If you're looking for a way to reach your financial goals, house hacking may be the answer. By definition, house hacking is when you live in a part of your investment property and rent out the other units to cover expenses. While it sounds simple in theory, there are a few things to keep in mind if you want to succeed at house hacking. This blog post will give you an overview of how to get started with this versatile way to invest in real estate and what you need to do to make it work for you. If you're ready to make serious progress on your financial goals, keep reading to learn about how house hacking can help you.
What Is House Hacking?
House hacking is the process of buying a property and living in it while renting out parts of the home to tenants. You can pay off your mortgage with rental income, making your housing costs much cheaper or even free!
House hacking comes in various forms. One option is to rent out a room in your house. Your tenant will pay rent and utilities in exchange for access to the room and all common areas. It's similar to having roommates, except they pay you instead of a landlord.
People with additional structures on their property can convert them to livable quarters using their DIY skills or hiring a trusted contractor. Depending on the size of the space, the detached structure could include a restroom and kitchen, meaning you wouldn't have to share any of your space with the tenant.
You can also buy a duplex and any other multi-family housing complex, live in one unit, and rent out the remaining ones.
How to Reach Your Financial Goals With House Hacking
While some people house hack to save money on their housing costs, it can also be an effective strategy for reaching financial goals. A few of the benefits of house hacking include passive income, reduced housing costs, appreciating equity, and tax deductions. Here are a few ways house hacking makes it easy to reach common financial goals.
Start a Retirement Fund With House Hacking Passive Income
If you're looking for a way to jumpstart your retirement savings, house hacking can be a great option. The extra income from your tenants can be funneled directly into a minimally taxed retirement account, such as an IRA or 401(k). This is known as "passive income," meaning that you're earning money from sources that don't require as much involvement as a full-time or even part-time job.
For people who don't receive a 401(k) matching from their employer, house hacking can be a great way to supplement this financial goal.
Buy a Home For Less by House Hacking
Owning a home is a top-priority financial goal for most Americans. For many people, it's also the most expensive financial goal they'll ever have.
If you live in an expensive market, it may seem impossible to buy a first home without overexerting your housing budget. Fortunately, house hacking can make it much easier and more affordable to enjoy the financial benefits of homeownership without financial setbacks.
Use House Hacking to Pay Off Debt
If you're one of the many Americans struggling with debt, house hacking can help you get out from under it. The extra income can be used to make larger-than-minimum payments on your debts, helping you pay them off faster.
This will save you money in interest payments, but it can also help improve your credit score, another super important financial goal. Your credit utilization will decrease as your debt balances are paid off, and on-time payments will be reported to the credit bureaus.
Start Investing in Stocks With House Hacking Income
Investing in stocks is a great way to build a nest egg, start an emergency fund, or increase net worth. It can be challenging to get started if you don't have a lot of money. House hacking can provide the extra income you need to start investing without straining your budget.
Leverage Landlord Tax Deductions With House Hacking
Last but not least, house hacking can help you take advantage of landlord tax deductions. These deductions can include mortgage interest, repairs and maintenance, property taxes, and more.
This will help you save money on your taxes, but it can also help you reach financial goals by funneling the money you save into investments or other savings accounts.
House Hacking Can Be a Big Step Towards Your Financial Goals
House hacking is a great way to achieve your financial dreams. You can use house hacking to reduce your housing costs, create passive income, and get tax deductions. These benefits will help you pay off debt, increase your credit scores, and reach other financial goals. If your financial goals seem far away, house hacking can bring you closer to them.
Author Bio: Anthony Gilbert is the Creative Director of Texas Real Estate Source. Anthony specializes in real estate lead generation and digital marketing.