What is House Hacking?
If the idea of making money with minimal effort, every single month, appeals to you…That is to say, if monthly cash flow appeals to you…I suggest you look into “house hacking” with your VA Loan.
The principle of house hacking means a homeowner does the following:
a) purchase a home and live in part of it (yes, you may use your VA loan for everything up to a 4-plex!)
b) rent out the remainder of the home to others in exchange for monthly rent payments
If you’re doing it correctly, you’ll find that you can live in your home for free, plus earn a little money on top of that. For example,
a) Buy a four-bedroom house with no money out-of-pocket for, say, $250,000; your monthly payment is $1,250. You’ll live in the master bedroom.
b) Find three roommates who are each willing to pay you $550 per month to live in one of the bedrooms.
With this approach, you will be earning $1,650 per month and only having to pay $1,250 per month to the lender. Essentially, you’re living in a house for free while also earning $400 per month on top of that. Of course, you’re going to have to handle the occasional complaints from your roommates, “The heater’s too hot!” or, “The heater’s too cold!” or, “I think my sink is leaking!”
But if you can handle these challenges by calling licensed contractors, using your $400 per month cash flow to pay for the repairs, you’ll still be living for free. Even if you have to come out of pocket a thousand dollars here and there, that’s still probably significantly less expensive than paying $1,350 per month to live by yourself in your own home or rented apartment.
In short, house hacking is how we can turn our houses into assets instantaneously. We just have to be willing to put up with some roommates and additional responsibility of owning a home, living in the home, and also being the landlord for the home. Click here to learn more about being a landlord and the challenges it presents.
House Hacking a Duplex, Tri-Plex, or Four-Plex using your VA Loan
If living under the same roof as your “tenants” does not appeal to you, or if you want to have some more privacy plus the option of renting to people you don’t know that well, consider purchasing a multi-family home.
That’s right, the VA Loan allows you to purchase a property of up to four total, separate units! The catch is that you have to live in one of those units, since the VA Loan is designed specifically for owner-occupants rather than pure real estate investors. By house hacking, you can become a real estate investor while living in close proximity to your asset.
This allows you to learn first-hand some of the most common factors of being a landlord and taking care of your residents with personal application and care. Eventually, you may find that you want to hire a property manager to take care of your assets for you, so that you can be more hands-off.
However, I always advise that your first experience as a landlord be as hands-on as possible. I have found that nobody cares about your asset as much as you do. While you can hire a property manager most commonly for 10% of your monthly revenue, I think it is absolutely necessary that you have some kind of monthly connection to your property with a check-up to ensure it’s not getting neglected by the current residents.