House hacking is nothing new, but it’s definitely an under utilized strategy. A dream for many people is to become a homeowner. Fortunately, house hacking is a great way to achieve that dream. The best part is that house hacking is a very popular trend amongst the younger generation of first time home buyers.
The days of buying a property and paying a mortgage for 35 years is over. It’s painful, stressful, and puts you through an emotional roller coaster ride. Once you buy the property, you’re pretty much stuck. Can’t go anywhere, and have lost your freedom. It’s time to settle down!
The good news is that you don’t have to live that type of lifestyle. Buying a home shouldn’t be scary and this is where first time home buyers are house hacking through Airbnb.
What is House Hacking?
So what exactly is house hacking? House hacking is when you live rent free or have very little in mortgage payments by renting part of the home to others.
If the market allows it and if house hacking is done correctly an individual could even make a profit. Short-term rental services such as Airbnb and VRBO have made it easier to house hack and have successfully transformed the lives of many individuals.
For example, you can purchase a fourplex, rent out 3 of the units through long term rentals and use Airbnb or another short-term rental service to rent out your unit when you’re on the go or traveling. Essentially it empowers new first time home buyers the opportunity to live life to the fullest.
How Do You House Hack and Live For Free?
There’s many different ways you can house hack. The first and most easiest way to house hack where almost everyone is familiar with is by having roommates. If you’ve been to college and hated in campus housing, then you’ve probably weighed the costs of living with roommates at a house close to the university.
According to Business Insiders with respect to on campus housing vs off campus housing, at University of Oklahoma it costs $1,266 average to live on campus. Meanwhile, finding an off campus location to live would only cost $566 a person.
Holy cow, that’s a lot of money saved. Talk about ripping students off. Well the good news, this is one of the ways students have been house hacking.
First find a three or four bedroom house, then you select the room you want (preferably the smallest one), then you sublease or rent the other three rooms.
Since you chose the smallest room, you can rent out the other 3 rooms for a higher price. If done correctly, the cost of the other 3 rooms should cancel out all if not most of your rent payments. Viola, you’re living for FREE!
Welcome to the world of house hacking, and students know how to do it best. Signup for Zumbly, to start researching great homes for house hacking.
Why First Time Home Buyers are House Hacking With Airbnb?
Let’s be honest with ourselves. Living in debt really sucks. Especially when you work so hard for your money. Renting month to month is no longer feasible, and most landlords require a minimum of a one year lease and have a clause that forbids subleasing.
They have to lock you down in a long term contract because they have to protect themselves from turnover. The costs of finding a new tenant is extremely expensive for apartments.
First time home buyers are house hacking because they’re sick of being locked down, losing money month to month, and never getting the opportunity to live life to the fullest. Listen, you have only one life. It’s time to take control of it.
5 Benefits of House Hacking
There are many benefits to house hacking. We all want to spend more time with our family, travel the world, meet new people, and live a life without worrying for money.
House hacking helps you save more money, it builds equity, lets you live the way you want to live, you meet many new people, and most importantly it gives you experience.
1. House Hacking Saves You More Money
It’s no secret that if you get a roommate or rent a room that your monthly mortgage goes down tremendously. Let’s say you buy a 3 bedroom house, and your payment after, mortgage, furniture, taxes, HOA, insurance, and other fees is $3,500. In a city like Los Angeles, California a room can easily go for $1,200.
If you rent all 3 rooms, you will receive a total of $3,600. Which not only pays your mortgage payment, it also brings an extra $100 in income a month. This is the long term strategy of house hacking.
Now if you really want to hack away, we highly recommend exploring options such as short term rentals on Airbnb. The opportunity of short term rentals is absolutely insane, and should not be ignored.
Here is an example of another model that you can try and implement for yourself. Let’s give a hypothetical scenario where you travel a lot for work. Your mortgage is still $3,500 a month, and you only stay at home for 2 days of the week because you’re always on the go for work.
One day you’re in New York to close that next deal, the other day you’re in San Francisco securing your venture capital. No matter what you’re doing there’s a solution, house hacking.
Since you’re only in your room 2 days a week, that gives you a total of 5 days free that can be put up on Airbnb. If your room can go for $120 a day, then you can make an extra $600 a week for a maximum total of $2,400. What would you do with an extra $2,400 a month? We would recommend saving it, and then using it for a bigger investment!
2. House Hacking Builds Equity
One of the best reasons to buy a home is to build equity. The struggle of building equity is when you have to pay it.
