House-Hacking - A way to overcome high interest rates

Are you tired of paying sky high rent amounts? Are you wanting to buy but struggling to stomach the higher interest rates we are seeing right now? If this sounds familiar, house-hacking might be the solution you've been looking for! House-hacking is an investment strategy that involves purchasing a multifamily property and living in one unit while renting out the other(s) to offset your living expenses month to month. Let’s explore the concept of house hacking specifically in the context of a duplex, highlighting the benefits and providing practical tips.

House hacking in a duplex offers several advantages that can help you build wealth and decrease your monthly living expenses.

• Rental Income: By renting out one unit of the duplex, you generate rental income that can help cover a significant portion, if not all, of your mortgage or maintenance costs.

• Equity Building: Owning a duplex allows you to build equity through property appreciation and mortgage paydown while your tenants contribute to your monthly mortgage payments. You can also make physical improvements to the property and therefore force even more appreciation.

• Flexibility: When you decide to move on to the next home, you can rent out the side of the duplex you were initially living in, and hopefully cover all of your costs for the duplex while also taking home cash each month. This is a great way to have others pay off your mortgage but build your net worth.

Crunch the Numbers:

Before diving into duplex house hacking, it's crucial to ensure it aligns with your financial goals for the future. Consider the following factors:

• Purchase Price and Types of Financing: Analyze the purchase price of the duplex and explore financing options with a lender who understands the complexities. With you planning to occupy the property as your primary residence, you have many more options for financing the property. For example, utilizing an FHA loan where you would only need to put 3.5% down. At Fox we have the lender connections to set you up for success!

• Rental Income Potential: Research the rental market in your area to estimate the potential rental income from the second unit. This will help you determine the affordability of the property and calculate potential cash flow. There are a couple rental property calculators we can help you utilize to run the numbers!

• Expenses and Cash Flow: Don’t forget to account for expenses such as mortgage payments, property taxes, insurance, maintenance, and vacancy.

• Choose the Right Property: Finding the right duplex property is essential for successful house hacking. Look for duplexes in desirable neighborhoods with good rental demand. Access to amenities, public transportation, and schools can increase the attractiveness of your property.

• Unit Layout and Condition: Ensure that the duplex has a suitable layout for both your living space and the rental unit(s). Assess the condition of the property, including the roof, electrical systems, plumbing, and overall maintenance requirements. If it’s not too competitive make sure to get an inspection performed on each unit.

• Potential for Value-Add: Look for duplexes with potential for improvement or value-add opportunities. Upgrading units or common areas can increase rental income and property value by forcing the appreciation!

Understand Legal and Rental Regulations:

Before renting out the second unit, familiarize yourself with local regulations, zoning laws, and rental requirements. If you are working with a skilled agent, they should be able to help you locate all of that information! Understand tenant rights and responsibilities, rental agreements, security deposits, and eviction processes. Compliance with legal obligations will help you avoid potential issues and disputes.

Be a Responsible Landlord:

Maintaining a good relationship with your tenants is crucial for a successful house hack, especially since you are living next door. Be responsive to their needs, address maintenance requests promptly, and ensure a safe and comfortable living environment. A positive landlord-tenant relationship can lead to longer tenancies and reduce turnover costs.

Continuously Monitor and Optimize:

Regularly monitor your financials, including rental income, expenses, and cash flow. Look for opportunities to optimize your property's performance by increasing rental rates, improving energy efficiency, or exploring cost-saving measures. As you build equity, consider refinancing options to further lower your monthly living expenses.

House hacking is such an excellent strategy to lower your monthly living expenses and build wealth through real estate. Working with the right agent who has connections and knowledge on this topic is crucial to finding a great deal! As a fellow real estate investor and landlord myself, I’ve been through it all so please feel free to reach out anytime with questions on property investing!