Have you thought about getting into real estate investing, but you don’t have the finances to do so? House hacking may get your foot in the door and help you build up wealth. So, what is house hacking? In a nutshell, it’s when tenants are paying for your primary residence! Sounds great, doesn’t it?

There are multiple ways to get into house hacking. Owning multi-unit rental properties and living in one as your primary residence is one option. If you’re renting out a bedroom or two in a home you own, it’s considered house hacking, too. You can even convert your home’s garage or basement into a livable space and rent out the room. House hacking does mean that you’ll likely have to take on a bit more work, especially if you buy a short sale that is in need of repairs, but the payoff can be worth it.

House Hacking Benefits

The most significant benefit of house hacking is that the tenants are helping you pay down your mortgage. Having others help you pay off your house-related costs can help you build your disposable income. With more disposable income, you can invest in more real estate opportunities! At the very least, as long as you have responsible tenants, you could be living in your primary residence for a fraction of the expenses you’d have without a tenant!

Of course, sharing a home with multiple people may not be an ideal situation for some people. After all, you’ll need to be more trusting of people and give up some of your privacy. If that’s the case, you may want to consider purchasing a multi-unit property or finding a great deal on a large home. You can also try to find a house on a lot that’s big enough to build a granny flat or guest house to rent out.

Other potential benefits of house hacking:

  • Your tenants could be paying for most of your housing expenses. According to the U.S. Bureau of Labor Statistics, about a third of all total costs go towards housing. And whether you’re young or old, house hacking can bring some relief from rising rental and other housing costs. With extra cash flow coming from passive income, you can pay down your mortgage or use the extra money to invest in more properties and transition into the world of land lording.

  • Kick-start your rental property business. When you’re renting out rooms to additional housemates or renting out units in a multi-unit building, you learn how to be a landlord quickly! House hacking may kick-start a new career in property management. However, unless you want to pay for general maintenance services and repairs out of your pocket, it’s a good idea to learn some necessary handyman skills. Plumbing and electrical maintenance are excellent skills to have to tackle any property upkeep. You can also learn valuable bookkeeping and tenant management skills.

  • Might improve your chances of receiving larger loans. Lenders, such as banks, like it when people have successfully managed and owned properties. So, if you’re looking for future financing options, landlord experience may improve your chances of receiving a larger loan.

  • There may be tax benefits. Your rental expenses could be subject to tax deductions.

Avoid These House Hacking Mistakes:

  • Choosing the wrong neighborhood. Whether you’re planning to buy and live in a multi-family property or you’re looking to score on a great deal on a large property through auction, try to avoid an undesirable neighborhood. Houses located in a desirable location can attract tenants. Some properties may be great for short-term or vacation rentals. With a little research, you can find neighborhoods with excellent job growth, population growth, and appealing local amenities that make the community attractive to prospective tenants.

  • Disregarding local ordinances. If you plan on making changes to an existing property or building an ADU (additional dwelling unit), be sure to check with the local zoning ordinances. Failure to comply can lead to legal action and may end up costing you more in the long run.

  • Ignoring repairs. Pay attention to repairs as soon as they’re needed. Create a budget for repairs and make sure to set aside enough money to cover any unforeseen expenditures. You want to keep your tenants happy so that they want to keep living in your property for years to come!

  • Choosing the Wrong Property. When looking at potential house hacking opportunities, consider properties with specific features to generate revenue. Some of the strategies to consider include multi-unit properties. Multi-unit properties can have two or more units (the more units, the better), and you will have to live in one of the units. Properties with finished basements are a great option, too. Here, you can convert the basement into livable space. You can strike gold if you can find a home with a basement featuring a separate entrance! Another possibility is to look for a single-family house with multiple bedrooms. You could even convert areas such as dining rooms, lofts, and living rooms into additional living spaces. Try searching foreclosure listings, and if there are some near your area, go ahead and check it out!

  • Other things to consider. It’s not just the house or multi-unit property that is important. Try to find houses near public transportation. Some investors avoid homes in areas with HOA’s. HOA’s can have many restrictions and may do not allow short term rentals.

Conclusion

Your house has the potential to become much more than a home; it could become a revenue generator! Auctions are a great place to browse and bid on properties. You can typically find a great deal on newly foreclosed homes or short sales. A reputable online auction site, such as ServiceLink Auction, can help you find the right property at the right price. With helpful buyer tools, you can quickly bid on bank-owned homes, foreclosures, short sales, and pre-foreclosures. Remember, if you go the auction route and win your bid, you will need to have all your finances on hand.

Did this answer your question?