House hacking is a powerful tool investors use to build their real estate portfolio. You simply buy a property as your personal residence and get a great loan product at a low-interest rate and little to no money down. The bank requires that you have the intention of living in the property for at least a year.
House hacking could be used on a single-family home, a duplex, a triplex, or a quadruplex (aka a simple house, 2 unit building, 3 unit building or 4 unit building)! To maximize the power of this strategy, purchasing a multifamily means that you can live in one unit and rent out the others. Since your tenant, or tenants, are paying rent, your cost of living is decreased, or eliminated completely! AND, your tenants are paying down your mortgage, aka loan amortization, while the value of your property increases, aka appreciation. Additionally, you can depreciate the asset and write off the mortgage interest, alleviating your tax burden! So many benefits to buy and hold real estate investing besides cash flow!
Anyway, back to house hacking! Sorry for getting so excited- I just LOVE real estate!
Ultimately, even though this purchase is an investment, the strategy is so powerful because you get to take advantage of a low-interest rate and down payment. These loan products are reserved for resident occupants, and won’t apply to a property you will purchase solely as a tenant-occupied investment, or as a flip.
When you buy an investment property, the bank or lender is going to require you to put 15-30 percent down, and you’re going to get a higher interest rate.
As a primary residence, you can take advantage of the lowest possible rate Fannie Mae or Freddie Mac will allow! Keep in mind, though, that this is dependent on your income, your debt to income, and your credit score as you will be personally guaranteeing the loan.
House hacking works and people are building lucrative portfolios using this strategy! Because you can get into a deal for a lot less money, and keep your monthly payment low, it’s a great way to maximize your return on investment and your monthly cash flow.
Also, military house hacking is even more incredible because you can use your VA loan, and get into these houses for zero down. If you’re a disabled veteran or a service-connected disabled veteran, you can get your funding fee waived. The funding fee is essentially the loan origination fee which can get expensive. It can be up to three percentage points of the overall purchase price.
House hacking is a great tool especially if you’re looking to scale a portfolio or if you want to buy multiple properties over the next course of time. This is a great way to get started with little or no money down.
To help you get started, check out my Real Estate Investor Course!
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