House Hacking

Want to really ramp up your equity position and cash flow, but don’t have much to start with?

House Hacking is a great way to start putting dollars in your pocket or real estate investment account or even live at your place for free using little or no money down. There isn’t just one way to do it, which means you can find a balance that best suits your style.

Intrigued? Here are a few ways you can adjust your mindset and be on your way to real estate investment success:

buy a duplex, triplex, fourplex - live in one, rent the others

This is what we call the original House Hack. Because you are living in the unit, you receive owner-occupant mortgage rates rather than investor rates. This can save you thousands up-front and ongoing. In fact, smaller down payments (even 0%-3.5%) are also available with VA or FHA loans.

With a fixed-rate mortgage, your principal and interest payments stay the same, but the amount you receive for rent can increase over time – even 5-10% per year during times of extreme housing inventory shortages.

For example, let's say you purchased a duplex in Everett as follows:

Purchase Price	$600,000
Financed Amount	$579,000
Principal Amount*	$3,137
Current Monthly Rental Income Potential	$2,700 for the second unit
Already, the rent is already covering the majority of the loan payment. But let’s jump ahead five years and project that rent has increased by a conservative 3% per year.
5-Year Future Monthly Rental Income Potential	$3,038.37
Now the rental income is almost at the principal and interest payment. But remember! The asset has also been appreciating during these five years. At 5% annual appreciation (again-very conservative), the duplex is now worth $729,304.

*(FHA 30-year loan at 4.75%). There are additional fees such as mortgage insurance, property taxes, etc. that are not in this example.

Wow! A $21,000 initial investment has given this homeowner an almost-paid-for place to live and equity gains of $129,304 in five years. That is House Hacking at its finest!

rent a bedroom or space in your house

But what if you don’t have a multi-family property? If you have a spare bedroom in your house and want to bring in income, consider renting that out. Of course, there are pros and cons to bringing in roommates, so this House Hack isn’t for everyone. Short-term rentals may also be an option if you don’t want to be committed to someone long-term.

rent a garage or storage space

However, if you have a garage, shop, or some other storage space that is not in use, looks like another House Hack!

What about an accessory dwelling unit?

ADUs are becoming more common and are a great way to build value to your property and bring in extra cash. It is a bit like the duplex idea with either an area of the current residence (such as a daylight basement) carved out to allow for a separate living space or a detached unit in the backyard.

Want to learn more about House Hacking? We can talk about it all day! Whether you want to find a perfect House Hack property or strategize, we can help!

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