Articles

This is one of many articles we will be writing regarding investing in Real Estate.  Today we’ll be looking at house hacking.  What is it?  How do you do it?  What are the pros and cons?

House Hacking is essentially getting other people to help you pay your mortgage payment.   You basically turn your home into an income stream.   To do this, you need to rent a portion of it to others.  This can be done with a multi-family home (duplex, triplex, quad, etc.) where you live in one unit and rent out the others.   It also can be done on a single-family home where you simply rent out bedrooms or a portion of the home (like and in-law apartment or the basement) for others to use and they pay you for the space.   A good example would be having a couple of roommates who rent out a bedroom and they pay you each month for the room use and perhaps a portion of the utility bills.  There are many ways to set it up, but the net effect is other people are giving you money for the use of the space and you can use that money to help pay the mortgage down.

There are obvious advantages to having other people help you pay the mortgage.  It results in an opportunity to live much cheaper than you normally could for the property you are living in if you so choose.  Ideally though, you want to use that extra money to pay down the mortgage faster than you normally could.  This allows you to gain accelerated equity in your property.   Once you have enough equity in a property you can refinance it to free up that money so you can buy another income property and accumulate wealth faster.

The drawbacks of house hacking is dealing with the tenants.  There can be occasions where a tenant does not work out and there are annoyances that can come along with that situation.  In the long run though, house hacking is the fastest way to generate wealth for a starting investor and its highly recommended.