make as an investor is not seeing the potential of your primary residence.
Many people buy a home for themselves and their family, then never benefit from the advantages of owning a home.
Ability to Rent
This is an overlooked aspect of owning a home.
You might think that you can only rent out a property if it’s a rental.
However, if you’re living in a primary residence, you can collect rent from people that are living in that home with you.
There are different methods you can choose to make this a reality.
The first is buying a single-family home, living in the master bedroom, and renting out the other rooms (or “units”) that you aren’t using.
This allows you to use all the space in your home that you require and then turn your extra rooms into income.
Another method is through a multi-family property.
If the single-family space seems too compact for your liking, you might favor this instead.
A multi-family property often comes with split floors or entirely separates areas and units.
House hacking such a property gives you solitude, while still allowing you to benefit from the extra rental income you’ll be bringing in.
The best part about both methods?
You don’t have to have permanent roommates.
If you prefer part-time renters, you can go with Airbnb.
This would allow you to book people to stay at your property when it's convenient for you.
Getting tired of other people? Stop renting for a while.
Already paid your monthly mortgage payment through your rental income? You don’t have to take any more tenants for the month.
There are so many options at your disposal when you own a home. Make sure you use them!
Lower Down Payment
One of the best parts about house hacking is that you get favorable mortgage loans!
With regular rental properties, you have to put 20-25% down. This can be a huge burden — or even disinterest you entirely.
But since you’re buying a home for yourself, you don’t need nearly that amount. 0-5% will suffice.
That lower down payment helps you get into the real estate game quicker than if you wanted to buy a rental property straight away. You simply need less money.
And since you’re using less of your own money to secure your home, you have more leverage. Leverage that’s multiplied when you get your roommates to pay down your mortgage loan for you!
Equity Into Captial
Other people paying you to live in your own home. It seems like it couldn’t get much better.
But wait… there’s more!
As your roommates continue to pay down your loan, you’ll build up equity in your home.
This equity signifies your ownership of your property…
It also gives you another tool to build your wealth.
Once you have enough equity, you can use it to access capital. Capital you can then use to purchase more real estate rentals.
There are a few different methods to access this capital, 4 of which we cover in a past article.
Go check that out after you finish this article.
House hacking paired with equity pulling could allow you to snowball your wealth really fast.
No Limits Investing
Before reading this, you might have been limiting yourself in terms of investment potential.
But the world really is your oyster when it comes to real estate investing.
You don’t have to buy a rental property to start collecting rental income. Just house hack instead.
Money’s waiting for you — all you have to do is rent out extra units in your primary residence.
You’ll benefit from a low down payment, get your roommates to pay off your mortgage for you, and then you can use your equity to buy more properties.
Happy hunting!
How We Can Help You
Does investing in real estate sound intriguing to you? Would you like to learn more? We’d love to be of value!
At Undoor, we pride ourselves on teaching new and experienced investors how to maximize their gains with minimal stress. Our goal is to help you fall in love with real estate and real estate investing. What we’re most passionate about is maximizing investment gains for people like you.
Do you want to get key insights and advice that’ll help you get ahead of the game? Don’t hesitate to contact us for any and all real estate wants or needs.
