Definition:
House hacking in real estate refers to a strategy where an investor lives in one of the units of a
multi-unit property while renting out the others. This approach can significantly reduce or even
completely cover the owner’s living expenses, making it an attractive investment option.
Advantages:
Reduced Living Expenses: By renting out one or more units in your property, you can
offset or completely cover your own living expenses. This can include mortgage payments.
property taxes, insurance, and maintenance costs.
Builds Equity: As you pay down the mortgage with rental income, you’re building equity
in the property. Over time, this can lead to significant wealth accumulation.
Potential for Cash Flow: Depending on the rental income and expenses, house hacking
can generate positive cash flow, providing you with extra income.
Owner-Occupant Financing: House hacking allows you to qualify for owner-occupant
financing options, which typically have lower down payment requirements and more
favorable terms compared to investment property loans.
Tax Benefits: House hacking offers various tax advantages, including deductions for
mortgage interest, property taxes, maintenance expenses, and even depreciation.
Diversification: Having multiple units allows for the investor not to rely on a single tenant
for the rental income. This provides a more stable and reliable source of cash flow
Types of Properties that Are Suitable:
Duplex
Triplex
Fourplex
Larger multi-unit buildings
Financing Options
When it comes to financing, it’s important to think differently. There are ample numbers of
investors that look into house hacking. If the property is listed on the MLS, I like to think in
terms of the landlord: what makes my offer stand out, Why should I pick person A’s offer over
person B. Just recently, I had an experience where my client won the house and got under
contract because of the creative financing options that are out there.
FHA- typically 3.5% of purchase price
VA- must be an eligible veteran, active-duty service member, member of the National
Guard or Reserves
Conventional with low downpayment- if the downpayment is less than 20%, PMI (private
mortgage insurance is required to protect the lender in the event of default.
Seller Financing- all financing goes towards the seller hence seller’s financing. This
includes downpayment, purchase price, interest rate, and repayment schedule. Regarding
purchase price, interest rate, and repayment schedule it comes down to the seller and buyer
agreeing before signing.
Tips for Success!
Effective tenant screening
Budgeting
Long-Term Planning
Contact me to get started on the journey
⭐Words of Wisdom by Ryan⭐:
To get something you’ve never had, you must do something you’ve never done!
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