If you are an aspiring real estate investor, house hacking can be a wonderful strategy to move on to more lucrative multifamily investing later down the road. House hacking is a strategy where the investor buys a residential building containing 2-4 units and lives in one of the units while renting out the remaining ones. There are many advantages of this investment strategy which is why it has become very popular among a large group of investors.
It's easy to finance
Since this is going to be your primary residence (at least for the time being) banks are willing to give you more favorable lending terms. Any building with four or less residential units is considered “residential real estate” in the eyes of the bank and is treated just like purchasing a single-family home. This means you can take out a 30-year loan on the property, where as that is very rare for a commercial building. You can even secure FHA or VA loans for a 2-4 unit building with very low down payment requirements.
You're providing a home for yourself
House hacking gives you the liberty to enjoy a new home for your family while enjoying a decent rental income from the property. In addition, you reduce your own cost of housing with rental income from the other units. In fact, you may be living “for free” as it is totally possible to pay the entire mortgage from the income earned via rent and still be left with a surplus of money every month. Talk about a way to kickstart your journey to financial freedom! This is the power of house hacking.
Learn the tricks of landlording living on site
House hacking is like learning on the job. You learn the nuances of landlording as you live in one of the units. What is more, you are being paid to perform the duties of a landlord. Through house hacking you put on the hat of a property manager. Managing the property becomes easier as all your tenants live under the same roof and you are there to quickly resolve any issues as they arise.
Get started with house hacking and you are well on your way to owning a large multifamily apartment building in future.
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