House Hacking | The Fastest, Easiest Way to Invest in Real Estate

House hacking is a term used for a specific strategy that is ‘hacking’ your way into real estate investing.

What is House Hacking?

House hacking is when you create an income stream from the property you are living in. The most aggressive house hack is purchasing in a 4plex, living in 1 unit and renting the other 3. Other options include: renting one or more roommates, purchasing a 2 or 3 unit property, living in 1 unit and renting the other units traditionally or on AirBnB.

Most Aggressive House Hack Strategy

This method is not for everyone, but those who are determined and have some flexibility in where they live, this strategy allows investors to build their portfolios with little to no money down.

Using FHA or other low down payment programs, investors qualify for an owner occupant loan. Most of these loan programs allow you to purchase up to a 4 unit property, the only catch is you must live in one of the units for at least 12 months.  You can repeat this process yearly, up to 10 properties with most loan programs available.

  1. Buy a small multi-family property with a low down payment such as 5%.  On a $600,000 property, this is $30,000 down payment.
  2. Move in & Rent the other unit(s). 
  3. Live with a lower monthly housing payment.
  4. Save up another down payment.
  5. Repeat yearly for 10 years+ keep the original property as rental. 
  6. Own 40 units in 10 years = Retire Early!

how to make money when you buy real estate

Why House Hack?
  1. Personal Finance | House hacking reduces or eliminates your monthly housing payment + converts your monthly rent liability into a monthly mortgage liability.  In time, this liability will be paid in full with the properties income; At that point, this property is officially a cash flowing asset!
  2. Low Down Payment | Many would be investors cannot get started because the lack the 25% down payment. House Hacking allows you to get started building your rental portfolio immediately by taking advantage of Owner Occupant Financing. 
  3. Entry Level Investing | Living on-site gives you an opportunity to learn the fundamentals of property management; Eventually, you will likely hand this off, but you will fully understand what your managers are doing on your behalf. 
Who Should House Hack?

House Hacking is an appropriate approach for buyers who:

  • Want 1 or more Cash Flowing Asset(s)
  • Don't mind living next door to their residents
  • Don't mind moving in 1-2 years
  • Prefer to put down 3.5%-5% rather than 25%
House Hacking Strategies

The classic House Hack strategy is to purchase a multi-family property, however, this is not the only approach. Any way you can produce income from your primary residence could be considered a house hack, such as:

Analyzing House Hack Deals

Here's a tutorial video demonstrating how to use Sagareus House Hack Deal Analyzer:

 

This video refers to the Conventional Buy & Hold Analysis + Deal Analyzer, which is similar to House Hacking except you don't live in the property. If your plan is to Buy a property using the House Hack strategy, then move out and keep the property long term, analyzing the deal with both approaches is very helpful.  Here is the Conventional Real Estate Investing article which includes a tutorial video as well. 



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