House Hacking Loans – Guide For Investors

House hacking is a real estate investment strategy that involves purchasing a property and living in a section of it, and renting out other parts of it to generate an income. This approach allows the owner of the property to cover a large portion, or sometimes all of, their housing costs. In other words, the rental income can cover the monthly mortgage payment, property taxes, insurance, and other expenses. Which means that house hackers can build equity in a property and eventually make a profit from it once their mortgage is paid off. It also gives property owners the chance to gain valuable experience in property management and real estate investing.

How does it work?

• Single-family homes are used to live in, and extra rooms or even the basement are rented out.
• Multifamily property, like duplexes, can be used for house hacking by living in one unit and renting out the others.
• Short-term rentals through platforms like Airbnb form part of the house hacking strategy where owners can rent out their rooms or units for short stays.
• Accessory Dwelling Units (ADUs), such as granny flats, can be added onto a property and rented out to provide tenants with their own space.

The benefits of house hacking include:

• Reduced housing costs: Earning a rental income allows property owners to cover the monthly mortgage payment and various other costs associated with housing every month, and use this to build equity in the property. Often, homeowners who are house hacking can get tax benefits from writing off expenses related to the rental portion of the property, such as repairs and maintenance. By using a mortgage to purchase the property, investors can control a more valuable asset with less of their own money, and essentially use it as leverage.
• Flexibility: House hacking allows homeowners to have flexibility in their schedules and continue earning the rental income, even when they aren’t on the property or in town.
• Gain landlord experience: Living on the same property as the tenants gives homeowners a fast track into becoming landlords. This is a good way to learn about what it takes to become a landlord and manage properties.
• Lower risk: House hacking provides a low risk way to earn rental income, by managing the tenant situation yourself and choosing wisely as they will be living on the same property. House hacking also lowers the risk of purchasing a home, because the monthly mortgage payment and other housing expenses will be subsidized.
• Financing as a primary residence: Homeowners can finance a primary residence and use this to house hack, which saves them having to get an investment property loan. Mortgages for primary residences typically come with lower fees and better interest rates.