You may have heard the term “house hacking” thrown around a lot lately. It sounds like a trendy new real estate hack, but it’s actually a tried-and-true way to buy a home, generate income, and build wealth in real estate
So, what exactly is house hacking? It’s a real estate investing strategy that involves buying a multi-unit property, living in one of the units as your primary residence, then renting the rest out. The occupants of the other unit(s) contribute to your mortgage and living expenses through the rent they pay you. You can even house-hack a single-family home by renting out a bedroom, basement or outbuilding.
We all know that buying a house is expensive, but offsetting those expenses by bringing in rental income that covers some or all of your mortgage just makes sense. Check out this example:
Duplex purchase price: $300,000
Down payment (3%): $9,000
Mortgage payment: $1,667/month
Rental income: $1,100/month
Cost to own the duplex: $467/month
Simple, right? Here are a few ways that house hacking is a great way to invest in real estate, secure a steady stream of income, and build your rental portfolio.
Better mortgage rates
When you house hack, you qualify for owner-occupancy financing which has lower rates and better financing terms. And you get to keep your owner-occupied loan even if you move out (after a minimum of one year) and convert your home into a long-term rental.
Lower down payments
Unlike investment property loans which usually require 20-25% down, you can get an owner-occupied loan for as little as 3% down or a VA loan for as little as 0% down.
When you house hack, you get a crash course in being a landlord and managing real estate. If you plan on using house hacking as a gateway to expand your property portfolio, it helps to be onsite as you learn in the ins and outs of property management including maintenance challenges and tenant relationships.
When you start out house hacking, even as a first-time homebuyer, you’re in a better position with financers when you’re ready to move on to your next property investment. Lenders are more likely to offer you good financing and larger loans if you’ve proven you can successfully own and manage another property.
House hacking is a great way to get your foot in the door as you secure a safe and reliable financial future with real estate investing. At IDEAL, we are experts in choosing the right property for the right price, financing, leveraging equity to buy more properties, tax benefits from property depreciation, and everything else there is to know about real estate investing. Contact us today!