By Damon Cameron Jr
Do you want to live for free? House hacking is one of the most popular real estate investing strategies among recent high school graduates and college students. House hacking is when you live in one unit of your investment property as your primary residence and rent out the other bedrooms or units to tenants. Then, your roommates or tenants are paying your mortgage for you!
House hacking is by far the best housing strategy for young people pursuing early FI. This real estate strategy will allow you to own an investment property at a very young age because of its many benefits; the most significant of which is the low down payment required.
The Strategy in a Nutshell
You start with buying a property; let’s say it’s a five-bedroom house. You live in the property and take one of the bedrooms, which leaves four empty bedrooms. You can rent those bedrooms to friends, classmates, or coworkers. No matter who you rent to, you thoroughly screen them. You check their credit history to see if they pay their bills on time. You do a background check and get references from former landlords. For the best living situation, you only choose tenants who will be fantastic housemates.
The rent you collect from your tenants is used to pay your mortgage and expenses. You get to live for free! You have to manage the property (which isn’t too tricky when you’re living there), but the benefits far outweigh those additional responsibilities. I highly recommend this book if you want to learn more about house hacking: The House Hacking Strategy by Craig Curelop.
Freak Speak: House hacking = A strategy where you live in one of the units or rooms of your property and rent out the rest, using your tenants’ rents to pay your mortgage and expenses.
There are two main ways you can house hack your first rental property.
Rent by the Bedroom
Rent by the bedroom is when you purchase a single-family home as your primary residence, live in one of the bedrooms, and rent out the other bedrooms. Typically, this works best with houses that have between three and six bedrooms total. The rent from the other bedrooms can pay for your mortgage and expenses, including insurance, property taxes, and maintenance.
Rent the Other Units
Buying a multi-unit property can be intimidating, but it is an excellent way to house hack. Your multi-unit property could be a duplex, a triplex, or a four-plex. In this situation, you would live in one unit and rent out the other unit(s). The rent from the other unit(s) will more than likely cover your mortgage and expenses, allowing you to live for free or very cheap!