In the last several years, millions of so-called ‘life hacks’ have gone viral on the internet. From quick DIY construction tips to organizational tricks, hacks promise to make your life easier and save you time and money.

One of the most popular hacks for people who are involved in real estate is ‘house hacking.’ House hacking is considered one of the best ways for first-time real estate investors to put their capital into real estate assets, while living for free at their own investment property.

What is house hacking?

As people invest in their education, progress in their careers and grow their families, they typically choose to stop renting and purchase a home to live in. Owning your own home can give you an incredible sense of pride and independence, but you will likely still be saddled with monthly mortgage fees that can be as high, if not higher, than the average cost to rent. With these monthly payments, you might not be able to save as much money as you’d like to for retirement, investments and discretionary purchases.

This is where house hacking comes in.

House hacking allows you to maximize your initial investment in real estate by purchasing a multifamily residential property, renting out the units and reserving one unit for yourself to live in. In this way, you can make enough money to cover all of your property’s expenses—including mortgage payments, utilities and taxes—while making an additional profit that you can put towards future investments and your personal savings.

Instead of following the normal progression of buying a starter home and then investing in profitable real estate later on, you can get started with a profitable real estate investment right off the bat.

Benefits of house hacking

For many prospective investors, house hacking offers a way to get involved in real estate much sooner than they could otherwise. Here are a few of the most significant advantages of house hacking:

·Minimize expenses: On average, Canadians spend nearly 30 percent of their monthly budget on housing. Through house hacking, you can cut your budget by a significant margin, build your wealth and pursue other investment opportunities with your saved capital. This takes a lot of the stress and burden off of you so you can focus on developing in your career or growing your personal investment portfolio.

·Leverage financing: In many cases, investors who purchase multifamily properties are eligible for financing with smaller down payments. Owner-occupied financing also tends to be a better deal for investors than standard investment financing, meaning you can save on fees, interest rates and upfront costs.

Develop real estate skills:House hacking is a great way to get started in real estate investment for the first time. It gives you the opportunity to learn about real estate firsthand and develop the skills you need to grow your portfolio with additional investment properties in the future.

Getting started with house hacking

If you’re wondering whether house hacking is a viable option in the area where you live, the answer is probably yes. The reality is, there are multifamily properties and a demand for rentals, at least to some extent, virtually everywhere. First time investors should start with a property with four units or less to maintain cash flow, without dealing with the complexity of the commercial real estate market.

Depending on how much capital, time and energy you want to invest in house hacking, you can decide whether you want to buy and flip a property or purchase one that’s ready to rent. Flipping a property allows you to purchase for a lower price and increase value through remodeling and renovation, but it will take more time before it’s move-in ready for you and your renters. Purchasing a move-in ready property, on the other hand, will cost more upfront but will fast-track the profitability of your property.

The most important thing for you to do before you get started with house hacking is to find a real estate agent or other qualified advisor. They will be able to help you assess all of your different options and provide you with the information you need to make the best investment decision possible.

When you research your options, plan thoroughly and take a strategic approach to house hacking, you can enjoy all of the many benefits of this investment option. When it’s done right, house hacking can help you achieve your investment goals much more effectively and efficiently.