House Hacking - Grade: A PDF

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The Investors Guide to House Hacking Are you a prospective investor looking forward to starting a career in the real estate business? If your answer is, yes, then this ultimate guide on house hacking is for you. I am sure if it is the first time you are hearing of the term “house hacking” it might sound scammy or even fraudulent. However, real estate investors have made wealth for decades using this clever and legitimate house hacking strategy. It is relatively one of the easiest ways for any aspiring investor who wants to get into the real estate business because if well utilized it can completely eliminate your housing expense. This means that when the house hack is correctly done can see get a house and live for free. Do not pay for your home! Hack it and get a house for free with this clever strategy that has been used for decades now. What is House Hacking? “House hacking” is a term commonly used in real estate investment to describe the act of purchasing a multi-unit property or rather a multiplex home, living in one of the house units, and then renting out the rest of the units to other people. The goal of this strategy is usually to live for free whereby; the entire mortgage is paid for by the rental income generated from the tenants. For this reason, it has proven to be a lucrative investment strategy that can save you thousands of dollars and provide amazing financial freedom. Investors getting into house hacking as part of real estate investment are advised to ensure they charge enough rent to cover monthly house expenses and mortgages. What are the benefits of House Hacking? House Hacking brings forth very amazing benefits to real estate investors if done accurately. These benefits include: 

Investors can easily grow their wealth through passive income – the monthly cash flow generated from rentals helps investors cater for their monthly utilities and mortgage rather easily and faster. Once the mortgage has been paid off, the investor can easily save from the passive income thus enabling them to buy their next investment property.

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It guarantees flexibility- in case the investor wants to move to a new location with their family, they can rent their own unit and continue earning passive income. This is done without having to sell the whole multi-unit property because you are moving to a new location.

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Reduces and eliminates the investors’ housing cost- Even though purchasing the multi-unit property the first time can be costly because of the high upfront, renting out the other units means that the tenants will pay the mortgage for you. In other words, you will live for free.

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It is an easy way for beginning investors to enter into real estate investment – this strategy ensures that the financial burden on the investors is less and thus risks are minimized. It is also easy because the property acts as both the investors’ primary residence and investment property. Consequently, living with the tenants in the same property helps to hone the investors’ property owner skills.

How to house hack Before planning how much to charge your tenants and where to get them, it is important to understand what it takes to get the right property. It is also essential that you as an investor understand how to find the best hack house, how to finance the hack house, how to purchase your first house hack, and how to run the numbers for f. How to finance your multi-unity property There are several financing options available to investors seeking to engage in real estate investment through house hacking. They include: 

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FHA Loans – These loans are very friendly and most suitable for first-time real estate investors because they lower credit scores. Borrowers are required to put down only 3.5% of the property cost and their interest rates are very low. With a credit score of 580 or higher, you can easily get a loan. In case, your credit score is less than 580, you can get the loans by paying a down payment of 10% of the purchase price. FHA 203k Loans –these loans are available for investors seeking to repair and improve their units before renting them out. It is a great option because it lets you as the investor borrow up to $35,000 for renovation purposes. It requires a down payment of 3.5% for investors with a credit score of 620 or higher. Other financial options available for real estate investors include VA loans and conforming loans, which sometimes do not require down payments and are very low costs. However, the credit score should always be above 620. Investors can also make use of the BRRR method, which involves the use of short-term funds to renovate and rent out the property. Long-term mortgage repayments then follow these rehabilitations. More information on this financing option can be found at the BRRR strategy.

How to find the Best Hack House When purchasing your multi-unit property, it is important to have the real estate property owner mind-set. This is because the house you choose to hack will determine not only the purchase price but also the rent price and the marketability of your estate.

Location can easily make or break your real estate investment career, therefore, be careful not to buy a home in a bad neighborhood even if the deal sounds juicy. Some of the real estate investment choices that have produced the best house hack investments with good returns include Fixer-uppers, HUD homes, and foreclosed homes. As a beginner in real estate, you should look for guidance from an experienced real estate agent who will help you understand the prevailing purchase and rental prices. When looking for a good house to hack put into consideration the following aspects. Does the property or home have multiple dwelling units? Does it have more than three bedrooms? Is it located close to social amenities such as hospitals and schools? Is it close to public transport networks? Does it have enough security? Lastly, does it have comfortable living spaces? If your answer to these questions is, yes, then you are good to go. The availability of additional dwelling units and easily convertible areas is also an added advantage because it provides more rental space to add bedrooms thus making a great investment opportunity. Running the numbers for House Hacking Running the numbers seeks to find out whether the investment is worthwhile or not. Several calculations involving your rental income and property expenses are carried out to arrive at the Net Operating Income (NOI). With the help of NOI, you will be able to calculate how much passive income you can make minus monthly utilities. NOI – loan principal + interest = total monthly cash flow The following items should be included when calculating for net operating income: Maintenance & repairs, income from rentals, property taxes, insurance, monthly utilities, and operating expenses. The next calculation involves getting your mortgage monthly payment. It requires the purchase price and estimated down payment amount. There is an online calculator called Mortgage Calculator, which helps prospective investors to do their math online with much ease. To get your monthly income, the monthly expenses are subtracted from the net operating income. A positive figure means that you are living for free and making some profits from your investment whereas a negative income flow means that you are still paying part of your multi-unit property. It is paramount that investors run an accurate before making any investment decision to avoid falling for the wrong deal. Here is more information for first-time investors

If you have followed this guide keenly, you are just a step away from owning your first real house investment through house hacking. Go for it and start making your lasting wealth from this lucrative deal....