According to Rocket Mortgage, House hacking means finding ways to generate income from your home. Traditionally, house hacking meant buying a multifamily property, living in one unit, and renting out the others so that the tenants pay the owner's mortgage, and the owner builds equity while maintaining the property.
THIS IS HOW I PAID OFF MY HOUSE BY AGE 34. My first property was a duplex, and my first tenant was a retired widow who loved that I let her use the flowerbeds for gardening. She essentially purchased my home for me. Over the years, she and my various roommates effectively paid off my 12-year mortgage. I honestly miss that duplex but am glad it's taken me to where I currently am in life.
How did I do it? I'll admit that I got a good deal because my mom owned it for a couple of years before me and she sold it to me for what she owed - $106,000. My dad had to cosign with me to acquire the loan, and he has banked with Regions for as long as I can remember. Before it was Regions, it was First National Bank of Russellville, and who knows before that. Anyways, since Dad banked with Regions we made an appointment with the commercial loan officer, Stan Tapp.
Stan Is a great guy who gave me some amazing advice while acquiring the loan. I went in thinking I needed to get a 30-year mortgage, but Stan said, "Don't do that." Stan recommended a 12-year mortgage on the property. We already had a little bit of equity in the duplex since Mom sold it to me at a discount and Dad had good enough credit for me not to have to make a down payment. I can't remember the interest rate, but I think it was about 6.5% at the time.
The payment ended up being about $641 per month for 12 years. At the time, Mildred was paying $425 per month in rent, and I had a roommate paying $225 per month in rent covering the entire mortgage payment for me. The roommate also split my utilities with me, so I essentially profited while paying down the loan. My only out-of-pocket expenses were insurance and property taxes. Mildred lived in the duplex for about 15 years and her final rent payment was $550. She loved that I lived next to her for most of that time and that I let her plant her flowers year after year.
It honestly was a dream scenario! Things did come up as they usually do with rentals, but I always had some money tucked back for a rainy day. Most financial professionals recommend 5 months of rent, but I tried to always have access to $5,000. My only regret is not coming up with the term HOUSE HACKING myself and trademarking it, lol.
Currently, I live in a 3 bedroom, 2 bathroom home that I purchased for about $120,000. Soon I will be listing it and making a sizeable profit from this home as well. Stay tuned for stories on other ways that I have profited from real estate. Hopefully, the stories will give you ideas on how to profit from real estate too!
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