How House Hacking Can Help You Live Rent Free
How great would it be to live rent, or mortgage free? The moment anyone moves out of their parents house and starts paying rent or mortgages, they almost instantly miss the “good old days” where they lived rent free.
The good news is that there is a way that you can still live rent free after you move out, and it is called house hacking.
What Is House Hacking?
Unlike the picture above suggests, house hacking has nothing to do with computers or technology. It also doesn’t require any preexisting knowledge or skills. So what is house hacking? House hacking is a method people can use to pay for their rent or mortgage by renting out unused parts of their homes.
How Does It Work?
When looking for a place to move, instead of looking for something that works for only your needs, look for something where you can earn enough income by renting out parts of the property to cover your costs.
For example, if you are a student you might be looking for a bedroom rental in a student housing complex. What if instead of paying $600 a month for a room in residence, you instead rent a four bedroom house nearby for $1800. This may seem counterproductive to saving at first, but what if you calculate what you could earn from renting out rooms to other students? Since the house is further away from school you may only be able to rent rooms for $500 each. Since there are four rooms, you can rent to three other students to bring in $1500. You can also rent a parking space to other students who commute to school. Say you can rent the parking space for $100 a month. Next you can rent out the garage to someone else who needs storage for $200 a month. Add it all up and you will be able to bring in $1800 a month in rent from others, letting you live in your room rent free.
This concept doesn't only work for students. If you are looking to buy your first house or condo, instead of looking for a single family home, you can look for a larger condo, or a house with multiple units. This would allow you to live in one area while renting out the other. If you have an extra bedroom you can rent it out to a colleague, friend, or you can use a platform like Airbnb to earn income from your second bedroom, or second unit.
Why You Should House Hack
Rents and mortgages are usually one of the largest expenses you have. If you can bring your cost of your rent or mortgage down, you can save a large amount of money. For example, if you are a student and you are able to save $600 a month through your four years of school and put it into a savings account, after your four years you could have $28,800 ($35,233.50 if you invest it in something that returns 10% per year). In most areas this is enough for a down payment on a starter home.
If you continued to do this for your first 5 years of working, you would have $64,800 ($104,432.23 if you invest it in something that returns 10% per year). If you did this, then left the $104,432.23 alone in investments that returned 10% per year, without adding in any additional savings, you would have $1,259,130.88 in 25 years.
Wrapping Up
While you may need to have roommates, and you might need to put in some extra work, house hacking is a great way to reduce or completely eliminate one of the most costly expenses in life. Doing this at a young age can help you save up enough money to buy your first home, or kick start your retirement fund.
This article is for informational purposes only; it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.
