Investment Strategies How to Live for Free with the House Hacking Strategy by Heba Baker September 2, 2019September 2, 2019 by Heba Baker September 2, 2019September 2, 2019 Who doesn’t want to live rent free? There’s a way for you to get a start in real estate investing while also technically living “for free”. House hacking is one of the best real estate investment strategies and I’ll tell you why. Let me explain. What Is House Hacking? So what do we even mean when we say “house hacking“? This is a great investment strategy for anyone, but especially beginner real estate investors who want to own multi-family homes. You invest in a multi-family real estate property and live in one of the units. So it’s your primary residence. How to live for free by doing this? You cover your mortgage payments by renting out the remaining units of this investment property to tenants. Although house hacking is primarily used as a strategy for getting into multi-family investing, it can also be used when your primary residence is a single-family home. In this case, you’d rent out a part of your home, like a room or basement. Or maybe you planned on investing in a single-family home to flip for a profit. While you’re making improvements on your investment property, you can rent it out to tenants for some cash flow. But the main theme behind house hacking is to live in one part of the property and rent out the rest of it to cover your expenses. So you’re investing in an owner-occupied rental property, because you, the owner, are also living there. Tenants are paying for your primary residence. Whether these tenants are short term vacationers you’re hosting through Airbnb or full-time residents, the strategy works if you want to live rent free. It’s honestly a strategy that makes a lot of sense and can help you build wealth while developing your real estate investment portfolio at the same time. And that’s the basic concept behind how you can hack your housing. Related: 8 Best Real Estate Investment Strategies for Beginners House Hacking 101: The Benefits You already know what the basic advantage of house hacking is- it’s an answer for how to live for free. But with this strategy comes other advantages. Real Estate Investment Experience You can learn the ins and outs of operating a rental property, managing expenses, and handling tenants. It’ll be a smoother transition into the business of rental property investment when you have hands-on experience by living in one of the units of your rental property. Even if you didn’t have any dreams of pursuing a career in real estate investment, you can still pick up some valuable lessons by personally managing the property. Cash Flow Depending on the type of property you buy, the level of cash flow it will generate can differ. But with the right real estate investment, you can definitely expect positive cash flow. That’s the great thing about this strategy. It isn’t just a hack on how to live for free. After paying off your mortgage for the month, and any other expenses, you can save up whatever it is you have leftover. That cash flow will build your wealth and can pave the path for future investments. So what kind of home is best for house hacking? When it comes to house hacking, there are a couple of small multi-family real estate property types you can choose from. The duplex investment strategy is the easiest since you’re dealing with just a two-unit property, so you only need to handle one tenant. But whether you’re house hacking a duplex, triplex, or fourplex, it doesn’t need to be complicated. You can start searching for these types of properties and analyzing their investment potential (based on rental income, cash flow, etc.) with Mashvisor. Find a Profitable Multi Family Property Related: Is a Duplex House a Good Real Estate Investment? Airbnb House Hacking What’s great about house hacking is that it doesn’t just conform you to traditional rental strategies. If you aren’t ready for a tenant to occupy a part of your home for a long time, Airbnb is a great alternative. You can still generate enough cash flow by renting out a room or unit of your property on the short-term. And the short-term rental market is booming right now, so whether house hacking or not, Airbnb should be a serious consideration. How to Live for Free: Getting a Good Mortgage Another one of the advantages of house hacking is the financing options. Residential properties in the US housing market can cost hundreds of thousands of dollars. When purchasing an investment property, you want to get the best mortgage. Get a deal for a small down payment and low fixed interest rates. How can you get a mortgage like this? Consider these loans: FHA Loans When you invest in a property with an FHA loan (Federal Housing Administration loan), your down payment could be as small as 3.5 percent. For example, let’s say you’re buying a duplex worth $350,000. With an FHA loan, you’ll only need to put $12,250 down. This loan type is easier to qualify for and has low fixed interest rates for 30 years. Keep in mind, however, that every loan has its requirements. A key requirement for an FHA loan is that you need to occupy this investment property for at least 12 months. Live rent free for a year? It doesn’t sound like too much of an issue to me. VA Loans VA (Veterans Assistance) loans have attractive terms and easy qualification, but the catch is that these loans are only for US military veterans. If you or your spouse is a veteran, definitely ask about this loan at your local bank. Don’t miss out on the chance of paying 0 percent down on your home purchase. Conforming Loans Here we’re talking about loans that conform to the rules and guidelines set by Fannie Mae and Freddie Mac. Typically, they offer low interest with a 15 or 30-year fixed-rate mortgage. There is a larger down payment here though. The standard is about 20 percent down. But the reason this loan is great for house hacking is owner-occupied investments can qualify for a 5-10% down payment. Related: The 5 Best Real Estate Loans for 2019 To really live for free, you need to consider important factors like monthly rental income, vacancy rate, property taxes, property insurance, and utilities. To succeed with this real estate strategy you need to treat it just like any other rental property investment. Financing, managing, and profiting from a rental property may seem overwhelming at first seeing as there are a lot of numbers involved. But if you really want to use the house hacking strategy to live mortgage and rent free, you need to invest in the right property. Use our rental property calculator to analyze the profitability of any investment before you go through with it. Get investment insights you won’t find anywhere else. Start out your 14-day free trial with Mashvisor now. Start Your Investment Property Search! START FREE TRIAL AirbnbHouse HackingMortgageMulti FamilyOwner OccupantTraditional 0 FacebookTwitterGoogle +PinterestLinkedin Heba Baker Heba is Content Writer at Mashvisor with a BA in Business Administration. Most of all, she enjoys writing about the constantly changing markets in the US real estate industry. If not writing, Heba is exploring and learning. 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