House Hacking January 21, 2024

House Hacking: Turn Your Home into a Money Magnet for First-Time Buyers

Buying a home feels like a giant leap, especially with housing costs rising. But what if you could live for free (or almost free) while building wealth and property ownership? That’s where house hacking comes in, a creative strategy that first-time buyers can use to make their home pay for itself!

Here’s how it works:

  • Buy a property with rental potential: Think duplexes, triplexes, homes with in-law apartments, or even single-family homes with rentable basements or spare bedrooms.
  • Future rent can make you look better. Lenders may count a portion, perhaps ¾, of the expected rental income on a signed lease towards your debt-to-income (DTI) ratio, thus decreasing your risk profile to a lender 
  • Look for the lowest down payment, lowest interest rates possible. And “owner occupied” rates are generally lower that investment property rates
  • Live in one part, rent out the other: Your tenants’ rent helps offset your mortgage, lowering your housing costs significantly or even covering them entirely. The more of the space you rent out, the more revenue, so try to live in the smallest part!
  • Build equity and wealth: While you enjoy living in your home, you’re also building equity and gaining valuable experience as a landlord.

Sounds too good to be true? Here are the benefits:

  • Reduced housing costs: Instead of you paying a landlord, you are getting paid. House hacking can slash your monthly expenses, freeing up cash for other priorities.  
  • Faster wealth building: With rent income contributing, you can accelerate your mortgage payments and build equity faster, putting you on a path to financial security.
  • Real estate experience: Learn the ropes of property management firsthand, gaining valuable skills for future investments.
  • Flexibility: Depending on your needs, you can adjust your rental situation as your life changes. Perhaps later you leverage the equity into a second purchase.

Ready to unlock the potential of house hacking?

  • Do your research: Explore different property types, financing options, and local rental regulations.  For example, various Boston and surrounding towns have rules about accessory dwelling units (ADU), and you may not have to live in the larger portion.
  • Connect with experts: Consult with realtors, lenders, and property managers who specialize in house hacking.  Mortgage brokers in my network certainly can help first-time home buyers and house hackers to be!
  • Crunch the numbers: Carefully calculate your potential rental income and weigh it against your expenses to ensure it’s a financially sound decision. With high rents in the mix (that you pay by not owning, or are paid when you own), perhaps hacking numbers are in your favor?

House hacking isn’t for everyone, but it offers a powerful way for first-time buyers to break into the housing market and get ahead financially. So, explore your options, and see if turning your home into a money magnet is right for you!