How To Buy A Property And Get Paid To Live In It
What is your biggest expense that you have to pay for each month? Whether you're a doctor, teacher, or construction worker, your answer is probably the same- Your monthly housing payment.
For many, this monthly payment does not only affect the bottom line; It also adds the weight of financial stress. What if there was a way to own a house, live expense free, and build long-term wealth? Good news! It’s possible with something called House-Hacking.
House-Hacking is a real estate investing strategy where an owner lives with paying tenants, allowing the owner to live for a discounted rate, for free, or even generate a profit. Typically, house-hacking is associated with owner-occupied multifamily properties like a duplex, triplex, or a quadplex. However, you can also house-hack by renting out specific rooms or other areas in your home, even with a single-family property. Here’s an example of how an owner could convert his biggest monthly expense into a profit.
It was love at first sight when Bill’s realtor showed him a new listing for a Duplex in his area. While conducting his due diligence on the property, Bill calculated his mortgage, taxes, insurance, utilities, and other expenses, which totaled $1500/mo. Bill valued his financial freedom, so he called two of his friends to see if they wanted to move in with him to help him cover his monthly expenses. He rented out one unit for $1000/mo to one friend and rented out a room in his own unit to his other friend for $600/mo. Bill buys the property, his friends move in, and Bill is now making $100/mo in profit from his living situation.
After comparing his current living arrangement to his previous rent payment, Bill is now saving thousands every year, and building equity in a house that he can call his own. After a year, Bill moves out, and now charges each friend $1000/unit. He finds another property and repeats the process. After a few years, Bill has multiple properties, and has enough income to quit his day job, hire a property manager, and spend his time doing what he pleases.
House-hacking can be a great way to get into real estate investing or just to cut down on monthly expenses. However, it will require you to be a landlord. This means dealing with maintenance, tenants, evictions, and any other problems that might arise. This will take effort and time, especially in the beginning. Landlording for the first time may seem ominous at first, but there are ways to speed up the learning curve. Reading books on landlording, networking with local real estate investors, and developing systems to run your business can make this process much easier to manage.
House-Hacking isn’t for everyone. However if you are willing to be a landlord and live with or next to your tenants temporarily, it could be your entryway into financial freedom.
