5 Reasons Why House Hacking is Worth it

If you have your own place, you may have heard of this thing called “House Hacking”. Although there may be some concerns with housing strangers, house hacking is worth if you your looking to utilize the property you own and generate a another stream of income. Since everyone has their own hardships and special circumstances, house hacking becomes a good alternative to owning investment properties or multifamily homes if you are unable to own one right now. Let’s look at some more reasons why house hacking is worth it.

1. A Single Family Home is a Liability

You may have learned from what we spoke about before that a house is better than an apartment. However, the first reason why house hacking is worth it because single-family home is a liability to the owner. Every month the owner has to pay down the mortgage in order to repay a loan. Although owning your own house is a typically desire for most people, owning a property without generating an income from it makes it a liability no matter how you look at it. Some might say it’s an investment and it could appreciate but, liabilities take money from  you every month and assets generate an income for you every month. As a result, it is not uncommon for the homeowner to be expected to pay down a mortgage in 25 years! Although this is normal, it is a very expensive lesson to learn. Loans benefit banks more than they do the homebuyer for single family homes. However, there is one way to help mitigate the risk of being responsible for a 25 year or more loan and that is house hacking.

2. It’s a New Stream of Income

One of the primary reasons why someone would consider house hacking is to generate a new source of income. If you have recently started learning about wealth building like how the rich get richer and the poor get poorer, you may have come across this creative method for turning your home into an asset. For anyone who has a goal to become financially free, reducing your liabilities and increasing your revenue streams will lead to time freedom. As a result, house hacking is a great way to get started without having to build a business from scratch.

3. You Can House Family and Friends

One con some people might consider for house hacking is housing random people. However, you do not always have to offer a room to strangers. You can always start with family or friends. The advantages of doing it this way is, you probably already know someone looking for a place. Moreover, you get to help your family or friends get on their feet if they’re going through a rough time.

Difficulty with Family or Friends

On the contrary to the pros of housing family and friends, be sure to let them know you are doing this as a business and you need the money to work towards your goals. Be sure to let them know you can not let them live for free. Otherwise, you property turns doing a favor for family and friends as opposed to generating a new stream of income. This can be a tough conversation to have later down the road when someone has already been living with you so be sure to have this conversation in advance.

4. Creative Tenant Demographics

One of the potential concerns with starting out with house hacking is how you will feel with a stranger in your house. For those who don’t think they have any friends or family who qualify as potential tenants, have you considered college students? What about elderly people who don’t want to live or can not afford senior housing? There are also foreign exchange student programs available for those who would like to have a younger student at home. The foreign exchange program would likely be a good option for a couple who does not already have kids in the house.

Free Marketing

No matter which demographic you hope to have as a tenant, at least you can find them for free. Sites like Craigslist.com and Zillow.com make it easy to market your property. Just simply create an account or profile with a similar site and list your property with as many details as possible. Once someone finds your listed property, you can get contacted via email or phone to qualify your tenant. 

5. Better than the Alternative

The next reason why you should use house hacking for another source of income because the other alternatives may be out of reach. Your only other option for getting some rental income outside of house hacking would be owning an investment property or getting a multifamily home. Although both property types are good options, there are challenges for both.

Investment Property Challenge

If you have tried already, it’s important to know that when you aim to purchase an investment property, the bank will require you to pay 25% down to own the property. Only needed 25% down is much better than needed the full purchase price however, 25% down can be a lofty amount if you do not have a lot of money saved up. 

For example, if you wanted to buy a house as an investment property at $400,000.00, the down payment required to close with a bank would be $100,000.00. If you had 100k sitting around, you probably wouldn’t be considering house hacking at all so, the downpayment is what makes an investment property the most challenging.

MultiFamily Home Challenge

The multifamily home is probably the least challenging of all invest property types. The only reason why this home type may be a challenge is that you currently have a loan on your residence now. As a result, the bank won’t allow you to purchase this property unless you currently do not have a home loan.

If you don’t have a home loan, a multifamily home like a duplex at minimum or a fourplex at most would be great options for generating a new income from your primary residence.

Conclusion

After now seeing several creative options for house hacking, you should now be able to see why this might be a good option for your. If you are not able to get an investment property or multifamily home, house hacking could definitely be worth trying. Who knows, house hacking could be the way you save that extra money to get an investment property or start a different business.

To get more tips like these check out our email list at this link. 

-Wisdom is shared here.