If you're sick of long commutes or expensive real estate in growing cities, house-hacking may be the solution for you.
WHAT IS HOUSE-HACKING?
House hacking is a very popular investing strategy. Essentially, you rent out part of of your primary dwelling to help with the costs of homeownership. You can actually end up completely eliminating all housing costs, possibly even making some extra money.
House-hacking is usually more efficient than traditional renting because you're actually renting out your own residence. When investing in traditional rental properties, you'd generally have to make a down payment of up to 25% of the property's value, which can be a major hurdle for first-time investors. However, this is not the case with house-hacking.
House hacking is also a great investment strategy because it's completely mutually beneficial. You, as the investor, get short commutes and low net payments, while your tenants get to live in highly-in-demand areas for a fraction of the regular price.
Investing doesn't have to be a headache. Let's get into some specific strategies for getting into house hacking!
WHAT TO LOOK FOR
The key to successful house-hacking is finding the right property. You and your tenants are all living in the same building, so it's important to not choose a tiny one-bedroom house with limited living space.
Multi-family properties, like duplexes and triplexes, are the best possible way to house-hack. In general, the more units there are, the better it is for house-hacking. You and your tenants also each get an isolated section, and the housing will be ready to house-hack without needing any major renovations.
Finished basements are another excellent option for house-hacking. Having a separate entrance, a kitchenette, full bathrooms and extra bedrooms in the basement also add to potential rent value. You can either live in the basement while renting the main space to families, or, if you have a family, you can live in the main space while renting out the basement. Like multi-family properties, a huge benefit to using a finished basement is that you don't have to share any living space.
Additional dwelling units, or ADUs, can also be great for house-hacking. These are structures added on to a property, with full living facilities installed. They allow the most isolated house-hacking experience. When looking into properties with ADUs, always make sure you can rent them out. Some ADUs are build without a permit, and some cities do not allow ADUs to be rented out. However, if none of these restrictions apply, they're a great option for a house hack!
Multi-bedroom housing can also be house-hacked. If you can't find a property with separate units for tenants, you can rent out the bedrooms of a property built for a single family. Just like with multi-family properties, the more bedrooms, the better. Buying a property that's above your price limit but with more bedrooms can end up drastically decreasing your housing costs. Even if you can't find properties with many bedrooms, you can always convert dining rooms or bonus rooms into extra bedrooms. This can be extraordinarily cost-effective. A great strategy to find adequate properties is to seek out 3-bedroom properties with more square feet than usual.
Here are also some other factors to consider:
Location – Your house-hackable property should be in a popular area with easy access to public transport. If you don't have any willing tenants, house-hacking won't save you any money.
Surroundings – Make sure you're not buying a property in an area with lots of other multi-family properties and house-hackers. These indicate a higher concentration of tenants, which usually ends up being less beneficial for investors.
Legality – All properties you're looking into buying for house-hacking need to be in areas without restrictions. Some areas make it illegal to rent out portions of a property, and others do not allow short-term rentals like AirBnB, which can limit your options.
Space – Make sure there's enough space in your property for tenants to be comfortable. Features like lofts, outdoor areas and dining rooms make it so tenants aren't confined to their bedrooms. This lets you charge more for rent and keeps tenants longer.
Overall, house-hacking is an excellent strategy to get into investing! If you have any interest in trying it, I'd be happy to help. Just give me a call or text me at 312.477.9594, and I'll help you start your investment journey!