House Hacking: Free Housing for Life

House Hacking: Free Housing for Life

What if you were offered a deal, you could work really hard for 1 year, then for the rest of your life you would have a free place to live for the rest of your life, would you do it? This is house hacking.

Some of you may be thinking that there is a catch, or that something has to be up, however what I am about to share with you will revolutionize your finances. Some may have some objections but keep an open mind when you read this; you might open your eyes to the wealth you can achieve right in front of you.

DISCLAIMER: Please verify all information with professionals who do this for a living, Realtors, CPAs, Attorneys, etc. This blog is for entertainment purposes only.

Yes, the answer is so simple! If you read Joe Six Pack’s blog- you will become wealthy!

How much does housing cost you now?

According to Business Insider, most Americans pay 37% of their monthly take home pay to housing expenses. That means if you work 20 days per month, 7.4 of them are strictly to pay for your housing. That’s a whole work week and then some!

However, some might say “well, you have to live somewhere!” “I like a nice house for my family.” While these are true, you do have to live somewhere, however there are many places that I will show you that you can live that will also set you up for your financial future.

Also, to me as the breadwinner of my family, it is my duty and responsibility to provide for them a stable and secure future along spending quality time. If I am worried about foreclosure, one layoff away from being evicted, or working and stressed so much it is affecting my relationship with my family, then it is not worth it.

If what I mentioned in the above paragraph sounds like you, please continue reading. Even if it doesn’t keep reading and hopefully you will learn a thing or two!

Over One Week per month to pay for housing costs! How can us “Average” people afford to invest?

The “House-Hack”

I first heard the formal term that has come to be associated with the investment strategy I am about to describe from the website That website is a wealth of knowledge and specializes in real estate investment specifically.

House hacking is when you are occupying a property and are also receiving some sort of income to offset your typical mortgage payment, thus the cost to you is $0.

The most common example would be a multi-family home, maybe a duplex with 2 units, or a triplex with 3 units; the owner would live in one side and rent out the other. If purchased correctly, the rent from the other units you don’t live in would cover the cost of your mortgage, then you would live in the remaining side rent free and pay $0 per month.

Yes, shared walls. But at least these neighbors are paying you!

The numbers of house hacking

So, the median household income in the USA is around $61K. Let’s say the typical American was just getting by and almost all of the $61K was being used in their budget. Taking our average housing spend from before, that would mean they spend $22,570 each year or $1,880/month on housing.

Doing a house hack just saved them enough money to fully max out their 401k/403b at work. This will allow them to become rich. Just being flexible and creative with their housing situation allows them to be in control of their own real estate, their own landlord, and free up 1/3rd of their income annually. This is a no-brainer.

But wait, there’s more.

Two Mysterious Forces of House Hacking

The other thing that is happening every month when those rent checks come in, you are using your tenants’ payments to pay down your mortgage. The goal being that eventually they will pay off your property and you can either reap the benefit of the cash flow or sell it and make a pretty penny.

There is also another mysterious force at work usually, it is called appreciation. If you are blessed enough to still have one of your grandparents, or your parents are still around, ask about home prices when they were younger- for example in the 1970s the average value of a home was $17K according to CNBC.

Every year, the price of what your house is worth is said to increase by at least 3%. So not only do you get free rent, you get to max out your 401K to fast track your way to wealth, you have someone else pay down your mortgage for you, and you have an asset that will appreciate yearly with inflation.

The cherry on top is also that you rent can depending on economic circumstances appreciate with inflation too. You may start with charging $800/month for rent, but after 10 years find that you can now charge $1100/month. The great thing is your payment stays the same! You pocket the $300 gained!

CNBC Chart on Housing Values. The cherry on top of House Hacking.

How can I afford to House Hack?

Now, you may be saying “wait a minute. I call shenanigans. You said those folks were treading water in your example. How could they afford this magical investment?”

This wizard has some house hacking magic up his sleeves.

First of all, it is not as expensive as you may think. There are a few programs that I would look into, the FHA owner occupied program allows for a 3.5% down payment on an owner occupied property.

Honestly, that is the program I first used. Let’s say you buy a duplex you like that makes sense for $200K. You would need around $7K for the down payments, and around $5K in closing costs. So $12K to get into an investment where you will potentially free up $20K a year in housing costs?

Also, there are alternative programs run by the USDA for rural areas, and also the VA I believe has a 0% down payment option as well. You just have to do research as they are all bound to change at some point.

Read up on your current expenses and see if you can tighten the belt up for a year or two to save up for house hack.

Sounds great. What could go wrong?

A lot. This is by no means a total guide to house hacking. Consider this an introduction. Please do your research and consult all the professionals you need to in your unique situation. Everyone is different, don’t blindly trust some “Joe Six Pack” on the internet…. Get it? #Dadjokes.

Let’s see, what could go wrong, missed something big in the buying window, now your property needs mold remediation, new roof, or foundation word, plumbing replacements, new air conditioners/furnaces.

Or, you inherited a tenant that doesn’t pay, and now you have to fight to get them evicted, which can be awkward since you are living next to them. Or maybe you have kids, and your tenant has many visitors over and is selling some undesirable things to shady people.

Even worse, you ran your numbers wrong, and it costs more than you thought. You didn’t keep in mind you had to pay for shared utilities for your tenant who has the heater cranked and the windows open to help the environment… /sarcasm.

After a hard day of work, who doesn’t want to come home and fix a toilet? #InsertLandlordToiletjokehere

 Well that sounds bleak

All of that could happen, but also you could have a great tenant in there who pays every month, and you get the kickstart to wealth you and your family needs. So many real estate investors have started with this basic house hacking strategy and it has propelled them to be more successful financially.

You don’t have to be the next Donald Trump of Real Estate and have an empire if it is not your thing. I get it, hearing that the toilet is clogged doesn’t exactly sound sexy. This investment isn’t glamorous, however if you run you number right, you can afford to call a plumber if it’s just a poopy situation… #Dadjokesagain

But, But, But

It’s too expensive here. Save more, look at a different part of town, or move.

I don’t want to be a landlord. Worst case scenario you can hire a property manager for the side you don’t live in. However, changing your complete financial situation with one investment, I think you can handle one tenant. Read a book or two on customer care and property management.

I have a big family, I can’t live in an apartment. I get it. However there are options I’ve seen for 3- and 4-bedroom multifamily properties. 4 bedrooms are rarer. If you can be inconvenienced for a few years, you may have the proper finances to buy your own home, and just rent out your side.

I just want a house. You have two options: suck it up for a few years until you can financially afford a proper house and rent out your side. Or get creative and find a house with an in-law suite that you can legally rent out, and it may cover a good chunk of your mortgage. Alternatively, some can buy a house and rent out rooms- this was never a path I went on.

No excuses during my house hacking blog post.

I think you get the point

House hacking is an excellent strategy and is way more complicated than one blog post. But the potential for a 30%-50% annual return on your investment are common when you are investing with so little down, couple that with the money saved from not having to pay rent and this is like turbo charging your finances.

While this is easier when you are younger, this can be done at any age, and family size- well maybe 10 kids is too much… you get the point!

There are even more powerful strategies not covered in this brief blog post. Please do your own education. I hope this post inspires you to think outside the box and social norms to gain wealth. When you are like myself and my family, and we earn the average income or less, you need to be creative. I am reminded of the famous Dave Ramsey saying, “If you will live like no one else, later you can live like no one else.”

“If you will live like no one else, later you can live like no one else.”


Business Insider link

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