What if there was a way to find a home for yourself without needing an exorbitant down payment or monthly mortgage? Would homeownership become more appealing to you? Well I have great news for you, through a strategy called house hacking, many people that would otherwise have a hard time qualifying for a home can now find one. This is the strategy I used when I first got started in real estate. 

So what is it? It’s pretty simple actually, you just buy a house, live in it, rent out the part you don’t live in. That’s it! Now, why would this be such a favorable method for new investors? Primarily because there are many loan products available these days for new home buyers looking for single or multi family homes to be used as a primary residence, that will qualify for low money down requirements. These requirements can be as low as 3.5% depending on the lender, unlocking massive buying ability to the new investor. Now obviously, the down payment is not the only barrier to entry we have to tackle. The other one is those monthly mortgage payments, yuck.. Well the other amazing thing about renting out your house, although being a landlord may not be appealing to everyone, is that the extra income helps to reduce your monthly payment and pay down your mortgage. Lenders know this, so they take it into account when qualifying people for loans, unlocking even more buying ability for an investor. 

So what are the drawbacks to this? The first and most obvious is having to be a landlord, which may or may not appeal to people. The great thing about this is you don’t have to rent your home out to strangers for this to work. You could literally rent out a room in your house to a friend or roommate, or rent out a section of the house to extended family. There are many possibilities to navigate this conundrum, and in my opinion the benefits outweigh the drawbacks. The second major downside to this strategy is something called PMI. It is essentially additional insurance required by the lender when you put less than 20% down on a home, which does increase your monthly payments. But again, if you’re receiving additional income from rents, it should cover that and some. 

So there it is, the house hacking strategy. Is it for everyone? No, not necessarily, it is only another tool in the tool belt to help home buyers navigate today’s market. That said, it is one I see a lot of value in for new home buyers looking to get started. Thanks for reading!