By this point, the majority of us know what house hacking is. It is the idea of purchasing a multiunit property, living in one unit and renting the other. This is one of the best strategies for getting started in real estate while significantly reducing your living expenses.
What if I told you that beyond house hacking, there is a way to earn an additional $1,500 of monthly income with little time commitment?
The strategy? I call it “life hacking,” and you can do it, too!
Before we fully delve in, I want to let you know that this idea of life hacking is easiest for a bachelor/bachelorette without kids living in a popular city. However, anyone who has a burning desire to achieve early financial freedom can do it. You just need to be willing to do whatever it takes. Be willing to sacrifice current luxuries for long-term happiness. You need to be on a mission where absolutely nothing can stop you.
If this sounds like you (or someone you know), keep reading!
If not, don’t waste your time. Return your Facebook surveys so you can figure out which Friends character you are.
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
So, what is life hacking?
As many studies show—and Scott Trench articulates in Set for Life—the average American’s two largest expenses are housing and transportation. He mentions that in order to reduce these expenses, you should house hack AND live in a location where you can either bike to work or have a job where you can work from home.
Let’s assume you have accomplished both of these things. Great! You are now living for free (or extremely cheap), and your transportation costs are close to $0. This is awesome in itself.
BUT WAIT, THERE’S MORE!
You can actually increase the amount you are paid to live in your current property and get paid for owning your car. This will help turn properties in popular locations where cash flow is tough into cash flowing properties. For example, I live in Denver, where prices are relatively high. This makes it difficult for half of my one-bedroom duplex to fully cover all of my expenses.
So I asked myself, “How can I cover my remaining expenses?” Then it dawned me.
House Hacking 2.0
I can take house hacking to the next level by also renting out my bedroom on Airbnb.
“But Craig, where do you sleep?!”
I don’t! Sleep is for the weak!
I have sectioned off a portion of my living room with room dividers to make it into a makeshift bedroom. See below to view my setup.
Is it uncomfortable for the first few nights? Sure it is! But as with anything else, approach it with a positive attitude and you will get used to it. Perhaps you’ll even enjoy it. I know I do. I get paid to meet new, interesting people from all around the world on a regular basis. Heck, I even befriend most of them, and they even offer me a place to stay if I am ever in their home city.
Wife (or Husband) and Kids?
“Craig, I have a wife (or husband) and kids. This is going to be a problem.”
There is no doubt that this strategy will be easier if you are single with no kids. However, you can use this as an excuse—or you can figure out a way to make it work. It goes back to the question: Do you have that burning desire for financial freedom? If so, I know you will make it work.
What about that extra bedroom you have? You know, the “guest room” where a random family member or friend will sleep maybe two or three times per year?
Or how about having the guests sleep on your couch in the living room? You will not make as much, but something is better than nothing. I thought about this option, but I am willing to sleep in the living room for the premium I am able to charge for renting a private bedroom.
So how much do I make on Airbnb? Typically, I charge $40-$50 a night with a $25 cleaning fee, which nets me approximately $1,000 a month after expenses. That does not include any additional tax write-offs, which is a subject for another person at another time.
The amount you can charge will vary based on your location and the amenities you offer. I live about 1.5 miles outside of downtown Denver and offer the essentials—a comfortable place to sleep with clean sheets, towels, and coffee.
Now that you see how I make an additional $1,000 per month in housing, where does the other $500 come from?
You guessed it! My car.
Because you either work from home most days or can bike or take public transportation to work, your car is likely sitting idle for at least five days a week, losing value every single day. How do you turn this money-sucking “false asset” into a real, income-generating “asset”?
You rent it out!
There is a site called Turo, which is exactly like Airbnb, but for your car. People who are traveling to your location can rent your car from you for a daily fee. You set the availability of your car, and they drive it whenever you deem it available.
I’m sure there are tons of questions regarding insurance, payments, logistics, etc. This article will not answer those questions. I will just tell you it works and you are covered. To learn more, go to www.turo.com.
Now, let’s assume your car makes an additional $500 per month for renting it out during the week. However, similar to Airbnb, the fee increases on the weekend. If you can go without your car on the weekend, you can make even more! So, on weekends that you have no plans, why not?
I rent my car out for $30-$40 per day and on most weekends. I make between $700-$900 per month this way. I’m actually over that $1,500 mark in peak seasons.
If you can’t already tell, my philosophy is “when in doubt, rent it out!”
So now that you are life hacking, you are likely making money on most Americans’ two largest expenses. Talk about expediting your journey towards early financial freedom!
This idea CAN be accomplished by anyone. However, it will be much easier for those who are single, without kids, living in a popular city. Again, you can use all of the excuses in the world, but excuses will not get you any closer to financial freedom.
My question to you is this: How badly do you want it? How badly do you want to have the option to work? How badly do you want to have all of the time in the world to spend time with your family, travel, and do those things that you truly love?
If the desire for freedom burns deep, then you will find a way. The scenario outlined above works for me. It may not work for you. But what will? Be creative!
How do you increase your monthly income by $1,000 to $2,000 per month? That is something for you to figure out, for you to decide. Good luck!
What outside-the-box ideas have you come up with to increase your monthly passive income?
We’d love to hear about them. Leave a comment below!