House hacking is now getting popular and many people started to try it. This is one of the most promising real estate investing strategies especially for new investors. There are lots of new investors who are discouraged in starting their career in real estate business because they haven’t purchased their own home yet. This is one of the hurdles they think is the hardest. However, house hacking gives new light in real estate investing and a great feat to try by new investors even when they haven’t purchased their own home yet.
Helpful tips to house hacking effectively
House hacking is real estate investing strategy in which the investor rent out part of the property they live in. For example, if you live in one of the units of your multifamily property then you rent out the others. However, it isn’t limited to those who live in multifamily property only. Even if you live in a single-family home you can rent out one of the rooms and it is still counted as house hacking.
There are various benefits you can earn from house hacking. First, you will earn passive income. Second, you have chance to learn more about real estate business and how it works through smooth transition. Third, your household expenses will be reduced. Fourth, you will be able to pay down your mortgage quickly and save up. Here are some tips for house hacking:
- Before anything else, you need to know how to find the right and best property. You can purchase multifamily property so you can live in one of the units and rent out the rest. Or, you can also purchase single-family home and rent out one of the rooms.
- Decide your funding source since finance is one of the most important keys in real estate investing. Keep in mind that by implementing house hacking strategy, it means your status is as an owner-occupant. Thus, determine what kind of funding that benefits you the most. There are various options you can choose. Make sure to choose the best deal for the loan.
- After deciding funding source, you need to do market research to find the best property. Once you find it, you need to run the numbers. You need to analyze the deal and find out more about the value of the investment. In running your numbers, you need to make estimation of rental income and property expenses. You need to do thorough calculation which includes property taxes, rental income, vacancy reserve, insurance, maintenance, utilities, and operating expenses.
By following those tips, your house hacking strategy will be running smoothly especially in the beginning. It is important that you plan everything thoroughly because even though this strategy looks simple, you still need to calculate your steps since real estate business is about game number. However, house hacking is more flexible than other real estate investing strategy since this is the very beginning of your journey to property industry. You will learn everything eventually.