Are you up to date on all things related to real estate investment strategies? If so, then you may have heard mention of house hacking. Simply put, house hacking is a real estate investment strategy to follow when you want to own real estate but cannot afford a single family home. There are many ways to house hack and in this post we will focus on multi-family rental properties.
It is when you live in one of the properties and use that property as your primary residence. The others residing in the other units are renters and they are the ones that ultimately pay for your mortgage and expenses.
Now that we have an idea about what house hacking is, let’s take a look at some of the other basic information.
Why House Hack?
The main point of house hacking is having other people pay for all of your housing expenses. When you have this kind of advantage, you can then focus all your efforts on continuing to grow your real estate portfolio. Other benefits of house hacking include:
Increased Cash Flow. This is one of the main benefits. You will be able to accumulate extra income each month after the expenses have all been paid. You can then use the extra cash to pay down the mortgage or invest in new properties.
Financing. It also provides you with a means of financing other real estate deals. For example, if you finance through an FHA loan, you put down 3.5 percent.
Experience. For conventional financing in the future, house hacking is a way to show that you have successfully owned and managed rental properties before. This may improve your chances of receiving higher loans in the future.
Good Starting Point. It is also a good starting off point if you are a new real estate investor. The property you are living in will be considered your primary residence which means you will also have full advantage of all the benefits owner-occupancy allows.
Steps to House Hacking
To get yourself moving in the right direction, you need to first commit to the concept of house hacking. You can then begin to prepare your financing and study your market. You want to increase your chances of finding a great investment property.
You will then create a deal finding plan. Remember, a good deal seldom lasts long. Finally, take action. Don’t just sit behind the computer. Get out into the neighborhoods, check out the areas, find the properties, and keep the momentum going.
Before investing in this kind of real estate strategy, you will want to make sure to do your research when it comes to financing and acquiring these kinds of real estate investments. Don’t just jump on the first thing that comes along. Make sure you get pre-approved prior to going to market, this is the first hurdle to take.