All you need to know about House Hacking

Updated by May ,28, 2022

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House hacking is an investment strategy where you buy a home using a low down payment residential mortgage and then rent out the home to generate income.
Many consumers use it as a long-term investment strategy to both make money off of the property and also cover the costs of the mortgage.

Here's how it works: You purchase a multi-room or multi-unit residential property with the intent of living in one and renting out the others. This allows you to leverage conventional and FHA mortgage loans, which require as little as 3% to 3.5% as a down payment on primary residences. After closing on your loan, you move into the property, rent out the additional units, and use the rent to cover the costs of your mortgage and property costs.

Experts say interest rates are much lower for a primary residence than for an investment property. will essentially be living in his or her new home for free, because the other tenants are paying rent and, therefore, the mortgage."

While some consumers use this as a method to simply cover their housing expenses, for others, it's a long-term investment strategy that can serve as a source of income for as long as you rent it out. It can also pave the way for other investments. After a year — the minimum amount most lenders require you to live in a home as your primary residence — you could move out, purchase another property, and use the same strategy, eventually building up a whole portfolio of income-generating real estate.

To get started you need to get your finances in order, then get your mortgage, Find a good agent ideally it should be someone who understands house hacking and has experience working with investors. An experienced agent can also help you find, screen, and place tenants once you have your property. This can reduce vacancies and help your property be more profitable.

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Research your market this would help to ensure you get fair market rental values that will be sufficient to cover your mortgage
To findthe right property you want to house hack — the most important piece of the puzzle. The experts recommend analyzing properties as "purely rentals." This would ensure you'll make income off the property when you move out, and it also covers you in case of vacancies.

When analyzing a property, consider its rent potential, the mortgage it would come with, and. the costs to maintain the home.