House hacking is a concept coined by the people over at biggerpockets.com
What were we told about housing growing up?
Bigger is better? White picket fence? Kids and a golden retriever?
Turns out, there’s more to real estate then just a single home (also known as single family homes)
In fact, anything from 1 – 4 units under one roof is considered residential, therefore they’re all treated the same even though property A could have one unit while property B has four.
The problem with getting a home – it’s not an asset, it’s a liability.
Assets put money into our pocket, liabilities take money out of our pocket.
That mortgage payment has to get paid no matter what.
Most people buy a single family home, one unit, and then they’re on the hook for that 1,000 dollar mortgage payment – because that’s what we’re supposed to do and our home is our biggest ‘investment’….
But what if instead we borrowed the same amount of money, had the same mortgage payment each month but instead bought a duplex rather than a single family home. Then we could live in one side of the property and rent the other. This rent of say 1,000$ a month could be used to cover the mortgage payment.
And that’s house hacking. The easiest way to explain the concept is living in one unit and renting the other, but this process could be done in many different ways.
Like renting a room out of a house, or a section
Or having two properties on one lot like an attached or a detached mother in law
Some even sleep in their car while they house hack, dedicated?
And the best part about this house hacking concept is the loan programs available.
As of 2021 and years before this, there is a loan known as an FHA loan.
The fha loan is powerful because we can buy owner occupied property for as low as 3.5% down…
On a $500,000 property that’s just about $20,000 down, not bad.
We can take out an fha loan once a year, we just have to live in the owner occupied home for one year to follow fha rules, but each year we can take out a loan with 3.5% down? Sign me up.
That’s what we plan on doing too.
The catch? We need to be able to get approved for an fha loan and this is going to take some work.
Steadier income, more landlord experience, tax returns, etc..
And even if we never get the 3.5% loan down and have to rock out with typical 20 – 25% down payments on properties, we’ll get our goals done.
Complaining about the downpayment isn’t a valid reason to not go through with this.
Plus, we can still house hack properties if we put down 25% because we’ll still have a mortgage payment to cover each month and the point of house hacking is to have the other side of the property pay for the mortgage, taxes, insurance, and debt on the property while we slowly continue to build our wealth, the low down payment is a bonus if it can be used.
Would you be down to do a house hack?
Joe DiAndrea 