Luckily, with services like Airbnb and VRBO it’s been a lot easier to have the house pay itself off. Meaning your building equity without having to pay for it over time. Even better, you still get the awesome tax benefits of paying interest on a mortgage.
Every payment you make towards your mortgage, the more you own of your property. If you have a 30 year mortgage, you will own 100% of the home after you’ve made 30 years of payments.
That sounds like a long time, but no matter what decision you make you will always be paying to have a roof under you. If you rent, you’re not building equity, but if you own the home and make the payments towards your mortgage then you own more and more of the home with every payment you make.
If you do a 20% down payment, that means you own 20% of the home, and the bank owns 80% of the home.
As time goes by and you continue making on-time payments, then the banks ownership will slowly reduce. This is why it’s so important to own your home and not just throw away the money towards rent.
3. House Hacking Lets You Live The Way You Want
The beauty of life is to live life the way you want. It’s your money, you should spend the way you want to.
You need to enjoy every moment of your life, and being locked down on a home just locks you down. Why should you take life so seriously?
Living life for others, living life for society? That’s not how it should be lived. Zumbly was created to help you achieve your dreams.
Love hitchhiking, traveling the world, going to parties? Then you need to get your money to work for you and not for someone else. House hacking will let you live the life you want.
Tomorrow Ibiza, Monday Ko Phi Phi, Thursday Miami. Don’t ever miss another event that you want to go to.
If you have a room available, just put it up on Airbnb and use the funds to travel around the world.
A trip from LAX to Miami is only $107 if planned according. If you did a little more research then the 5 minutes we spent, you can probably find it for a lot cheaper. Here’s proof.
So how many days do you have to rent your home to pay off your round trip? Let’s say you live in LA, and you Airbnb your room for 7 days.
If you book out all 7 days, for $120 each a night that will leave you with $840. After fees and other expenses, that will leave you with somewhere around $600.
The flight costs $107 for a one-way trip which then leaves you at $493.
Now you just have to find an Airbnb in Miami. Luckily, there’s no shortage of things to do in Miami. You can rent a bunk bed for as low as $17 a night.
You’re always on the move so all you need is a place to crash, shower, and keep hygiene on point.
If your living expenses cost, $160 for a week then your left with $330 with discretionary income.
That gives you a spending budget of $48 a day.
There you go, you went to your dream vacation to Miami without paying a dime. Maybe you even came out on top and made some cash.
Check out how much similar properties can make a month by signing up for Zumbly.
4. House Hacking Lets You Meet New Awesome People
Every time you list your home on Airbnb, or get new tenants you meet new people. The more people you meet the bigger the network you have.
It’s a small world, so you never know who you meet. You’re exposed to so many different cultures, food, and most importantly other like minded people!
The same applies when you’re renting out your room to travel to other cities. You’re always on the go meeting new individuals and that’s one of the benefits of house hacking. Meeting new people is extremely fulfilling, and the bigger your social network the more opportunities you will have in life.
5. House Hacking Gives You Experience in Real Estate
Knowledge is one thing that no one can take from you. You gain knowledge and skills that can’t be taken away by deep diving into house hacking and understanding the ins and outs of property ownership, investments, and money management.
Every homeowner is a real estate investor. Even if they are a first time home-buyer. In fact, first-time home buyers are the most important group of investors.
First time home buyers are younger, smarter, understand technology, love video games, and are more efficient. Innovation in real estate and home buying will be fueled by new investors, and they will be the ones telling the stories of success in the future.
Millenials are always trying to invest in new trends. Just like the rise of esports because of easier access to technology. If you want to be an investor looking to capitalize in new trends, then check out this new Esports ETF.
Are you looking for Airbnb investment property, and don’t know where to start? Signup to Zumbly so you get more knowledge on your local market.
Questions You Need to Answer Before House Hacking
- Do you have a list of houses with a great home score?
- Do you have a list of ideal locations for your investment property?
- How are you going to finance the investment property?
- Is my credit score high enough to get a loan?
- Would you live in the investment property yourself?
- Are you ready to learn how to become a landlord?
Searching for the right Investment Property
Find the right investment property for house hacking is a lot of fun. Searching for houses is extremely exciting. but it’s always taken for granted. When conducting your house search, you want to keep a few things in mind, amongst the most important is asking yourself whether you can invest in your potential house.
In other words, will your house be able to potentially pay for itself? You can rest assured that our Zumbly Home Score will help you make the best, most effective and most efficient house search yet.
Our Home Score here at Zumbly generates a real-time scored that is based on over 500,000 calculations. Homes in each city are weighed and are scored against each other. We will discuss more about housing investing and how
Would You Live in the Airbnb Investment Property?
