House Hacking: How You Can Use it to Generate Income

Are you one of the many Americans who can’t afford their dream home? Are you interested in earning a passive income through your home, but you don’t know where to begin? Luckily for you, there’s a simple and effective solution to your problems; it’s called “house hacking”.

This article will walk you through everything you need to know about house hacking, from what it is to how you can profit from it.

What is House Hacking?

House hacking is essentially a real estate investing strategy where you can earn income by renting out different rooms of your primary residence.

The concept originated from homeowners who lived in areas where it was too expensive to purchase their own homes. They found it difficult to make ends meet due to costly property prices and monthly mortgage payments. As a solution, they decided to live in multi-unit properties and lease the unoccupied units to interested parties. That way, they were able to offset their expenses and earn profit from the rent payments of their tenants.

Nowadays, the same strategy can be used in single-family homes as well. By transforming different rooms in your house into functional living spaces, you can rent them out to students or young professionals who want to live affordably within the area.

The Benefits of House Hacking

According to a December 2021 survey conducted by Morning Consult, an average American spends around $1,000 to $3,000 on monthly housing-related costs. That’s approximately 30% to 34% of their income spent on housing alone. Can you imagine if your housing expenses were covered by passive income? You would be extremely financially liberated. This can enable you to do the following:

Eliminate Housing Costs

At the beginning of your career as a house hacker, you can already reduce your total housing costs significantly. As you continue along this path and nail down your strategies, you can eliminate housing expenses altogether.

House hacking also allows you to benefit from tax deductions. When tax season rolls around, you can deduct any money spent on the costs of repairs as well as depreciation expenses from your taxable net income.

Dabble in Real Estate Business

House hacking seriously shrinks the amount of capital that you need to shell out for your rental property. Because of this, it’s a great starting point if you want to invest in real estate but don’t have much money to do so.

Gain More Flexibility

One of the greatest benefits of house hacking is that it gives you more flexibility to live the lifestyle that you want. If, for instance, your company transfers you to a different city, you don’t have to sell your property; you can simply lease it out. Doing so will enable you to earn passive income even if you’re not physically present.

In the event that you want to have a house of your own and grow a family, you can always convert the property back into a single-family home.

Grow Your Wealth Through Passive Income

Passive income is when you earn money from something that doesn’t require your active participation. In other words, it enables you to gain profit without exerting too much of your time or effort. This allows you to watch the money roll in even as you’re working on other projects or vacationing in different countries.

If you decide to pursue house hacking as a full career, you can use the extra cash to either pay for a mortgage or invest in your next property.

There’s so much potential for financial stability in this industry, but you can only enjoy it if you apply the right strategies.

Strategies for Generating Income Through House Hacking

If you want to learn how to gain the most profit as a house hacker, take a look at some of the best and most effective strategies below.

Purchase a Multi-Family Home

A multi-family home was once a popular option among young professionals moving into the city and families who wanted to live close to each other. Although single-family homes are becoming a more popular option for house hacking nowadays, there are still opportunities to seize with multi-family homes, such as:

• Having more rooms to rent

• Having more control over repairs and property value

• Having the ability to expand your investment portfolio

• Experiencing better tax benefits

• Getting more cash flow from a larger tenant pool

Offer Rooms for Short-Term Rentals

If you’re uncertain about the direction you want to take for your property, a temporary but equally effective solution is to open it up for short-term rentals. For example, you can promote some of the rooms on rental platforms like Vrbo or Airbnb to get the attention of international tourists and vacationers.

This approach can increase your pool of tenants and speed up the turnover process. As a result, you can generate more income at a faster rate than if you opted to rent out the rooms long-term.

Build a Housing Unit on Your Property

Once you reach a wider audience and require more living space, you can further hack your house by building a separate guest house, also known as an accessory dwelling unit (ADU). These are perfect if you want to provide your guests with extra privacy and a larger rental space.

Rent out for Storage Space

If you’re not comfortable with strangers living in your house, you can also choose to offer spare rooms on your property for storage purposes.

According to statistics, 1 in 11 Americans is willing to pay for extra storage space. This means that storage unit rental is in demand. By implementing this strategy, you can tap a lucrative market and gain significant profit without jeopardizing your privacy or boundaries.

Try it for Yourself!

Many Americans take their housing expenses for granted, spending too much on property-related costs without even realizing it. With house hacking, you can cut down on living expenses and even gain enough profit to live a comfortable lifestyle. If you’re interested, try it for yourself and see where it takes you!

Listen to one of the Money Fit Podcast episodes that discusses House Hacking for more information.
Season 2, Episode 10: House Hacking with Jack Alleweil