The term might sound silly, but “house hacking” is a great way to get into the real estate investment game. Simply speaking, you can have tenants pay your mortgage and related housing costs. This allows you to put your real estate investment capital into an income-generating property while keeping your cost of living minimal.

This method is popular among first-time real estate investors because you can build equity and live for free in your own investment property. Read on to find out if it could work for you.

But first, if you would like to see how house hacking can help you access exclusive mortgage deals and financing options, click the link below for a free strategy call today. Then our team at LendCity will help you find the best deal for your house hacking endeavours.

What is house hacking?

Buying a home is one of the biggest expenditures that you can undertake—but what if you got to bank your mortgage payment instead?

House hacking can take a number of different forms. Most often, investors purchase a multifamily property and live in one of the units. Rent from the tenants covers the mortgage payment, property taxes and other expenses, so you can save your housing costs for the next investment.

Since the average Canadian spends about 30 percent of their budget on rent or mortgage, this can free up a significant amount of capital. Basically, you’re purchasing a valuable investment property right away, instead of buying a home, then saving for investment properties.

Benefits of house hacking

Better financing options. When you live on your investment property, you should qualify for lower down payments, interest rates and fees. Investor financing tends to be more expensive—usually due to increased risk for the lenders.

Learn real estate investment skills. Living on your own investment property allows you to learn real estate investment and landlord skills firsthand. You can read all the articles in the world, but the best way to learn how to find properties, make offers and take care of your tenants is by doing it. Instead of waiting until you have another down payment saved up, you can learn these valuable skills right off the bat.

Keep your expenses low. Not having to pay your own rent or mortgage will enable you to save what you’re not spending. This is not only a good way to save for your next property, but the savings can also act as an emergency fund for major repairs and other unexpected expenses.

Discover How To Buy Unlimited Rental Properties With This Step By Step Guide

Different ways to hack your house

Live in one unit of a multifamily property

This is the most common way first-time investors hack their house. Whether you choose a duplex, triplex or a building with several flats, this allows you to take advantage of lower down payments and lower fees. It also creates personal space between you and your tenants, which you may not get with some of the other methods.

Live in a fix-and-flip while renovating

Fixer-uppers can usually be purchased at significantly lower prices. If you live in the fix-and-flip when you’re renovating it, you can take advantage of the lower financing options while getting it ready to sell. Plan to live in the property for a minimum of two years. After you sell, you can use the property to purchase a primary residence—or another fix-and-flip.

Rent out a room

If you don’t mind sacrificing some privacy and living with roommates, you can always rent one or more rooms in your primary residence. Assuming you can charge enough to cover the mortgage, this is a great way to pay off the house and save up for new properties. Just remember to research your local tenancy laws in the event that you eventually want the house to yourself.

Rent out the living room

Renting your living room is a more extreme version of renting a room, but it may be effective in high-cost of living areas like Toronto and Vancouver. Make sure you can earn enough in rent to offset the majority of your expenses. Otherwise, you might be stuck indefinitely with a roommate in close quarters.

Rent your primary residence while living in a trailer

If you can tolerate living in a much smaller residence, consider purchasing a trailer or RV to park on your property. You can rent out your primary residence and bank the savings for your next property. This is another situation where you’ll need to consult a local real estate attorney to ensure you’re not running afoul of the law.

Rent out an in-law unit

Finally, you can rent out an in-law unit or ADU (additional dwelling unit). This is a good middle ground between renting out a room and getting a multifamily property. Your rental unit should at least have a bathroom and kitchenette; private entrances are also a big draw. Some people even build tiny houses on their property to rent out for long and short-term tenants. Once you’re done renting your property, you can use these ADUs as guest houses, offices and more.

Remember, your tenants don’t have to be long-term. Many people are successful at using Airbnb to pay for the majority of their housing costs, freeing them up to purchase other investment properties in the future.

Getting started

There are a few things you’ll need to consider before you hack your house. First, is your desired (or existing) house “hackable?” Can you create separate rooms or units to rent out? Depending on what kind of building you want to own, and the tenants you want to attract, you’ll need to think long and hard about whether you can cope with other people living in your space.

Second, think about whether the rental market in your area can support your goals. If you need to raise $8,000 per month to pay for your multifamily property, but realistically can only recoup $6,000 of that each month, it’s not going to be a good investment. This will require research and networking.

Once you’ve created a financing plan and have located a few potential properties, however, house hacking is a fairly simple process. It can be an extremely easy and profitable way to launch your real estate investing career.

Once again, if you would like to see how house hacking can help you access exclusive mortgage deals and financing options, click the link below for a free strategy call today. Then our team at LendCity will help you find the best deal for your house hacking endeavours.

Thinking About House Hacking Set Realistic Expectation and Avoid These Pitfalls, w/ Scott Dillingham

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