For many individuals, housing represents their most substantial expense, and finding ways to minimize this cost can expedite their journey to financial independence. One commonly recommended guideline is the 28% rule, which suggests allocating up to 28% of your monthly income towards your mortgage payment. While some may exceed this figure due to higher housing expenses, it underscores the significance of housing costs. Introducing a roommate or tenant into a secondary unit can help lower your monthly housing expenses. Though this arrangement may involve shared living spaces, it doesn’t have to be a permanent situation. Some individuals manage to pay off their mortgages sooner and then discontinue house hacking once they are free of debt. Others leverage house hacking as a stepping stone to real estate investment, using it to acquire additional properties.
The Importance of Tenant Selection
The success of this strategy hinges on the quality of tenants you attract. Even with just one tenant, house hacking can feel like a full-time commitment, as regular communication and property maintenance are necessary. However, having the right individuals occupying your units can significantly ease this process.
One Reddit user shared their experience of purchasing a property with four bedrooms and three bathrooms, subsequently adding four more bedrooms and renting out seven rooms to international students while using the eighth bedroom for themselves. This approach enabled the Reddit user to pay off their mortgage in four years and acquire a second property. Many students treat college as a job, leaving early in the morning and returning late in the evening, minimizing disruptions and making property maintenance more manageable.
The Merits of Marriage
Another Reddit user pointed out that the best roommate is often one’s spouse, emphasizing the financial benefits of having a dual-income household. This sentiment was echoed by a poll within the FIRE Reddit community, showing that most members are dual-income earners. While a second income can help cover mortgage payments and other expenses, house hacking also serves as an excellent entry point for real estate investment. Married couples can use this strategy to familiarize themselves with property management and gradually expand their portfolios. However, if real estate isn’t of interest and living expenses are manageable, house hacking may not be necessary.
House Hacking: Ideal for Younger Individuals
While house hacking is open to everyone, it is particularly advantageous for individuals in their 20s. At this stage, one typically requires less space and can share accommodations with a tenant. Additionally, with fewer financial commitments and potentially no family yet, younger individuals can take more risks and use house hacking as a means to achieve their dream homes in the future. The property used for house hacking may not be their ultimate residence, allowing them to rent out the unit when moving to a preferred location, thereby generating additional income. It’s feasible for a house hacking property to cover its mortgage while also reducing your monthly housing expenses.
The main place where a person lives.
