Have you dreamt of being a homeowner? Maybe even tap into real estate? Well, there is a way you can achieve both. House hacking, coined by Brandon Turner, a successful real estate investor is among the easiest models you can utilize to realize your homeownership and land-lording dreams. In its simplest definition, house hacking entails purchasing property and renting a portion while still living in it. Utilizing the technique, homeowners get a chance of financing a significant portion, if not all, of the mortgage from the collected rent. If done right, house hacking is among the most effective strategies that help individuals in their quest for financial independence.
Putting a roof on your head is among the largest expenses. If you could save a significant if not the entire living expense, your quest for financial independence would not only be smooth but fast as well, a concern that effective house hacking facilitates. By undertaking house hacking, apart from financing your mortgage, you get to build equity for free and save more as you can deduct some of the expenses and depreciation in your taxes. If you are considering it, here is a look at some of the house hacking strategies you can utilize.
1. Rent by room
The model involves buying a single-family property, say with four bedrooms and two baths, living in one and renting out the rest by room. Since rent by room offers privacy, you can collect significant rent, not to mention appraisal value since single-family properties tend to appreciate quickly. What’s more, since you can get competitive mortgages rates as well as lower down payment requirements, the strategy helps you to fast-track your homeownership goals.
2. Accessory dwelling unit
This is among the most effective approaches, especially if your property has an additional dwelling structure or if you can comfortably build one. Following the unit’s features, including space and facilities such as kitchenette, fully-functional bathroom, and a bed, you can collect significant rent without sacrificing your family’s comfort and privacy. Since you won’t be sharing your house with the tenant, your family enjoys the main house while the tenant enjoys the extra dwelling unit that could otherwise be sitting empty.
3. Mobile home hack
The model is especially effective for a single person or young couple without kids. It involves buying a property and a mobile home or RV rental, rent out the main house while living in the RV parked on the property. The mobile home hack is among the most effective strategies since you get to eliminate housing expenses while collecting a significant amount from renting the entire house. If the model isn’t the right fit for your situation, you could stay in the house and rent out the RV or simply mobile home parking space.
4. Living room hack
The strategy involves staying in the living room while renting out the rest of the property. You can easily put a room divider in the living room and make it your bedroom, consequently increasing the cash-flow by renting the rest of the rooms.
5. Traditional house hack
Traditional house hack is among the most popular and easiest strategy. It involves purchasing a two to four-unit property, live in one, and rent out the rest. With access to the low down payment residential loans, you can comfortably purchase property and gather enough cash to finance a significant portion if not the entire mortgage from the rent.
6. Live-in flip strategy
While checking out real-estate ads, you may have spotted TLC, an acronym standing for tender loving care. This is a clue of the property’s condition, meaning that it needs repairs. Following the live-in flip strategy, you can purchase the property, make the repairs and sell it later after meeting the minimum tax law threshold to avoid capital gains tax.
The tax code requires you to live in the property for at least two years, enough time to undertake the repairs comfortably. From there, you won’t pay any tax on gains up to $250000 for an individual or $500000 for a couple, allowing you to re-invest the profits in your next house hacking endeavors. The best part about the live-in flip house hacking strategy is that you can combine it with other models and get the most out of your investment.
With its numerous benefits, it is not a question of whether house hacking is profitable, but what strategy best meets your needs and preferences. Following your situation, for instance, you know the property range you can comfortably afford. Moreover, with your goals in mind, you have an idea of a lifestyle you are willing to adopt in the quest for financial freedom.
Article Submitted By Community Writer