How would you feel if you could live for free?
Although it may sound like a pipe dream, it is attainable through house hacking.
Let’s take a closer look at this transformative lifestyle decision that has the potential to completely alter your financial destiny.
What is the term “house hacking”?
House hacking is a technique for purposefully lowering your housing expenses.
To simply put it, you rent out extra room in your home to cover the expense of your mortgage.
The objective is to live rent-free by charging tenants an amount sufficient to satisfy the total mortgage.
There are numerous ways to home hack.
Whether you choose a single-family residence or a multi-family structure, the objective of renting out the additional space stays the same.
Without the financial pressure of monthly housing bills, you may focus more easily on other financial goals.
House hacking enables faster debt repayment, more careful retirement savings, and a total break from the paycheck to paycheck cycle.
Can you really live for FREE?
Yes, in a nutshell.
It is entirely possible to live for free using house hacking techniques.
While it will need some inventiveness, the payoff may be well worth the effort.
You may rent out an extra room or a separate unit through home hacking.
However, the purpose of renting out your space is to cover the total cost of your mortgage.
Depending on your house hacking abilities, you may be able to live in your own home for free.
You may even be able to earn more in rental income than you pay in mortgage payments and earn money for living in your house.
However, even if you are only able to offset a fraction of your mortgage payment, home hacking remains a viable option.
Money saved through any level of house hacking can still have a significant influence on your life.
How does the process of house hacking work?
When it comes to house hacking, the fundamentals stay the same.
The ultimate goal is to cover the cost of your mortgage with rental income generated by tenants.
Thus, a good home hacking plan is one that secures tenants for the property’s additional space.
You may be able to create rental income by renting out a spare bedroom or a completely separate home.
Rental revenue can be used to pay off your mortgage.
Once you’ve experienced what it’s like to live for free, it’s tough to imagine living any other way!
Methods of house hacking
While the fundamentals will remain the same, the specifics of your house hack will vary significantly depending on the property.
Consider some of the alternatives in greater detail.
- Buying a 2 family home
Many people use this hack when they are first-time home buyers and want to save some money.
The idea is to buy a multi-family home (2 families to 3 family home), you will choose 1 apartment to live in and rent the other one, some cities will allow you to rent out your basement and attic after getting the right permits, which will also give you some extra income and help you offset your mortgage.
- Renting out individual rooms in a single-family residence
By renting out rooms in a single-family home, you can reduce your living expenditures.
With this type, you will almost certainly be required to share common areas with your tenants, such as the kitchen and bathrooms.
- Renting out appartments in a multi-family dwelling
Renting out apartments in a small multi-family property is another possibility.
In most circumstances, traditional owner-occupant financing will allow you to purchase a four-unit property.
This enables you to rent to tenants without requiring them to share any shared area.
Benefits of house hacking
House hacking is an excellent way to reduce your monthly bills while increasing your equity in a property.
You would likely adopt the role of landlord for your tenants in this plan, which entails some work.
Each year, you may save thousands of dollars by eliminating your housing bills.
The Bureau of Labor Statistics reports that the average American household spends more than $10,000 on housing costs each year.
Naturally, the amount you can save by removing your housing bills will vary by region.
In San Francisco, for example, the average rent is almost $3,600.
When compared to Orlando’s average rent of $1,435 per month, this technique may save you more money if you live in a high-cost location.
Finally, the decision to explore this opportunity will be driven by your objectives.
If you are comfortably fulfilling your savings goals, house hacking may not be worthwhile.
However, if you’re seeking ways to cut costs, house hacking should not be overlooked.