“House Hacking” has been a trending topic within the real estate social media world – making its way to, debatably, be the number one suggestion from social media real estate “gurus” for first time home buyers to be able to capitalize on their equity and potentially make significant passive income. Few aspects of the house hacking technique have become very popular, while others overlooked – Let’s take a more comprehensive look into house hacking!
What is House Hacking?
Any means by which you generate income or equity through your residence can be considered house hacking. If correctly implemented, house hacking can cover the residence’s mortgage and even leave profit for the property owner to profit.
The most common form of House Hacking refers to buying a multi-unit property and then using the rent from the other properties to cover the mortgage. Throughout social media, influencers and others with large followings have suggested first-time home buyers utilize an FHA Loan to put down a lower down-payment, but still be able to purchase up to four units and redeem all the benefits of FHA backed mortgages.
Why House Hack?
When getting started with house hacking, we suggest that your goal not be passive income, but passive equity. Still, passive income is a great benefit, but much harder to come by with house hacking. House Hacking can provide more than just equity and income, but also opportunity. House Hacking is one of the easiest ways to gain experience as a landlord and real estate investing, giving much reason to why it is suggested as one of the top ways to get introduced to the real estate industry.
House Hacking Strategy
Homeowners Associations and local zoning laws can be obstacles when looking to House Hack. Market research and demand then become a very important aspect in planning and deciding on what type of House Hack you are looking to do.
Another thing to think about is your lifestyle. Get creative! Take your skills and/or unused space and give it purpose. This can be through an owner-occupied fix-up property (often financed through a FHA 203k Loan) or through an unused garage or guest house on your property.
The avenues seem to be limitless. The decision you make after you decide that house hacking is something you want to do, should be based on what you’re comfortable with and your access to the things needed to do so.
House Hacking Ideas
Get Roommates – Something that is simple and often isn’t thought of as House Hacking. Getting roommates that pay rent and then using that rent and applying it toward the mortgage is a great way to House Hack if you have the extra bedrooms and space.
Rent Space or Amenities on Your Property – If you have an extra garage space, shed, in-law (ADU) apartment, or even open acreage, then you have an opportunity to make income through renting it out!
Do your own Live-In-Flip – As mentioned, if you are handy and have the skills to do your own upgrades and repairs, purchasing a residence that you can rehab yourself is a great way to House Hack. Depending on how long you plan to stay in the finished residence, the property will appreciate, you will have equity in it, and the additional value will be greatly increased after the rehab.
Purchase a Multifamily Unit – This is one of the most common ways of House Hacking and the method that has become very popularized. Purchasing a multifamily property and living in one of the units while renting out the others is one way to repurpose the rental income for the purposes of your mortgage, your equity, and hopefully, your additional income.
Tips on How to Get Started
Often, you’ll see much of the same tips from us when discussing investment properties and opportunities: research, plan, and be reasonable. Having the best possible knowledge of the area you want to House Hack in will allow you to make the most appropriate plan, but make sure that plan is reasonable. Keep in mind time and costs, the two biggest things that many under-estimate.
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