When it comes to buying the right house for house hacking, you want to make sure that the house is what it appears to be on the internet. When you have narrowed down your search, in terms of potential neighborhoods that you like or know are best to invest in, make a list of the houses that you want to take a closer look at.
When you find something that you particularly do not like in a specific house, make sure to ask yourself if it is an easily fixable and simple cosmetic issue. If this is the case, then you have to weigh the pros and the cons; is this cosmetic issue worth having me not buy this property? The answer is usually no, so it is something that you want to keep in mind when looking at houses and properties.
Do You Need a High Credit Score before House Hacking?
Before you begin your home search and homebuying process, is it a good idea to check your own credit. Most lenders see your FICO score, so make sure that you are using a FICO score. This will grant you the time that is necessary to work on further building your credit score if required. Even the slightest increase in your credit score can make a big difference for you in the long run.
Have Proper Documentation Before Buying Your Airbnb Investment Property
If you are applying for a mortgage, the lender will ask you for several documentation. If you make sure to gather all of the necessary documentation ahead of time, you will surely be buying yourself time and expediting the process. This will help you to obtain your approval sooner. Below is a list of necessary documents that you will need when applying for a mortgage:
- Tax Returns: Your last two years’ tax returns are necessary documents because your mortgage lender will want to obtain a full history of your current financial situation. Your lender will want to see that your annual income is consistent with your listed reported earnings, and that there are no especially large fluctuations from year to year. By singing a 4506-T Form, you will grant your lender the permission to request a copy of your tax returns from the IRS.
- Credit History: Your credit history report is a necessary document. It is needed for your lender to asses you as a borrower. In order to do this, your lender will need your written or your verbal permission. If your report has blemishes, which might include a previous foreclosure or sale, they will need to be explained. As the borrower, you have to be prepared to write a statement, in which you explain any negative items that exist on your credit history report.
- Photo ID: Your photo ID is a necessary document that you have to provide for security purposes. This is so that you can prove that you are exactly who you are claiming to be. Your driver’s license, or Social Security card are also acceptable.
- Employment or Income Verification: This includes the documents of your last two years’ tax returns, W-2s, 1099s, and your last few paychecks.
- Renting History: If you already own a home, lenders may request proof that you will be able to pay your mortgage on time. Documentation of your renting history may include a year’s worth of canceled rent checks, or documentation which shows that you have been able to pay your rent by the due date. If you do not have an extensive credit history, then your renting history is critical.
It is important to keep in mind that your lender may ask for additional documentation and information to what is provided on this list.
Hire an Inspector for Your Investment Property
Getting inspection should be an important part of your Airbnb investment property. After you have chosen your ideal investment property, you get a short inspection period, which typically lasts from three to five days.
During this time, you are given the opportunity to hire a professional housing inspector to conduct a thorough inspection of your new property. This is important because if there is something that seems off, you will be given the chance to resolve whatever it is that is of concern without having to face penalties for house hacking and having others live out of your house.
Most home inspections are standard, and include the inspection of structural elements. These structural are comprised of your houses’ foundation, floors, ceilints, roofs, and walls. Inspections will check for parallel vs horizontal cracks on your floors, will make sure that your house’s foundation appears to be secure, that your roof does not have any leaks, and history concerning fires in your house’s attic.
Your professional housing inspector will typically also conduct an exterior inspection. This exterior inspection includes the evaluation of landscaping, elevation, wall coverings, drainage, grading, fascia, sidewalks, fences, windows, doors, exterior receptacles, tims and lights.
If your house has an attic, this is typically inspected together with your roof, to evaluate your roof’s construction, the framing and the ventilation. This will cover questions such as the length of time in which the roof must be replaced, its average life expectancy, and the number of layers that it is composed of.
Appliances are also inspected during your housing inspection. This includes the close examination of your range and oven, any built-in microwaves, smoke detectors, garbage disposals, and your builtin dishwasher. Washers and dryers may be included in this inspection; however, it is important to make sure that these items are not the original owner’s personal property, and that he or she will not be taking the items with them.
Is House Hacking Right for You?
Feeling motivated? Great! House hacking and using Airbnb to live the way you want and deserve is a great way to live life to the fullest.
Just remember, before any decision is made with large sums of money, you need to do your research. Don’t worry. Research doesn’t have to be hard, nor do you have to be an expert. Zumbly will help you do research just like any other expert.
If you’re pumped like we are and want to do your research for the next house hack then we recommend you sign up to Zumbly.