In recent years, house hacking has become a popular way for people, especially younger people, to attain home ownership. The principle behind house hacking is that buy renting out a property you purchase, you create a scenario where your monthly payments are covered either in full or mostly by your tenants. If done right, people who hack their homes can end up living for free. These housing situations can be beneficial to home owner’s tenants as well. Mortgage payments are typically cheaper than rent and when divided by 3 or 4 people can lead to renters paying far below the average rent of even a 1 bedroom apartment in the area.
Nowadays, there seem to be hacks for almost anything. While the real estate market can be especially tough to navigate, there are hacks for that as well. Home ownership can be daunting and seem like a distant goal constantly out of reach. In recent years however, ‘house hacking’ has become a popular form of becoming a home owner without having to shell out half your income to cover expenses. In fact, if done right, people who hack their homes can end up living entirely for free. Particularly among young people, house hacking has become a great way for people to afford homes.
What is house hacking?
Simply put, house hacking is a way of cutting down your monthly living expenses to as close to 0 as possible while simultaneously building your home’s equity. House hacking is the process of investing in a real estate property in an optimal location or one that is expensive relative to other market prices. To rake in the biggest return on your investment, you rent part of the property out to minimize the total investment you put into it. Turning a $2.100 mortgage payment into three rent rates of $750 per tenant allows you to collect $2250 in rent, easily covering your mortgage and then some. This allows your own personal monthly investment on the property itself to be $0.
Home hacking makes it possible for those people who have financial constraints or young buyers to buy houses in prime locations or near their work stations, which could not be possible for them. Since the house will be in a prime location, you are likely going to fetch reasonable rent, which you can use to set other bills and paying the monthly mortgage of your property.
Why consider house hacking?
The idea behind house hacking is that you price your rent in a way such that your renters end up paying your mortgage for you. Let’s say you buy a house with 4 bedrooms in a nice location. Even if you live in one of the rooms, you may not need the other three. In that event, you can rent out the other bedrooms. If you’re mortgage is $1800 per month, you could charge each tenant $600 and that alone would cover your mortgage cost.
House hacking has a lot of benefits for both the short term and long-term. In the short term you will be having a house and immediately start to receive rents from the tenant, thus cutting down your monthly cost of operation build your equity in the process. In the long run, you end up owning a house in a prime location without having to personally invest much beyond the down payment. When you are ready to sell the property, your personal return will be much higher.
For many looking at houses for sale in places like Los Angeles or San Francisco, which tend to be on pricier end, house hacking may be a great option. However, like with everything, there are a number of things to take into account.
Be sure to have an excellent real estate team
Before embarking on house hacking, you must have a great real estate team at your back. When you are looking for a home intended for a house hack, you will be required to think like a real investor. Buying a house is a considerable investment that you need to be extra careful, we have something that you won’t be able to do by yourself, and you will need the help of a professional real estate team to take you through the process. Look for a real estate agent who is experienced in house hacking through to walk with you throughout the process. We have various ways you can use to find an excellent real estate agent, one of the ways is by asking your friends of the best team they might have worked with before, reading online reviews as well as going for one that is licensed and insured.
House hacking is a very serious transaction that requires someone who has done it before to guide you through.
Finding the Best Property
Finding the right house during the process is a very important adventure. It more about just ensuring the math works to your favor than just getting a perfect match. As much as you would like to be happy in your home, it is very important to make sure you buy a house in which you will be able to raise enough rent to cover up your major costs. Open your mind up and think like investors who want to make something out of it.
The Responsibility of a land lord
Before you proceed to acquire your house, you need to be aware of the responsibility of a landlord. With house hacking, you are definitely going to be a landlord us to the idea of getting someone to live in some part of your house so as to cover up the major costs. After you have purchased your home, you are going to be a landlord; you need to know everything that comes with being a landlord. Some of the landlord issues you need to be aware of include drawing up leases, finding a good tenant, and doing regular and timely house maintenance.
Invest in a property well suited to hack
Another important thing you need to be aware of when buying a house for hacking is to make sure the type of house you are going to buy can be easily hacked. This is a very important point to remember so that you don’t end up buying a house that you will not find a tenant. We have some things that you can look for if you want to know your property can be easily hacked. Look at the location of the house and the kind of facilities available like extra bathrooms, kitchen, dining room, feasible cost entrances, several rooms, and many more. Not all houses can be hacked; you can include a professional to help you out.
The risks of house hacking
Before going forward with the process of buying a property, be aware of the risk of losing a tenant. Will you have an alternative place to get the extra cash to settle your bills and house monthly house payment when your rental space is vacant.
Things to consider when choosing a house
- When choosing a property for house hacking, take into consideration the commercial areas of the property you’re purchasing. If you’re looking at houses for sale in Los Angeles, consider what neighborhood you buy in and what will give the home the most appeal.
- Run the numbers. Before you make any final decisions, make sure all your calculated costs are accurate so you know exactly what your monthly operating costs will be and what your rent prices will need to be.
- Look for a house that has a very large open area that you can convert into a living space or a bedroom. In some cases you may want to take advantage of renting out all the bedrooms, in which case you’ll need to convert something like the garage into a room for yourself.
- If you are limited financially and you are not in a position to buy a multi-story building, it is good to opt for a property that has a number of bedrooms with already attached bathrooms.
A multi-story building is optimal for hacking as it makes sure you are enjoying your personal space while at the same time getting your monthly rent without any inconveniences. However, single-family homes can still be great for hacking as well. This need not be limited to more commercial apartment type buildings. You can easily purchase a 4 bedroom residential home and rent it out.
These are things you have to be aware of before you make up your mind about house hacking. It is a good idea, especially if you don’t have enough cash at the moment. Do your research well and you will end up in your dream house very soon. Don’t make a mistake that will force you to sell your house.
When living in a big city and faced with expensive homes in Los Angeles or Phoenix or San Francisco, house hacking can be a quick way to make affording your dream home doable.