Millennials feel the pressure to buy their first homes by society, but many are not able to make the investment. With student loans hanging over their heads, many of them are not ready to take on yet another large debt.
That is where house hacking comes in. With house hacking, Millennials can buy their first home and live in it for free! Rather than paying a monthly mortgage, Millennials are getting other people to pay it for them, while still building equity in their home. Living for free and starting a real estate investment portfolio sounds almost too good to be true.
What Is House Hacking?
House hacking is a simple way homeowners can live in their property for free. This is most commonly done with multiunit properties. The owner of the property will live in one unit and rent out the other units. The owner then uses the rent from the other units to pay the mortgage and other monthly expenses. This means no money comes out of the owner’s pockets!
This can also be done with a single family home. Depending on the owner’s situation, they may make their basement or garage into an apartment that they can rent out. Another option is to take advantage of being young and rent out bedrooms to friends and live with roommates for a few years.
The Financial Breakdown
When looking to buy a first home and start investing in property, house hacking is a way to beat the system. Many property investors have to put down at least 20% for their down payment. First time home buyers can put down as little as 3.5% for their down payment with programs like FHA. That’s unheard of in property investing!
Now, once it’s time to rent out the other units or rooms, it’s important to make sure the rent will cover monthly costs. The rent should cover the mortgage, property taxes, homeowners insurance, and any included utilities. The price should also factor a vacancy rate, any other expenses, and possibly a profit margin.
While the full mortgage may not be covered due to the market or condition of the rented unit, it can still significantly cut down the monthly cost of living in the property.
A New Type of Starter Home
Many first time home buyers will see their first house as a starter home. It isn’t their dream home, but it puts them one step closer. House hacking offers a different type of starter home. It’s a start to an investment portfolio!
With house hacking, owners will learn how to be a landlord, build equity in their home, and make a profit to put towards their next investment property. It will also help when trying to get a loan for a new investment because you’re experienced.
Are You Ready to Live for Free with House Hacking?
Everyone dreams of living for free. Stop paying your landlord’s mortgage and have tenants pay your mortgage instead. With house hacking, you can live for free or very inexpensively while building an investment portfolio. Talk to a real estate agent today to see what’s on the market in your area to get started.
About Agent Lady: Cherise Wynne is a leading real estate agent in Philadelphia, helping home buyers and sellers navigate the City of Brotherly Love, with a special focus on first time home buyers. To chat about getting started with your first time home buying experience, call 215-518-5193 or click here.