This past weekend, my roommates moved out. It’s the end of an era: I’m not longer a house hacker. The last 27 months have been amazing for me financially with my biggest expense being hacked. It’s a little bit sad, but I’m going to enjoy living on my own for a few months as I figure out the next steps in my life. Getting paid to live in your own house is great, and it definitely will take a little bit of time to build up another income stream that was as awesome as the rental income from my roommates. In this post, I want to share with you how I made $39,000 through house hacking, and why I encourage everyone to look into renting out additional rooms in their house.
First, What is House Hacking?
House hacking is buying an owner-occupied property and getting paid to live for relatively cheap or free.
How are you able to live for relatively cheap or free? You get a house which has rental potential, and rent out your additional rooms or units to other people (friends, Craigslist people, strangers, etc.)
House hacking allows you to get into the real estate game and also have your housing subsidized by roommates or tenants.
Buying a House to Hack
In June 2015, I had just graduated with my Master’s in Financial Math in May and had been working full-time for about 5 months. Life was good.
Over the past few years, I’d been reading about different wealth creation strategies on Financial Samurai. I was interested in building extreme wealth and was interested in real estate. I’d dabbled in some stocks by trying to day and swing trade about $750, but didn’t have too much success. I was renting at the time and my friends and I were interested in moving closer to Uptown in Minneapolis – a vibrant and hip community. There were 4 of us who were looking to live together and we were looking to rent. The problem was, there were no available options for 4 people where we were looking.
Then, a clever idea popped into my head. I was sitting on the couch with my buddy and said to him, “Hey, I know we are kind of striking out with the whole apartment search… I wonder what I could buy.”
Over the next week, I got approved for a mortgage, saw a free houses, and pulled the trigger! For the full purchase story, click here. Since July 2015, I’ve been living a house with a few roommates and stacking checks!
My Financial Results from House Hacking
I want to share with you how much I made in rental income from house hacking.
First though, a quick digression into how spending on housing affects your ability to save. There are three categories that determine the bulk of your spending each month: housing, transportation, and food – if you can reduce any of these, you will be able to save a lot of money a month. House hacking tackles the first category, housing, and allows the house hacker to save a lot of money due to the decreased cost of living.
Getting Paid $39,000 in 27 Months for Living in my Own House
Over the last 27 months, I’ve made $39,325 in rental income.
I didn’t do anything special – all I did was purchase a house with 3 rooms and I rented out 2-3 of those rooms to my friends. I was literally being paid to live, and it was amazing.
How You Can House Hack
Anyone can house hack if they want to. I’d recommend house hacking because it’s both an income booster and it’s an investment in real estate. You improve your cash flow, and get invested in one of my favorite asset classes.
Why do I like real estate as an asset class? Real estate is:
- Accessible – Anyone can buy it
- Appreciable – Can increase in value over time
- Leverageable – You can buy on margin and borrow against equity
- Rentable – Cash flow baby!
- Improvable – Through sweat equity or contracting out
- Deductible/Depreciable/Deferrable – Amazing tax benefits
Looking for duplexes in your area, or homes with extra rooms you can rent out are fantastic ways to get started with house hacking.
Now that I have two open rooms, I have options with what I can do going forward. Starting off, I’m going to make one of the bedrooms an office by putting a table and desk in there. I may make the desk myself or buy it, I haven’t decided yet.
I’m going to keep the other room open for now. I’m a little bit busy with life and business, but the other room may become a guest room eventually. I’ve also thrown the idea of AirBnB around in my head, and think this could be a possibility (especially with the Super Bowl being in town this February!) Would this be worth it?
Something I’m looking forward to is cleanliness and the quiet with no one else living with me. My one roommate’s favorite thing to do is cook, and his least favorite thing to do is clean his dishes and equipment… I can’t wait to have my kitchen clean! Also, I can’t tell you how many times I’ve been woken up at 1-2 AM on the weekends when I wanted to go to bed at 11 PM and someone is stumbling in from the bar. A well rested Erik is a happy Erik 🙂
Adding a Property or two in 2018
At FinCon 2017, I met a lot of cool people who were investing in real estate and house hacking. In 2018, I want to start putting some of my cash to work in the rental market. Picking up a property or two in 2018 would do wonders for my financial situation and would keep me on my path to financial independence. I’ll be targeting lower cost areas in the Midwest that are bringing in $200-300 in cash flow after the mortgage and other expenses are covered.
Other Additional Comments on my House Hacking Experience
First off, being a landlord isn’t all that bad when you make sure to have a roommate agreement and lease in place. My roommates are solid gentlemen – they don’t always pick up after themselves, but they are very nice and friendly people. My living experience has been great and I’m very happy with the location I’m in.
I’ve spent about $1,500 on various repairs and fixes, and put proper grading around my house for $5,500. Other than that, I haven’t had too many major expenses related to the house.
Since I was living very cheaply, I had no excuse to keep paying the minimum on my student and auto loan. I paid off both in 4 months after moving into my house, and I’m extremely happy that the only debt I have is my mortgage. This is another reason why house hacking is great – you are able to get fancy with your cash flow!
Concluding Thoughts on House Hacking
House hacking is amazing and I recommend anyone who has an interest in getting ahead financially to consider it. It is definitely tough with student loans, the want to live in luxury apartments, and the increased responsibility of being a landlord, but at the end of the day, it is more than worth it financially. As I mentioned above, I increased my income by $39,000 just by living. What could you do by house hacking?
Readers: Have you house hacked before? Do you have any plans to in the future?