{"id":106676,"date":"2019-02-05T11:00:44","date_gmt":"2019-02-05T18:00:44","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=106676"},"modified":"2024-02-19T07:56:35","modified_gmt":"2024-02-19T14:56:35","slug":"house-hacking-reduce-eliminate-housing-cost","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/house-hacking-reduce-eliminate-housing-cost","title":{"rendered":"3 Levels of House Hacking: How to Reduce\u2014or Eliminate\u2014Your Housing Expense"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">If you are at all familiar with the BiggerPockets podcast or BiggerPockets blog, I am sure you have heard of <a href=\"https:\/\/www.biggerpockets.com\/real-estate-investing\/house-hacking-strategy\" target=\"_blank\" rel=\"noopener\">house hacking<\/a>. But for those of you who haven&#8217;t, here&#8217;s the gist: h<\/span><span style=\"font-weight: 400;\">ouse hacking is when you buy a single family home with a <a href=\"\/renewsblog\/2014\/09\/16\/is-it-really-necessary-to-make-a-down-payment\/\" target=\"_blank\">low down payment loan<\/a>, live in a portion of it, and rent out the other part. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">The goal of house hacking is to reduce\u2014or even eliminate\u2014your housing cost. By doing this, you can increase the amount of money you&#8217;re saving and create a solid financial foundation in order to tackle your other investment priorities. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">So, now that you are no longer living under a rock (which might be the ultimate house hack), let&#8217;s delve a little deeper. Essentially, there are three levels to the house hacking concept:\u00a0<\/span><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\"><strong>Level 1:<\/strong> Tenants&#8217; rent covers a portion of your monthly payment<\/span><\/li>\n<li><span style=\"font-weight: 400;\"><strong>Level 2:<\/strong> Tenants&#8217; rent covers all of your monthly payment\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\"><strong>Level 3:<\/strong> Tenants&#8217; rent generates positive cash flow on top of covering your monthly payment<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">For your reference, here&#8217;s a quick definition of what&#8217;s meant by &#8220;monthly payment.&#8221;<\/span><\/p>\n<blockquote><p><span style=\"font-weight: 400;\">Monthly Payment = Mortgage (Principal + Interest) + Insurance, Taxes, and Maintenance (meaning money set aside for repairs\/upkeep)<\/span><\/p><\/blockquote>\n<p><span style=\"font-weight: 400;\">Let&#8217;s take a closer look at each level, and talk about the ways in which they can be achieved.\u00a0<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-107184\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/02\/house-hacking-couple.jpg\" alt=\"man and woman looking at each other\" width=\"702\" height=\"336\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/02\/house-hacking-couple.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/02\/house-hacking-couple-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<h2>Level 1: Tenants&#8217; Rent Covers a Portion of Your Monthly Payment<\/h2>\n<p><span style=\"font-weight: 400;\">For most Americans who purchase property, having a mortgage payment due each month is just a way of life. Fewer and fewer people stay in a house long enough to pay it off. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">It&#8217;s a lifestyle that&#8217;s all too similar to renting. Every month you&#8217;re writing a check, whether it&#8217;s to a <a href=\"\/renewsblog\/2012\/12\/09\/how-to-be-a-landlord\/\" target=\"_blank\">landlord<\/a> or a bank.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But what if all of a sudden instead of shelling out $1,000\/month for housing, only $500 of it was coming out of your pocket? Obviously, you&#8217;d be financially better off.\u00a0\u00a0<\/span><span style=\"font-weight: 400;\">And that&#8217;s the main goal of house hacking: to <\/span><strong>reduce<\/strong><span style=\"font-weight: 400;\"><strong> or eliminate<\/strong> your housing expense! <\/span><\/p>\n<p><span style=\"font-weight: 400;\">For some, it can be as simple as moving all those dusty weights and the treadmill you never use out of your spare bedroom and into storage. Then, rent out that bedroom to a friend or relative and boom! You&#8217;ve become a house hacker! <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Even by decreasing your monthly housing payment by 25 to 50%, you would be doing so much better than most of your peers.<\/span><\/p>\n<p><em><strong>Related:\u00a0<\/strong><a href=\"\/renewsblog\/house-hackingfactors\/\" target=\"_blank\">House Hacking? Consider These Factors First<\/a><\/em><\/p>\n<h2>Level 2:<b>\u00a0<\/b>Tenants&#8217; Rent Covers All of Your Monthly Payment<\/h2>\n<p><span style=\"font-weight: 400;\">Getting to Level 1 is pretty easy for most people. But Level 2 requires a little more intention and planning. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">If your monthly payment is usually $1,000, you need to find a way to bring in $1,000 of rent to level up.