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The general rule of thumb is to spend no more than 30% of your gross monthly income on rent. This means that if you make $5,000 per month, your maximum rent should be $1,500. But what if you don’t pay rent? That 30% of your salary every month can go to your savings or for something you need. To do this, learn to house hack. House hacking can be a great way to lower your housing costs, build equity, and start your real estate investing journey.

What is house hacking?

House hacking is a strategy in which you buy a property that has enough space to live in and rent out a portion of it to tenants. The goal is to have your tenants cover all or most of your monthly mortgage payments, property taxes, and other housing costs.

This can free up a significant amount of your income, which you can use to invest in other assets, save for retirement, or simply enjoy life. How does house hacking work? There are many different ways to house hack.

Here are a few examples:

  • Buy a multifamily property, such as a duplex or triplex, and live in one unit while renting out the others.
  • Buy a single-family home with a finished basement or an in-law suite and rent out the extra space.
  • Buy a condo or townhouse and rent out a spare bedroom or two.

The best way to house hack will depend on your individual circumstances and goals. If you’re a first-time homebuyer, you may want to consider buying a multifamily property. This can give you the opportunity to live in a home while also building equity and starting your real estate investing journey.

The benefits of house hacking

There are many benefits to house hacking, including:

  • Lower housing costs: House hacking can help you lower your housing costs by having your tenants cover all or most of your monthly mortgage payments. This can free up a significant amount of your income, which you can use to invest in other assets, save for retirement, or simply enjoy life.
  • Build equity: When you buy a property with the intention of renting out a portion of it, you’re essentially creating an investment property. As you make mortgage payments and build equity in the property, the value of your investment will grow over time.
  • Start your real estate investing journey: House hacking is a great way to start your real estate investing journey. It’s a relatively low-risk way to get involved in the market and learn the ropes. If you’re successful with house hacking, you may eventually decide to buy additional investment properties.

The challenges of house hacking

There are also some challenges to house hacking, including:

  • Managing tenants: If you rent out a portion of your home, you’ll need to be prepared to manage tenants. This includes screening tenants, collecting rent, and handling maintenance issues.
  • Competition: The housing market is competitive, so you’ll need to be prepared to compete with other buyers when you’re looking for a property to house hack.
  • Mortgage requirements: Some lenders may have stricter requirements for borrowers who are planning to house hack. This is because house hacking is considered a riskier investment strategy than traditional homeownership.

House hacking can be a great way to lower your housing costs, build equity, and start your real estate investing journey. However, it’s important to be aware of the challenges involved before you get started.

If you’re considering house hacking, be sure to do your research and plan carefully.

 

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Follow Krystle and Kenny on Instagram:

  • Krystle’s Instagram: krystlersimpson
  • Kenny’s Instagram: kennybsimpson

 

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SPONSORS:

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* Cost Segregation Services: We have been working with Tim Looney at CSSI for a few years now and he has saved our clients and our hundreds of thousands, if not millions of dollars, in taxes doing Cost Segregation Studies. Let me give you a few examples. We bought a property in 2019, if we had just used straight-line depreciation, we would have saved about $18,750. Because we did a cost seg we saved $258,000 – that’s $239,350 more than standard straight-line depreciation in the first year! Call Tim Looney at (318) 469-9861 to schedule a complimentary property analysis, and tell him Krystle and Kenny sent you!

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