Making Renters Pay Your Mortgage?
House Hacking Explained!

8 min watch | July 26, 2024

In this episode, Seamus and Krista explore the concept of house hacking, a strategic approach for beginners in real estate investing. This method involves renting out part of one’s primary residence to help offset mortgage payments, providing a practical way to dive into real estate investment with minimal initial capital.

Presenters

Senior Education Content Manager

Key Takeaways

Why House Hacking is Ideal for Beginners:

The hosts discuss the advantages of house hacking, noting that it requires less capital upfront compared to purchasing a separate investment property. They highlight how it enables owners to qualify for homeowner’s insurance rates, which are typically lower than landlord insurance, and reduces overhead costs associated with managing a separate rental property.

Choosing a Suitable Property for House Hacking:

Seamus and Krista explain the types of properties best suited for house hacking. Multi-family properties are preferred for their ability to provide privacy and security, though they come with higher acquisition costs. Single-family homes with features like separate entrances or additional kitchens can also be effective, and basements with separate entrances are particularly well-suited for this strategy.

Considerations and Steps for House Hacking:

The conversation covers essential considerations and steps to undertake house hacking successfully:

Research Local Laws and Regulations: Understanding landlord-tenant laws and residency requirements to ensure compliance and avoid legal issues.
Build a Finance Team: Engaging with multiple lenders to find the best mortgage rates and terms.
Assemble a Real Estate Team: Working with real estate professionals to find properties that meet house hacking criteria.
Purchase and Prepare the Property: Ensuring the property is up to code and has all necessary amenities for renting out.
Find and Screen Tenants: Advertising the rental space, accepting applications, and conducting thorough tenant screenings.

Benefits of House Hacking:

Generates income to help pay the mortgage, thereby reducing personal living expenses.
Offers the convenience of managing the property in-house due to proximity.
Allows for homeowner’s insurance rates, which are more affordable than landlord insurance.

Drawbacks of House Hacking:

Requires living in close proximity to tenants, which may not suit everyone’s preference for privacy.
Involves the responsibility of maintenance and ensuring the property meets all safety and habitability standards.
Necessitates a strict tenant screening process to find reliable renters.

Conclusion

Seamus and Krista conclude that house hacking presents a unique opportunity for individuals to begin their journey into real estate investment. By leveraging their primary residence to generate income and following the steps outlined, beginners can navigate this investment strategy effectively, potentially laying a foundation for future real estate ventures.