Financial Freedom Through House Hacking

OK, so let’s put our real estate investment hat on for a few moments. House Hacking. You might’ve heard this term thrown around while talking with your investor buddies or on a podcast. Or maybe you’re a investor and know exactly what this terms means. If you have no earthly idea what I am talking about, read on…. my hope is you can learn something here as I have had multiple clients employ this strategy with favorable results.

So the typical residential real estate investor will purchase a property and either lease it or flip it. Either way, the investor rarely lives in the home for any substantial period of time and usually not at all. Conversely, the typical real estate buyer plans to live in the house. These are your Bob & Nancy Smith’s of the world buying a home on the open market. The real difference here is occupancy. However, what if there was a hybrid option? Someone was to buy an investment and decide to make it their home. How does that work? If they live in the house, then how is it an investment?

Welcome to the Wonderful World of House Hacking. Usually, this investor lives in one part and either rents out bedrooms and/or other units (if it’s a multi-family…duplex, triplex, quadplex). What’s the advantage? Financial and leverage!

If you’re mortgage is $1200 but can rent the other two bedrooms for $500 a month, then your housing costs just dropped to $200 a month. Yes, you read that right. That is far cheaper than any housing expense you could get otherwise. Essentially, the tenants pay your debt and you can live virtually mortgage free if you set it up the right way and make the numbers work for you. I have several clients who have done this or looking for this scenario currently because it makes a ton of financial sense.

The drawback of course is you have to deal with tenants and someone else living with you, but with a little luck you can find terrific people who just need a bedroom. If it’s just one house, you would share common spaces so it’s important the setup is appropriate. But always remember you’re the owner, roommate AND landlord!

If this idea excites you, note there are cases where the owner MAKES money every month because the tenant’s rent covers the mortgage and then some. Put another way, the tenants pay you to live in your own house! Who with a mortgage hasn’t wondered about how their financial situation would change without a housing payment? For the creative and flexible people out there, financial freedom through real estate can be had which frees up your cash to go invest in the stock market, go on vacations, save for college, pay down other debts or …wait for it… buy MORE real estate!

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