House hacking is definitely not a thing that all real estate investors can just go for! It takes commitment and constant work for real estate investors with this unique investment strategy to be constantly making money in real estate. So, what is house hacking? And how can millennials get into it to start real estate investing?
What is house hacking?
House hacking means buying a multi-family rental property and living in one of the rental units while renting out the others to tenants. It can be any type of investment property; many real estate investors/house hackers have done it in duplexes, finished garages, basements, you name it! What turns this creative real estate investment strategy into house hacking is the fact that your tenants are paying your rent and mortgage and other expenses. Overall, house hacking is one of the biggest trends for younger generations and especially millennials.
Looking for millennial tenants? Read this blog post to help you squeeze into that niche: Marketing Your Real Estate Property to the Millennial Generation.
How can millennials start house hacking?
According to Forbes.com, house hacking is becoming more and more popular among millennials; many are even buying apartments and renting out the vacant rooms to cover the mortgage. Accordingly, renting out a room on Airbnb.com or Homestay.com is perfectly legal in many metropolitan cities. On the other hand, you could find cities like Anaheim that banned all types of Airbnb rental properties, even if you’re in it by sharing your own household. Let’s take a few steps back and give a few pointers to millennials for house hacking.
Of course, house hacking is a process that real estate investors will have to go through to achieve wealth and financial security. Here are a few steps to demonstrate:
Can you afford a house?
In this step, you will need to determine your eligibility to join the many homeowners and real estate investors. Accordingly, real estate investors must ask themselves whether they can afford to own a property or not. If yes, how large of a property can you afford, and how to go about financing and obtaining a mortgage? Most importantly, do you have any money saved up for a down payment or are you looking to buy an investment property with no money down?
These technical questions will help you find a real estate investment strategy that will suit your house hacking lifestyle and ultimately generate a passive income. So, take the time and figure out these details before shopping for a mortgage.
Are you shopping for a mortgage? Read this blog post to learn all about investment property mortgage rates in the US housing market: Learn the Ins and Outs About Rental Property Mortgage Options.
Pick a location and start your property search
It’s always a good idea to start with locations you know, preferably in a city or neighborhood where you live or have lived in before.
We’re simplifying the investment property buying process a lot, but if you’re interested in knowing how to find an affordable and lucrative real estate investment, click here and use the property finder offered by Mashvisor’s investment property calculator.
Finding the right investment property is an achievable task for the determined house hacker! With today’s technology, real estate investors can locate the exact features they are looking for in an investment property without leaving the comfort of their own home. With investment property calculators helping real estate investors calculate cash flow, cash on cash return, and even occupancy rates, it’s not difficult to spot that golden goose of a property!
Buying and closing on a property
Buying an investment property and finding the right financing is not all that different than buying a house for yourself. In any cash with house hacking, you will get to benefit from residential real estate loans as this investment property will be your primary residence. This is an advantage that not many real estate investors can utilize to their advantage when financing investment properties.
Closing on the property is going to seem longer than it actually is. Many first-time homebuyers felt that the closing period took forever after an offer was accepted. So, be patient and stay calm until you start your real estate investing career!
Check out Mashvisor’s investment property calculator and make use of the 14-day free trial by clicking here.
Wondering about investment property closing costs? Read this blog post: Buying an Investment Property: Do Buyers or Sellers Pay the Closing Costs?
Managing the investment property
This is where real estate investing takes the course of house hacking. If you’re buying a property that does not require renovation (most likely you should), you can start renting out bedrooms in your first rental property right away. On the other hand, if you end up buying a fixer-upper, then you should think of the best way to maximize the space allowing you to generate the most rental income out of your space. In other words, redesign the property to contain more bedrooms, bathrooms, and ultimately more rental income flowing your way!
Rent out to tenants
This should be a subcategory that falls within managing your property. However, we chose to stress the importance of the landlord-tenant relationship with this real estate investment strategy. After all, you are living, sharing a kitchen, and sets of keys with your tenant. Here are a few pointers to keep the status quo through your first house hacking experience:
- Screen the tenants
It’s an obvious one. When you’re living with your tenants under one roof, you’re going to want a full credit score and criminal record. I don’t know about you, but I tend to like knowing who I’m living with!
- Run a tight ship
With house hacking, you’re going to go through roommates and housemates at a fast pace. You will find great friends and you will make foes. In the end, it all comes down to being professional and do onto others what you want others to do onto you! After all, you’re in the house hacking business for the money! Don’t forget that.
- Handle problems at birth
When any problem arises with your property, whether it’s as insignificant as someone not doing their chores or someone late on their bills, it’s better to handle a problem at birth than procrastinate dealing with it and allowing it to develop into a messier mess.
Grow your real estate investment portfolio
Once a real estate investor buys that first investment property, the motivation kicks in to buy more! Take your house hacking experience as an intro into buying rental properties and let it teach you how to manage and handle a property. When buying more investment properties, things will be different with owner-nonoccupant properties as loans will have more interest and down payments don’t seem to be lower than 20%.
More thoughts on growing your real estate investment portfolio? Read this blog post: How to Grow Your Real Estate Investment Portfolio in No Time.
House hacking is among the trending real estate investment strategies that millennials are using to hack their lives through cheaper and more affordable options. Additionally, real estate investors are broadening their horizon when it comes to buying investment properties and generating a worthy cash flow through it! Through house hacking, you can become the landlord and the tenant as a strategy for making money in real estate. Now, that your investing excuses have been thrown out the window, start real estate investing and building the financial life you desire!
If you have any more insights on house hacking, please share them with us in the comments section.