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">One common way to do this is to buy a house with more than one extra bedroom. For example, you could purchase a three-bedroom home and rent out both of the extra bedrooms. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Or maybe you currently own a home with a finished basement. Do you even use it? Renting out your basement on Airbnb is a great way to make enough money to completely cover your housing cost. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">I can attest to it! I have personally achieved this level. I bought a 2 bed\/2.5 bath townhouse in Denver. By adding a third bedroom in the unfinished basement, in addition to renting out the extra bedroom upstairs, my tenants&#8217; rent is completely covering the cost of my housing payment.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If I can do it in Denver\u2014a very expensive market\u2014it can theoretically be done anywhere! You just have to be intentional and willing to make a few sacrifices when it comes to your living situation.<\/span><\/p>\n<p><em><strong>Related:<\/strong> <a href=\"\/renewsblog\/house-hacking-mistakes-prevent\/\" target=\"_blank\">3 House Hacking Mistakes I Made (&amp; How I Could\u2019ve Prevented Them)<\/a><\/em><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-107186\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/02\/for-rent.jpg\" alt=\"for rent tag and cardboard cutout of house\" width=\"702\" height=\"336\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/02\/for-rent.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/02\/for-rent-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<h2>Level 3:<b>\u00a0<\/b>Tenants&#8217; Rent Generates Positive Cash Flow on Top of Covering Your Monthly Payment<\/h2>\n<p><span style=\"font-weight: 400;\">You may be thinking, \u201cThere&#8217;s no way it&#8217;s possible to eliminate my housing cost <em>and <\/em>generate\u00a0cash flow from my house. Mortgage payments are way too much!\u201d <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Well, guess what? I&#8217;m here to tell you, you are wrong and I have proof! <\/span><\/p>\n<p><span style=\"font-weight: 400;\">By using a low down payment conventional loan to purchase a duplex, triplex, or quadplex; living in one of the units; and renting out the other units, it is completely possible to generate enough income to cover your mortgage, insurance, taxes, and maintenance\u2014plus a few hundred dollars extra each month.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">BiggerPockets&#8217; own <a href=\"https:\/\/www.biggerpockets.com\/users\/ScottTrench\" target=\"_blank\">Scott Trench<\/a> and <a href=\"https:\/\/www.biggerpockets.com\/users\/CraigCurelop\" target=\"_blank\">Craig Curelop<\/a> are two house hackers who have achieved as much. Scott bought a duplex, lived in half with a roommate, and rented out the other half. Craig purchased a five-bedroom house and rented out the four additional rooms. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">There are a number of ways to reach Level 3, but all require an increased level of creativity and sacrifice.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">House hacking is a very powerful tool, and I encourage everyone to try it on some level. It can positively impact your financial situation in ways you might&#8217;ve never known were possible.<\/span><\/p>\n<p><a href=\"https:\/\/www.biggerpockets.com\/real-estate-investment-calculator?utm_source=renewsblog\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-91220\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-02.jpg\" alt=\"\" width=\"700\" height=\"85\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-02.jpg 700w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-02-300x36.jpg 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/a><\/p>\n<p><em><span style=\"font-weight: 400;\">Do you have experience house hacking? To what degree? Do you aspire to achieve a higher level? <\/span><\/em><\/p>\n<p><strong>Leave a comment below.\u00a0<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>What if you could find a way to pay less out of pocket on your mortgage each month? What if you could eliminate your housing cost altogether\u2014and even generate extra income? You can! It&#8217;s called house hacking. Here&#8217;s what you need to know!<\/p>\n","protected":false},"author":265108,"featured_media":107185,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7356],"tags":[],"class_list":["post-106676","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-house-hacking"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/106676","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/265108"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=106676"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/106676\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/107185"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=106676"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=106676"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=106676"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}