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  • Writer's pictureJosh Taylor

How I turned my home into cashflow: My House Hacking Experience

In today's craziness of a housing market, finding a viable real estate investment strategy can be quite the challenge. However, I've uncovered an amazing approach that not only presents a considerable upside potential but also carries a relatively low risk factor. Enter, House Hacking. It’s a technique I’ve personally utilized, allowing me to live virtually mortgage-free, and I’m here to share the insights.

My House Hacking Story

Living in a 2-bedroom, 2-bathroom home, I've effectively transformed the lower unit (1 bed, 1 bath) into a dedicated Airbnb space with its own entry/exit. San Diego's Airbnb policies are favorable; when a homeowner opts to rent out part of their residence, a license is assured. This strategy has provided a boost to my income, which then allowed me to save funds to buy an additional investment property.

What is House Hacking?

In its simplest form, house hacking involves buying a property—be it a single-family home, duplex, triplex, or fourplex—and renting out the spare rooms or units. By doing this, the owner often reduces (or sometimes completely offsets) their housing costs.

  • Single-Family Rentals

For many, the journey begins with a single-family rental. New graduates or those who enjoy shared living can purchase a sizeable single-family house, occupying one room while leasing out others.

  • Multi-Family Properties

The next step up from single-family rentals is investing in multi-unit properties like duplexes, triplexes, or fourplexes. The game plan? Live in one unit and rent the others. This strategy often finds favor with those using FHA loans, particularly first-time buyers.

  • ADUs

If privacy is your top priority, or you have a family, ADUs (Accessory Dwelling Units) are your best bet. These can either be pre-existing on the property or something you decide to construct in your backyard. They're often dubbed the "luxury house hack" due to the independence they offer.

Why House Hacking is a Beginner's Best Friend:

  • Owner-Occupied Financing: With rising interest rates, house hackers can benefit from owner-occupied rates, which can be around 1% lower. This not only reduces monthly expenses but also opens doors to more property deals.

  • Learning While Earning: House hacking is akin to landlord training wheels. By being on the property, you get hands-on experience in property management, a skill invaluable for future investments.

  • Flexible Cash Flow: House hacking doesn't necessitate high cash flow. Even if the setup merely reduces your monthly housing expenses, it's a financial win. Moreover, house hacking often benefits from various avenues of income, including loan amortization, potential property appreciation, and tax incentives.

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