What is a house hack? It is a real estate investing strategy whereby you purchase a multi-family property (2-4 units) and live in one of the units while renting out the others to qualified tenants. The thinking is the rents coming in from those tenants can go towards paying your mortgage and other expenses enabling you live for free or at the very least seriously supplement your housing costs. Why should you do this? Here are some of the benefits…

Favorable Financing

Owner occupied multi-family borrowers can leverage the power of a FHA loan or a low money down conventional loan and only put 3.5-5% (you can put more down if you want to) as a down payment on a house hack deal. Let’s say you are buying a $200,000 house, that is a downpayment of $7000 (3.5% FHA)-$10,000 (5% conventional). If you were buying that same rental property with a non-owner occupied conventional loan it would most likely require 25% down or $50,000 as a down payment. Big difference, right?

Best part is you only have to owner occupy for a year to get these sweet terms, and I didn’t even mention yet that the FHA owner occupied interest rates are often the lowest for a 30-year fixed rate. Some more great benefits!

You Get Experience as a Landlord

Just like any other business you need to learn every aspect of it in order to be a success and real estate is no different in that respect. There is no better way to learn how to be a landlord than to house hack. You are basically getting paid to learn the ins and outs of a business. Learning how to collect rent, respond to maintenance requests, etc will lay the foundation for your knowledge as you move forward in your investing career.

Allows You to Bulid for Future Investments

This benefit is sort of a hybrid between the first two on this list. With the low money down loan you will be able to recoup your cash invested at a quicker rate and when you combine that with your drastically reduced living expenses due to the rental income you have coming in, it will allow you to save money at a quick pace as you plot your next move.

The experience as a landlord you gain is also valuable as you move forward to future investments also because you will hone your craft and more importantly have a good idea of what you do or more importantly don’t want to deal with when searching for your next investment opportunity.