Free housing seem too good to be true? Not necessarily. There are many ways to have other people cover your housing costs — a strategy known as house hacking.
House hacking offers housing alternatives that decrease or even eliminate your housing costs altogether. Whether you just want to save on housing or you want to dabble in real estate investing, house hacking is a great way to get started.
While far from the only way to house hack, multifamily house hacking is one of the most effective. If you own a small (2-4) multifamily property, you have a couple ways to earn extra money and cover your mortgage payment in full.
Many classify this technique as the classic house hacking model. Essentially, you purchase a multifamily property, live in one of the units and rent out the other(s). You charge the tenants monthly rent which will then cover the cost of your monthly rent. Within the United States, any property with up to four units is classified as residential, meaning you can still take out a traditional mortgage to buy the property.
If this sounds appealing, take the leap! It can be scary at first, but if you are new to becoming a landlord, there are several websites that can help you manage your rental units from advertising to tenant screening to free lease agreements, plus tips and tricks to being a successful landlord.
Instead of renting to long term renters, rent your property in the short term with vacationers. If you have ever used Airbnb, you know the drill. People rent out an extra unit on their own and welcome it to guests for a fee.
Although this may allow you to charge more per night than someone living there long term, house hacking with vacationers does come with some risks. You are in charge of paying for utilities, furnishing the property, as well as any other costs associated with making your guests feel welcome and comfortable, and most importantly earning good reviews so others will want to book your unit too! This doesn’t mean you are running a miniature bed-and-breakfast, but ensuring that all guests have a clean and safe space is key.
Additionally, vacationers can cause damage, or even steal small items that wouldn’t necessarily be reported such as a kitchen pot or pan. Vacancy rates can also fluctuate with the seasons or the economy.
If you have never rented out your property to vacation renters before, read up on some tips and tricks to becoming a successful Airbnb landlord. You also will want to check your state’s local vacation renters law to ensure that any homeowner can rent out their space.
Not everyone wants to move into a multifamily property. Try these house hacking alternatives for single-family homes as well.
Roommates can be an extremely effective house hacking technique. Not only will they pay a significant amount of your mortgage but also split your utility bills. They may even become close friends! In other cases, the only thing you all share is the roof over your head.
Unfortunately, housemates come with some risks and downsides. With someone moving into your single family home, you give up personal space. That being said, if you are considering house hacking with your personal single family property, you will want to be very thorough when interviewing and screening potential roommates. Consider the following questions:
I myself have rented out rooms to housemates, to cover nearly three-quarters of my mortgage payment.
If you can’t fathom the idea of having a roommate or sharing a space with someone you don’t know, you can also rent out storage space to others. Now, this is definitely the least financially lucrative option in house hacking, for someone isn’t covering your mortgage with renting out your storage space. However, this does allow for a contribution to the mortgage or some extra cash.
Although you won’t make as much money as you would renting a living space, renting storage comes with less responsibility and annoyance. If this seems like something you would be interested in pursuing, check out websites like SpareFoot.com or Neighbor.com for renting storage space for some extra income!
With foreign exchange programs being so popular, there are several exchange student placement programs that pay a generous amount to host students. Usually, just like with a roommate, you screen them to ensure that you and the exchange student are a good match. Additionally, since foreign exchange students are typically teenagers, you are able to “set the rules.”
My partner Deni has hosted a foreign exchange student for the last four years, and the monthly stipend covers most of her mortgage payment.
Close your eyes and think about the current state of your basement. Mostly storage boxes and maybe a spin bike that you rarely use, right? Most people use their basements as a “junk” room with little actual usage.
If this sounds like you, consider transforming your basement or garage into an apartment that you can rent to others. Whether you end up renting to long term tenants or short term vacationers, ideally you will receive sufficient compensation which can help cover your own rent!
For practical reasons, the basement or garage apartment should have its own separate entrance as well as a full bathroom and kitchen. You should also ensure that the basement offers proper heating and plumbing. However, that can easily be added and the initial money you put into this transformation you will earn back in rent.
With any luck, you’ll almost never notice your neighboring renter.
If none of these appeal to you or if you don’t have the option to offer living space to someone else, you have another option: jobs that offer housing in the contract. Some of these jobs include:
While this is a very different type of house hacking, it is just as effective. At the end of the day, you are not paying for the roof over your head and that’s the idea right?
Eliminating your housing payment is the fastest way to boost your savings rate. Plus, it offers an outstanding way to tiptoe your way into property investing.
Just think of how much faster you could reach financial independence without a housing payment.
What fears or concerns are holding you back from house hacking?