With the birth of Air B n B and other DIY rental sites, as well as the rise of the Financial Indedepent Retire Early (FIRE) Movement, the concept of house hacking has gotten more popular in recent years. But this has long been a common strategy used by those investing in real estate as well as homeowners who want to decrease their living expenses.
Simply put, house hacking is a way of making money by renting out rooms or parts of your house. It works best in multi-family homes where a person or family can live in one unit and rent out the others. This can significantly offset living costs, and, in some cases, owners can even lower the costs of their rent or mortgage to the point where it is nonexistent.
Read on to find out more about how this strategy works and how you can use it to increase your income.
Benefits of House Hacking
House hacking is a great way to offset your living expenses and other monthly costs. But that’s not the only way homeowners can benefit.
Homeowners that rent out their spaces can also afford to move into areas that are closer to their work, minimizing time spent in traffic as well as any transportation-related expenses.
Another bonus is that you can learn how to be a landlord as well as the skills that will help you become successful in the world of real estate investing.
How Do I Find The Right Space For House Hacking?
If you are looking for a property that you can use for house hacking, you must look for a space that has certain characteristics. Here are some features that will work well for a house hacking venture.
Multi-Family Properties
A property where there is more than one unit will be ideal for house hacking, and the more units, the better. However, the neighborhood where the property is located should also be considered. Some neighborhoods are zoned for multi-family housing, and some are not.
If the neighborhood is zoned for multi-family housing, it is likely that a lot of investors have already flooded the area, so there is a higher concentration of tenants living in the space.
If you opt for a neighborhood that is not zoned for multi-family housing, it means the multi-family properties will be mixed in with single-family properties. This means fewer investors will flood the area, and it also increases pride in ownership.
A real estate professional will be able to give you information on zoning laws so you can make an informed choice when it comes to the neighborhoods that are best for multi-family home purchases.
Finished Basement
A finished basement can be great for renting out to a tenant. It’s best if the basement has its own kitchen, bedroom, bathroom, and entrance. When searching for properties, be sure to keep your eye out for ones that have finished basements. Check out the TV show Income Property to learn more about renting out basement spaces.
Additional Dwelling Units (ADU’s)
ADU’s are basically guest houses. They are permitted structures added to a property. They are usually located in the backyards of houses where electricity, plumbing, and other living necessities can be accessed.
However, when searching for properties, remember not all ADU’s are permitted. Check with local city departments to find out if the city allows for the space to be legally rented out.
Multiple Bedrooms
While it may be preferable for most people to rent out spaces with separate exits, renting out an extra bedroom is another way to bring in extra income.
When looking for properties, find ones with as many bedrooms as possible. Paying more money for more bedrooms may pay off in the long run.
Areas that Can Be Converted into Bedrooms
Dens, dining rooms, and other areas of the house can be converted into bedrooms that can be rented out. It can also increase the overall value of the house.
Looking for properties that are advertised as having a den or dining room will be the best route.
Consider the Neighborhood
Making sure the property is near public transportation is important. You will also want to choose a neighborhood that is safe. Having good schools and local businesses nearby is another bonus.
Properties That Don’t Have Restrictions For Renters (and roommates)
Many HOAs do not allow you to rent out your property to non-owners for tenancy, sublets, short-term rentals, and more. So make sure the investment property you are considering purchasing (and renting out) does not have an HOA that enforces these restrictions. If it does, you should not purchase that property because if you ever decide to move out and make it a rental, you won’t be able to.
Homes with Amenities
While having the space to accommodate tenants is the most important thing, there are certain amenities that will make the space even more desirable. Features like upstairs lofts, family rooms and living rooms, outdoor deck areas, and more will make the space more desirable and make tenants want to stay for longer periods of time.
Conclusion
House hacking can be a great way to bring in extra revenue. Look for a property that allows for extra tenants, and you will be on your way to a lower cost of living that frees up your money so you can spend it on the things you want to spend it on. What hacks do you use to make your life more affordable?
