Victoria, Canada – October 02 2017: Semi detached two storey/ double floor townhouse with front porch in Victoria, Canada. Single family house/home. Real estate architecture design.
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These days, it seems like there’s a life hack for everything, even real estate. In recent years, “house hacking” has become a popular way to keep costs of living affordable while still enjoying the benefits that come with being a homeowner. To that end, I decided to break down this trend, including what it is, how it works, and what you need to know before getting started. Read on to learn how you can get in on the house hacking movement.
What is house hacking?
Put simply, house hacking is a way to cut down on your living expenses while simultaneously building your home equity. When you house hack, rather than buying a condo or single-family home that’s just big enough for you, you shop for a multi-family unit instead. Then, once you’ve bought your home, you bring in tenants, who pay you rent and essentially cover the cost your mortgage.
House hacking has benefits for both the long- and short-term. Immediately, having tenants—or roommates if you’re renting out rooms in a single-family home—allows you to cut down on your costs of living while you still have the advantage of building equity. Long-term, when you’re ready to move on to a different living situation, you can keep your home in your portfolio as an investment property.
What you need to know before getting started
While house hacking may sound like a great deal, in order to make it work, you do have to do your your homework. With that in mind, here are some things that you should know before you start the process.
You need a great real estate team
Whenever you buy a house, you need to make sure you work with an experienced team of professionals, including a real estate agent and a lender. However, this is especially true if you’re house hacking. Even though the property you buy will end up being your primary residence, you’re ultimately looking for an investment property and you’ll want to work with an agent and lender who are experienced with that type of transaction.
Shopping for an investment property is all about the math
When you’re shopping for the home that you intend to house hack, you’ll want to think like an investor because that’s what you are. Buying an investment property is more about making sure that the math works than finding your perfect match. While, of course, you’ll want be happy in your home, you also need to verify that you’ll be able to charge enough rent to cover your major costs.
Use these equations to help you get started on the right path.
Being a landlord is a responsibility
While the idea of having someone else essentially cover a huge chunk of your costs of living is certainly nice, it doesn’t come entirely for free. After you’ve purchased your home, you’ll become a landlord. You need to be sure that you’re ready to accept responsibility for things like finding tenants, drawing up leases, and dealing with ongoing maintenance issues.