Have you ever heard of the term “house hacking”?
Us millenial’s can’t seem to catch a break. We’ve been beat down by the economic collapses, student loans, and a worldwide virus pandemic.
All we want are a few years to pay off our debt and finally get a chance at buying our first home. What if I told you there’s a way to get ahead and finally feel financially secure?
If you no longer had to pay rent or your mortgage, what would you do with all that extra cash?
The median mortgage payment in the US today is $1,100. That’s $13,200 per year! Would you take your family on vacation? What if you could finish paying off those pesky student loans? Would you finally start saving for retirement?
Today I will be teaching you what house hacking is, why it is beneficial for you and your finances, and the different types of house hacking you can do that fit best for your lifestyle.
What is House Hacking?
In a nutshell, house hacking is when you rent out a space in your residence in order to decrease your rent or mortgage. You can even house hack so your property pays for itself!
This is basically what landlords do for a living on a much smaller scale. In fact, many landlords today got where they are by using this technique.
Why Should You House Hack?
There are many reasons that you should house hack. The main being that taking a huge amount off your housing payment can really increase your budget and launch your finances in the right direction.
If you live in a city like me, you could be paying more than $2000 per month on housing. That’s not including utilities or parking either!
I house hacked for a year and saved up enough money for a down deposit on my first home. If I saved just by working, it would’ve taken me almost five years to save!
Types of House Hacking
Buying a Multi-Family
The most popular way that people begin house hacking is by buying a multi-family property. Multi-family properties are homes that have 2-4 units in them.
The idea is to live in one unit and rent out the remaining units to cover the mortgage and then some. The more units in the building, the better off you are.
Say for example you buy a 3 unit house where the mortgage payment is $2000 per month. You decide to live in one unit and rent out the other two for $1500 each.
Not only is your mortgage covered, but you have an extra $1000 a month from your new tenants.
Add that $1000 to the $1200 you were using to pay your housing costs previously every month, and you now have an extra $2200 every month to spend as you please. Cool right?!
Renting Out All Your Rooms
If you’re young and just starting out, this can be a great way to start house hacking.
I have a friend that got a boujee apartment in Williamsburg, one of the most expensive neighborhoods in Brooklyn. The apartment was 5 bedrooms.
He rented each of them out for $1500 (average for that area) and covered the $6500 rent while he slept on the pull out couch for free and saved $1000 additionally each month. Besides him, I don’t know any millennial saving money at all while living in Williamsburg, Brooklyn.
The benefit of this method is you don’t need to buy a property to get started. This is something you can do today.
However, this may not be the method for you if you have a family with kids or pets because you can’t have an entire family live in the living room with additional roommates in the house on top of it.
But if you’re young and want to tackle that student debt while you’re still in school, this is a brilliant way to do it.
Rent to Students Per Room
If you don’t have any multifamily properties for sale in your area, but you happen to live by a big college or university, renting a house to students may be the perfect strategy for you.
One location where this is a popular method is Buffalo, NY. Buffalo is home for three different state universities and 54,000 students.
The state universities have dorms, but some students may not be able to afford them or they want to rent a house with friends instead.
Another great thing about Buffalo, NY is that the average single family home is only $89,000. This makes their mortgage around $600 a month.
If you live in one room and rent out the other 4 rooms for $400 each, you live for free, the students get cheap housing, and you get an extra $1000 per month.
This method is great if you’re younger or independant and you don’t mind being a landlord and roommate at the same time.
Get an RV
Do you already have a home and a yard that you love but you don’t want to live with another family? Do you happen to like camping? Buy a used RV and live in it!
You can get a used RV for $10-$15k and rent out your house for a profit. The RV will pay itself off in a year from the profits you get from renting your house.
The benefit of this method is that you don’t have to buy a new house or move, and you’ll have an RV that you can take with you on vacations and to future properties.
You can even pass on the RV to your children when they go to college so they can live for free and house hack for themselves!
Build a Rental Space
Do you have a large shed, basement, barn, or garage on your property? Do these places in your house collect junk and not really serve a functional purpose? Put them to good use and renovate them into a small apartment to rent out.
Pinterest can give you countless great ideas on how to transform these dusty storage places into passive cash flows that help cut down your housing costs.
Get a Job with Housing Included
The last way to take advantage of house hacking is by getting a job that offers free housing. This may sound impossible, but there are a number of jobs that have free housing including:
- Park Ranger
- After Hours Security Guard
- Building Manager/Super
- International Educator
- Seasonal Hotel/Resort Worker
- Cruise Ship Worker
- Personal Chef
- Travel Nurse
Short Term Vs. Long Term Tenants
When house hacking you can decide if you want to rent to people short or long term. There are pros and cons to both.
The benefits of short term renting are that you can usually get more money per night, and that you don’t have to deal with the same people over long periods of time.
Posting your extra room on Airbnb can be a great side income for you. However, it can be harder to keep occupancy, so it can be less consistent income than long term rentals.
Long term rentals offer you the chance to establish long term relationships with your tenants, helping them to stay for several years and give you consistent income.
Unlike vacation rentals, you can expect to have tenants locked into a lease for at least one year. You won’t have weeks or months at a time with no income coming in.
However, long term tenants are difficult to evict in some states if they stop paying rent, so make sure to check your state landlord/tenant laws.
House hacking is a brilliant way to work the traditional housing system we’ve all learned and eliminate our housing costs, saving us thousands every year.
The next thing you should do is figure out what kind of house hacking method works best for you. Do you think you could see yourself house hacking and making some passive income? Let me know in the comments!