As we continue to watch home prices rise across the country, more home buyers wonder how they will ever be able to afford a house.
House hacking could be the right move for you and has several benefits you may not have even considered!
What is House Hacking?
In real estate, the term “house hacking” describes the practice of buying a multi-unit property, living in one unit, and renting out the others. In practice, you could do this with other types of properties as well, including single-family homes. You can truly be creative when it comes to choosing properties. Does the property have a garage that can be converted into another liveable unit? Is there an already existing tiny home or accessory dwelling unit that can be rented?
House hacking can be a very lucrative investment strategy. When done right, it can help you reduce or eliminate your recurring house expense, including the mortgage and utility payments.
According to the Consumer Expenditure Survey conducted by the U.S. Bureau of Labor Statistics, the average American household currently spends close to $20,000 (or 33%) of its annual income on housing-related costs. Imagine what you could do if you could get your housing expenses covered and increase your disposable income by a third.
How Does House Hacking Work?
House hacking follows the same process as buying any type of real estate. The difference is that you’ll be buying properties with house hacking in mind which means looking for multi-unit properties or houses where having multiple living units is possible.
It’s important that before buying the property, you do the math and make sure it’s able to generate some passive income. When doing your calculations, remember to figure in any repairs or construction costs you’ll need to do to the property. The idea is to update the space to make it as desirable as possible. The more desirable your unit is, the more you can charge in rent.
Financing Your Investment Property
Because you will be purchasing your primary residence, you’ll have a greater variety of loan options available than you would if you were simply buying a rental property. Specifically, government-backed loans are typically only available to those buying their primary residence.
Research these loan options to find the one best for you:
- FHA Loan
- VA Loan
- Conventional Loan
Looking for More Real Estate Investment Options?
We have lending options available for our renovation project, and you won’t even have to swing a hammer or become a landlord! Lenders can earn a tidy profit on the money they loan us. Each loan is backed by a hard asset (the property) to ensure your investment is protected. If you’re interested in learning more, contact us today!