How House Hacking Builds Young Adults Wealth

Updated: Aug 5

Here’s my guide on what house hacking is and how you can use it.

What is house hacking? The term has been around for a while, but a lot of people don’t know what it is or have never heard of it. Today, I’d like to go over what exactly house hacking is and how you can use it to your advantage.

The basic idea behind house hacking comes from the fact that the Denver Metro area is a pretty expensive place to buy a home. If you are earlier in your financial career, you can utilize a low down payment loan and supplement your income by renting out your extra bedrooms.

Let’s say you’re fresh out of college. You just landed your first adult job, and while the future looks bright, you don’t have the financial assets right now to buy a home. However, if you buy a four-bedroom property for $400,000 with a low down payment, your payment will probably be around $2,000 per month. If you rent out two or three bedrooms you aren’t using, you can bring in up to $900 per month per bedroom. This almost entirely covers your monthly payment.

You can start the whole process over again with another house after you refinance into a conventional loan.

If you do it right, and you live within your means, you can end up bringing in more money than you’re paying. At this point, you have some options. You can continue to rent out your bedrooms as I described, or you can use the money you’ve earned to refinance your FHA loan into a conventional loan. Since you can only have out one FHA loan at a time, this frees you up to start the whole process over again while keeping your first property.

When done properly, we’ve had clients who have accumulated 10 or 15 units by the time they’re in their mid-thirties. This translates into a large passive income stream, especially for someone so young. If you’re a young adult or you have a young adult family member, house hacking could be a great way for you to build wealth.

If you have any questions about house hacking, or you have other real estate questions, do not hesitate to reach out. I am always willing to help.

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