Posted 9 days ago

House Hacking your way to Financial Independence!

In today’s world, buying a house or apartment can be extremely expensive, especially if you’re looking for a property in a costly market. Many people are closed off to the idea of owning real estate altogether, believing it’s just impossible to save up enough money, being too young or just wanting to conform with the norm. According to Business Insider, 1/3 of the average American’s take-home pay goes towards housing! What if I told you there was a way to buy real estate without spending a fortune, earn money in the process, and let your properties make you financially independent? A new trend called house hacking has the potential to help you do just that!

What is House Hacking?

House Hacking property

Andres buys his first house hack

House hacking is a real estate strategy that consists of buying a property with little to no money out of pocket, living in one unit and renting out the others to roommates. With the rent received you will pay off your mortgage and ideally cash flow. A mortgage is a loan from a bank or lender to help you finance the purchase of a home. When you take out a mortgage, you make a promise to repay the money you’ve borrowed, plus an agreed-upon interest rate.

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Example:

Home: 4 bedrooms and 3.5 bathrooms

Sales Price: $286,000

Down Payment: $8,580

Mortgage Payment: $1,740 (Principal & Interest + Taxes + Insurance)

Gross Monthly Rent: $2,150 (2 Rooms rented for $700 another $750)

Monthly Vacancies and Expenses: $100

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Cash Flow: Rent $2,150 – Mortgage $1,740 – Expenses $100 = $310 + living for free

Benefits of House Hacking ?

    Leveraging the Bank with low money down: Usually if you are buying a property as an investment, the banks require 20-25% down payment. As a first-time home buyer and owner occupant, there are bank lending programs where you can buy a home with 3%-5% down payment, or 0% down if you use a VA loan or USDA loan. 

    Tenants pay for your mortgage: When you buy a home with a loan, there is a mortgage payment. It consists of the Principal, Interest, Taxes, Insurance (PITI). The good news is that if you have roommates living in your home or tenants on the other side of the duplex, their rent payment will be able to cover most, if not all, the mortgage payment. 

      Rent Savings: Instead of your money going down the drain with rent, you’ll be looking at building equity, rent savings and maybe even a cash flow. The Net Worth Return on Investment or NWROI consists of: (Cash Flow + Rent Savings + Principal Loan Paydown + Appreciation) / Initial Investment.

      Tax Benefits: Property taxes AND the Interest that you pay every month are tax deductible.

      Get your feet wet: A lot of people don’t pull the trigger to start investing into real estate because they get overwhelmed with the unknown. House hacking allows you to get your feet wet because you are buying a property for yourself, that just happens to have units or extra rooms that can make you money. Try it out and if you don’t like it, then sell it or just keep and manage that one property. But… if you catch the bug and see the magic of passive income, then you will want to continue investing.

      I look forward to your feedback and can’t wait to see you begin your journey to financial independence!



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