How to Start House Hacking: Build Wealth & Pay Off Your Mortgage Faster

Are you looking for a cost-effective way to start investing in real estate? Thanks to the rising popularity of house hacking, real estate investing is more affordable than ever! House hacking is a simple concept that's catching on like wildfire in the real estate investment world. In this blog post, we'll explore how real estate investors are using house hacking to build their wealth and how you can do the same.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

What Is House Hacking?

House hacking is when someone purchases a property to live in themselves and offsets some (or all) of the monthly housing expenses with rental income. Investors commonly house hack multi-family buildings. For example, you can buy a triplex, live in one unit, and rent the other two units out. This strategy is extremely effective when realizing that your monthly mortgage payment would be extremely high if you purchase a potential place. The rental income that you generate from the two units can help you pay for your monthly mortgage payments and other expenses. You can also house hack a single-family home by living in one room and renting out the others.

Purchase a Multi-family Building

The easiest strategy for house hacking is to buy a multi-family building, live in one unit, and rent out the others. This can be performed using a duplex, triplex, or larger. For many first-time real estate investors, duplexes are a great entry point into housing hacking. Start by looking at townhomes for sale in your area. If you buy adjoining units, you can live in one unit while renting out to the other and using that rental income to supplement part of your mortgage. It's important to know the laws surrounding rent increase limits where you own property. Although raising the rent can be tempting, you should keep your increases within the regulations set by your city.

Depending on how expensive your monthly mortgage payments are, you can sometimes completely cover your bills. The ideal house hack using a duplex is when you can generate positive monthly cash flow after covering all utilities plus your mortgage payment. Owning multiple units under one roof comes with benefits that make it appealing to many newer investors looking to house hack. There is only one roof to replace if it gets damaged. You can use the rental income from the other unit to help cover costs for repairs that arise over time.

Short-Term Rental House Hack

You don't need to own a vacation home to run a short-term rental. You can rent out your own house or build a rental structure on your property. This strategy is easier to implement when buying a property on a larger piece of land. The larger your land is, the more space you have to get creative. There is potential to build things like a yurt and luxury tree house, which you can rent out on Airbnb. It's a great way to house hack without having to live under the same roof as your tenants. Regardless of how expensive your market is, there are creative options to house hack your way into a property.

Build an ADU

In expensive real estate markets, investors are forced to get extremely creative to make certain deals work out financially. Major cities with high real estate values typically draw large amounts of interest from investors. It's common to see first-time home buyers house hack through creative uses of accessory dwelling units (ADUs). You can live in your house, build an ADU in the backyard of your property, and rent that out to help offset your living expenses.

Of course, the regulations and legality of building ADUs depend on your property size, zoning, and where it's located. Certain areas make it more challenging to build them than others. House hacking is a great strategy for new and experienced investors. It's not uncommon for home buyers to purchase a house on a large property, and add both an ADU and Junior ADU to rent out. You can live in the primary house and pay for most of our mortgage with the rental income from the ADUs. Creativity is key when investing in expensive real estate markets.

Invest For Less With House Hacking

House hacking is an innovative strategy that's revolutionizing the real estate investment game. It's a win-win situation where homeowners can generate passive income and build equity while living in their dream home. With different types of house hacking available, from renting out a spare room to a full-blown duplex, there's a solution that can work for every investor. By following the steps outlined in this blog post, you can start your house hacking journey today.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.