House hacking is a great way to buy a property and have tenants pay for the property. I found a down payment assistance plan and negotiated the closing costs so I didn’t need extra money. I bought the house for $1500, and the tenants cover the monthly costs with me there. If I move out that’s cash flow for me.
Table of Contents
I House Hacked My First Home: I bought a house for $1500
House Hacking is one of the best ways to get into Real Estate Investing for Cheap. It’s also one of the lowest risks especially in the beginning.
Why do I say I bought a house for $1500? The tenants are going to pay for my monthly payments. This is an asset that will keep on giving.
I would be able to use a HELOC as it’s paid off for business expenses or get higher cash flow when the mortgage is paid off.
Technically, this amount was returned back to me at closing. So, I was able to get my money with no money into the property.
Finding the Right Home to House Hack
There are patterns to finding the right home. You will want to look at multi-families, homes with a side house, basement, and lots of rooms.
These homes have potential to rent out space. When you rent out the space, you can use this money to pay your mortgage.
I’ve used this strategy to buy my first home. You can do this strategy over and over again.
The First Step: Find a Realtor
Ask a friend or family member for a Realtor. Depending on the state they can give you a rebate. Find out if your state gives rebates.
If you don’t have any potential referrals, you can look at House Selling Sites like Zillow, Trulia, and RedFin.
I actually didn’t get a rebate for this deal. I didn’t know about rebates, so do some research if it’s allowed. Some states don’t allow it, so double check.
Find a Mortgage Broker
Your Realtor should recommend a mortgage broker and not a mortgage banker. The difference is who creates the loan. The mortgage banker is limited to the products that their bank gives. A mortgage broker can find the best plan for you by surveying what is out in the market.
You will want to find a plan that gives down payment assistance. The government encourages you to buy a house. There are tax incentives when you pay down your mortgage.
Home owners also stabilize a community. They can use property taxes to pay for the different local services and infrastructure. The government will usually have programs to help you buy a home especially if it’s for your first home.
Get a $0 Down Payment Assistance Plan
Your mortgage broker should procure for you a plan that helps with your down payment. Don’t worry about the interest rate. After you get your loan, there will be opportunities to refinance your home for a lower interest rate.
Get a Monthly amount for payments from Mortgage Broker
Zillow has a mortgage calculator that you can use. You can access it by clicking here. The benefit it that it gives you a better idea on what your payments might look like.
If you procured your mortgage broker, it’s important to be able to ask for an estimated monthly payment amount.
Find Your Property
You want to make sure that it’s a rental property. If you moved out of the house, you will be able to rent it out and still come out okay. For the house hacking method, you will want to be able to have a basement, attic, or extra rooms that you can rent out.
If it has separate entrances, this makes it better. You can search mother-in-law dens. Ask your real estate agent for these types of homes. If you are okay with renting out the rooms, you can look for 4-5 bedrooms.
Find out how much you can charge for each bedroom, basement, attic, etc. You can search up rooms on Facebook Marketplace and Craigslist to see what other people are charging.
Negotiations: Get A Seller’s Concession
The main negotiating point is the seller’s concession. You will want them to cover the full amount of the closing costs. You can ask your broker how much this will be.
Assume you have a property for sale for $100,000.
Closing costs for you are $6,000.
If you negotiation, $95,000 with a seller’s concession of $6000. You paid $95,000, but you don’t have to come up with the closing costs.
For the seller, it’s like getting an $89,000 offer. $95,000-$6,000= $89,000
Generally, you will have to give a higher amount if you are asking for a seller’s concession, but it’s totally worth it.
Escrow
I personally send $1500 to escrow. A lot of agents will recommend that you put in 1% of the purchase price. I covered my full closing costs, so I technically got this money back. You’ll do a final walk through and you are set. You are at closing.
Closing
When you close on the property, you will need to sign a bunch of documents. You’ll get your escrow money back or it might be applied to the house depending on how the contract was written.
You’ll have an extra month to make your payment. So, you can get all your roommates into your house when you move in. They will pay for the monthly mortgage, property taxes, and utilities.
I usually charge a base monthly rate and include Wi-Fi and utilities.
Frequently Asked Questions:
Who should do house hacking?
House hacking is great for first time home owners. If you don’t mind sharing a room, basement, or attic, it can be a good way to get a house and save money.
Is house hacking the best real estate investing strategy?
I personally think it’s the best real estate investment strategy for first time homeowners. You buy a house and you have other people paying for it.
What is better than house hacking?
It’s hard to keep house hacking. It’s not very scalable. After house hacking, I recommend land investing.
