House Hacking: The life hack that will set you free.
- Paul Stamm
- Jul 2, 2022
- 4 min read
Updated: Jul 2, 2022
Today, Americans live paycheck to paycheck. We have little to no savings, yet we own, or should I say lease the newest car available, aspire to have a house that is definitely better than your coworker’s, and live in a life where we are up to our eyeballs in debt. Student loans and credit cards now seem just to be a normal step in becoming an adult, yet no one is taught about the lifelong consequences that this bad debt can have on a person.
Every person has basic living expenses such as food, clothing, housing, and many other things. Some people who are trying to save money and might begin taking a stab at their debt will try to pinch some pennies and do things like cutting out their morning coffee or buying the off-brand cereal at the grocery. These things, although helpful when starting out, have little effect in the grand scheme of things. I feel that it is more important to look at the expenses that are taking the most of your money. This would be housing.
According to a CNBC article, Americans should shoot for housing that costs less than 30% of your income. It is likely that some people are even above this number and are purchasing homes that take much more of their income away. A monthly mortgage or rent check may go out and leave people wondering where all of their money went. So many people live above their means and do not recognize how much they are spending on housing. I believe that one of the most powerful ways to combat this large and expensive, yet simple problem can be solve through house hacking.
What is house hacking?
House hacking is really not as weird as it may sound and actually has been around for a long time. In its simplest form housing hacking is making income off of your personal residence. It is turning what was once something that sucked money away from your wallet each month into something that now pays you. You may be asking “Your telling me I can get paid to live somewhere?” Yes! It is entirely possible and even pretty likely that you can get paid through house hacking.
How?
House hacking is a process where you rent out a portion of your home to tenants who will in turn pay you on a monthly basis. The best option would be for you to purchase a property and then rent it out. The action really isn’t that much different than what so many college students are doing: you get your group of friends together and go rent a place. It saves money and you get to hang out with your best friends. The difference with house hacking is you will be owning the property which gives you equity and tax benefits and the tenants might not be your friends (but they could be if you choose).
Options
There are many different ways that you can house hack and that is the beauty of it. You can do it in your own home by renting out the other bedrooms or basement, or you may own a duplex, triplex, or quadplex. These options range from your comfort level of how close you want to live to your tenants.
Rent by the room
Renting by the room can be one of the most profitable ways to house hack. This is the case because you can have multiple sources of income all under one roof. In this option, you as the landlord are the closest you will ever be to your tenants so you can stop/prevent any problems before they turn into something major. Living this close to your tenants is also more a negative option as you have less privacy and space to call your own. If these things do not bother you then this would be a great option!
Basement Conversion
The next option for those who don’t want to live with their tenants would be to do a basement conversion. This is where you take the existing basement in your home and make it into a livable space with a bathroom, bedroom[s], and a kitchen. This would be similar to a mother in law suite. A basement conversion presents an excellent option for those who already own a home and are looking to house hack.
The Plex’s
Another option would be to live in a duplex, triplex, or quadplex. This is a property that has 2, 3, or 4 separate dwelling units that are all under one roof. These properties are extremely special as they all qualify for the traditional FHA loan but still provide you with an excellent potential for cash flow.
ADU
The final option would be to create an ADU or accessory dwelling unit. This is where you build a new structure detached from your home as an investment property. This is a great option for those who do not want to share any walls with their tenants but still want to house hack. ADU’s can provide homeowners with a nice source of income from a short distance away.
I truly believe that all people should look into house hacking. It is an incredibly powerful tool that will set a person up well for the future. By doing just one house hack and keeping it as a rental upon moving out if desired, this person will reap the benefits of a strong cash flowing property. However, if they so choose to repeat this process year after year for 5 years or more, then it is very likely that this investment portfolio can ease the burden of life's bills. It can even provide someone with the opportunity to never have to work a job again in their live. Real estate truly has the power to change lives for the better and house hacking is one of the easiest entrance points. The choice is yours, it is all set out in front of you. How will you choose to prepare for your future? What will you think the next time your rent check leaves your bank account? There is no doubt in my mind; I choose to not let rent money exit my accounts, but instead to be the one getting paid to live for free.
Sources:
Images:
https://www.hoffmannpersonalinjury.com/3-things-you-need-to-prove-lost-wages-from-a-car-accident-in-st-louis/ https://www.phillyaptrentals.com/blog/are-you-looking-for-an-apartment-duplex/
https://pacificlegal.org/adu-reform-what-good-is-a-law-if-its-not-enforced/
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