By Peyton Zachrich - A powerful personal finance strategy & a good way to begin real estate investing for many
House hacking is when you live in one of the multiple units of your investment property as your primary residence, and use rental income from the other units to pay your mortgage and expenses.
You search for a 2-4-unit property and live in 1 of the units. This enables you to get owner-occupant financing, so you can buy with a down payment of only 3-5% of the purchase price, rather than the 20% you need for other investment properties. This makes it the best on-ramp to real estate investing for many people.
You're able to make the investment with much less capital - on a $200k investment property it's the difference between needing 10k (5%) and needing 40k (20%) saved up for a down payment. And it tends to be more efficient than other rental properties due to lower financing and management costs.
A house hack can reduce or eliminate your housing expense. If you would've otherwise been spending $750/month on housing expenses, then you would free up an extra $9000 per year to invest toward your goals.
Because you'll be living right in your investment, you can keep a closer pulse on how things are going and learn as you go. You can apply what you learn (and the money you save from reduced housing expense) toward investing in rental properties.
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