No, this is not about marrying rich! This is a real solution to make living expenses more manageable, or even make money. And while this is not about getting a sweet sugar mama or daddy to pay your rent, it is having someone else pay for it.
What I’m talking about is commonly referred to as House Hacking. House hacking is when you buy a property with the intention of renting out units or rooms to people to pay for the property. The HGTV show Income Property often makes a reference to this when people are making a rental unit in their basements and such.
If you are in need of more immediate housing solutions, I would like to point you to https://portal.hud.gov/hudportal/HUD?src=/topics/rental_assistance
I have been house hacking for the last six years. What we do is purchase a home, we have a family, so we aim for multi-unit homes. We keep the property prices low as we don’t have a huge income and have lots of skills by buying fixer uppers, usually living in the unit we are fixing up. Right now we are living in a duplex, in the larger of the two units: a three bedroom two bathroom. The other unit is a two bedroom 1.5 which is completely separate is paying the entire mortgage. Pretty sweet right?
Related: How I never have to pay another penny for my retirement at age 34 on a 30,000 per year salary!
It gets better, once everything is fixed up we find a new property and do it all again, renting out the other property fully.
Examples of house Hacking situations:
– Buy a 3 unit property, live in 1 and rent the other two out.
– Get a large single family home with four bedrooms, you live in one bedroom and rent the others out.
– Purchase a house with a guest house or basement that will function as a rental to help cut costs on your large residence.
House Hacking allows for low-income investors to squeak into the investment property world. This is because the rental property will qualify for owner occupied loans with down payments of 3.5%-5% as long as it is four units or under.
Related: How to Buy a Property With No or Low Money Down!
It can lower your expenses, allowing you to save more money to invest in yourself. I do love it when other people pay my mortgage!
You are close to your tenants, so they tend to behave better, it is also convenient being your property manager allowing for more profits.
If you buy a fixer, you can live in a unit that needs to be fixed up and slowly do the renovations. No driving to the site. No lapse in rent during a renovation. Improve slowly, or by the room, as you have the money to do it, the only one who has to suffer a construction zone is you.
You will be living next to your tenants. For some, this can be awkward.
You may be giving up the privacy that having a whole lot between you and your adjoining neighbor provides.
Have you ever lived in a construction zone? While amazingly rewarding, there is nothing like building something to make you feel accomplished. It is stressful. There is always something to do. In fact, that half done project might be right in front of you while you are trying to get some relaxation in. It also always tends to take longer than you expect!
Advice for first-time house hackers:
If you are going to get a fixer upper, and do the work yourself, try not to be too ambitious, stick to surface problems and properties that do not need to be gutted.
Get rid of your mortgage insurance by forcing appreciation with improvements. You can do this once you feel you have 20% equity. You can either refinance or try to get a reevaluation from your current lender, and they will likely want an appraisal.
Just because you are living in the home does not mean the numbers do not matter! Plan for possibly turning it into an investment property in its entirety. You still want a cash flowing property. When evaluating net income just use a fair market rent for the unit you will be living in.
Do you Have any experiences house hacking? Would you recommend it? Planning on trying it?