House hacking. It’s one of the less popular terms in real estate. But you’ve probably heard of it without realizing there was an official name. Simply put, it is a strategy where you live in a primary residence, but also rent out portions of your home to offset the mortgage cost as well as any other home expenses.
For example, you may have purchased a duplex, live on one side, and rent out the other side. Or maybe you have a guest house on your property that you can rent out. Or a finished apartment above your garage or finished basement that you rent out. You can even list a room in your house on a platform such as Airbnb. These are all examples of ways in which you can collect money to help pay your bills without continuously buying additional investment properties. Sometimes, you can generate enough income to live for free, and even make a profit.
How Is House Hacking Beneficial?
With house hacking, you’re benefiting yourself financially. You’re doing this by essentially utilizing every ounce of value that you possibly can from your home. If you previously rented, and purchased a home with the goal of house hacking, you are now able to accrue some tax incentives such as home mortgage interest deduction (HMID).
For a majority of homeowners, housing expenses are the most expensive monthly cost. Through house hacking, your budget can improve significantly, freeing up more money. You can use this extra cushion of money in various ways. It can be for investing, saving, home improvement projects, paying off debts, paying down your mortgage quicker, etc. House hacking is also a great way to easily transition into the world of real estate investing. However, it’s done without the extra upfront risks and cost associated with a different way of investing, such as buying a second home as an investment.
House Hacking Challenges
As great as that may sound from a financial standpoint, house hacking will involve extra work. You’re essentially a landlord. If someone is renting a property from you, you’re held accountable for general maintenance. If things within the home break, you need to fix them in a timely manner. You also have to find responsible tenants. If you’re just renting out a room in your house through a platform such as Airbnb, you’re going to need to make sure it’s furnished and clean. You want to make sure your guests are comfortable. If they have a positive experience, they’ll give you good reviews. This way, more people will want to continue to book your room through the website. However, going that route, you’re giving up some of your own comfort, privacy, and freedom by allowing strangers to stay in your primary residence.
Deciding If House Hacking Is Right For You
Now that you know some of the general benefits and challenges of house hacking, you’ll need to decide if it’s the right decision for you. If you decide that house hacking is in fact right for you, you’ll need to plan accordingly for ways to utilize this strategy within your existing home, or when looking for a new property to purchase. Once you’re committed to the concept, you need to prepare your financing accordingly, study your market, create a plan, and take action.
With doing this, you may want to work with expert real estate agents that can help you find the right home to help fill your wants and needs through house hacking. If you work with an expert agent at Trelora, their team-approach will assist in ensuring that you find the right property, all while saving you money.