Its pretty crazy to think about, but I am about a week away from closing on my first home and starting my house hack. It’s pretty cool that I went from being in $55k in Student Loan debt four years ago to becoming debt free in April of 2017 to now being in the position to buy my first house later this month.
As I talked about in my last post “Building My First House (Hack)” I didn’t purchase my house to improve my lifestyle or because I needed more space. The main reason I bought my house was to reduce my largest expense, which is housing (by a pretty significant percentage). It sounds somewhat crazy that I am making the most substantial financial purchase of my life, and I’m talking about reducing my largest expense, but hear me out.
If you are unclear on what House Hacking is, check out this video.
Current Situation
Right now I live in a one bedroom (700 sqft) apartment with my fiancee and my dog. We pay $1232 a month in rent, and we split that half way. When we move to our house, we will have 1500 sqft and three bedrooms. That means that I will have two spare bedrooms as an asset to produce extra income. I will go from splitting with one person to now potentially three people (Fiancee + 2 others).
My projected mortgage (includes Principle, Interest, Taxes, Insurance + HOA) will be around $1775 per month. So my best case scenario is that each roommate pays $600-$650 for rent and I would be able to live there for free. Worst case scenario and for whatever reason, we have issues and have to pay the full mortgage on our own (my finance would contribute $600 a month for rent) it would 28% of my monthly net income. I guess that we will close to best case scenario at least 75% of the time, but I am preparing for the worst case scenario.
Below are some of the things I am doing to prepare for my first house hack.
Meeting with others who successfully House Hack
I had been intrigued by the idea of house hacking for a while now. After reading books, listening to podcasts, and chatting with like-minded individuals, I decided this was the year I was going to make it happen. Luckily for me, my Fiancee was on board once I explained the potential benefits of our decision. Most people wouldn’t be comfortable with the idea of living with others to live mortgage-free, but for me, I think it makes a lot of sense for me in this stage in my life, and I’m willing to get a little bit out of my comfort zone to make it happen.
Last year, I started connecting with other personal finance friends during the Fincon conference. I met some awesome people from across the country that reduced their living expenses from house hacking. I met Scott, Drew, Erik, Craig, Kevin, and others who successfully house hack in different ways. These guys gave me the motivation to pursue house hacking for myself.
Since I was pretty novice about the home buying process, I needed to hire a realtor to help me purchase my first house. Through a mutual friend, I met my current realtor/friend, Diego. Diego has been house hacking since he was 24 and now owns multiple rental properties in Texas and Florida. I knew that most real estate agents wouldn’t understand how house hacking works so I was excited to work with Diego because he knew how to find the right house for house hacking and would be a great help in the home buying process.
House Hacking Course
Diego had created a House Hacking course while we started working together earlier this year. His course has helped me understand the ins and outs of renting out rooms in a single family home.
Everything from:
- Having the correct mindset
- Buying the best home to implement house hacking
- Understanding the numbers and finding deals
- How to properly vet roommates (background/credit checks)
- Creating a successful listing
- Building systems that scale
- Understanding Taxes
Now, after taking the course, I already have a plan to implement after I close on my house. The course helped reduce some anxiety I had, and now I’m ready to get started creating passive income/ reducing my housing expenses.
Making the House Renter Friendly
Through taking the house hacking course, I learned that it’s essential to set up the house to be renter friendly. I did my best to make my house stand out in the rental market in the following ways.
- Bought in an area close to a major highway and near large corporations
- Location is essential to attract the young professional type of roommate who works nearby
- Bought a new home
- By purchasing a new home, I can justify higher rent, and my house will be more attractive to potential renters. (It turned out in Austin many of the older homes in the area were close in price as the new home options).
- Rentable rooms located on another side of the house, away from the master
- Bought front door keypad and ring doorbell so renters don’t have to use keys (and I can be alerted who comes in/out of the house)
- Will have maid service come to clean the common areas of the house 2x per month
- Using Cozy.co for rent payments and lease agreements
Testing out Airbnb
For the first month or so I am planning on trying out Airbnb. After talking to multiple people about Airbnb, I believe its best to “test and find out” if it can be a viable option for me.
There are pros and cons to both having full-time roommates and using Airbnb. I am planning to test out if I enjoy having different people in and out throughout the month vs. one roommate. Also, additionally I need to find out if I can generate enough income with Airbnb to cover my housing expenses.
If I can get 75% of the income, I would make from having two full-time roommates I might consider Airbnb full time. Either way, I think I will use Airbnb in some capacity going forward, even if that means only using it during big events like ACL (Austin City Limits) or SXSW.
More to Come
As I am one week away from closing on my first house, this is only the beginning. I plan to keep yall informed on how things are going with the house and my progress on reducing my housing expenses. I’ll see if I will do monthly updates or maybe once per quarter.
Either way, Let me know if you have any advice or recommendations for me as I start my house hack /home ownership journey.
Question for You!
What are ways that you reduce your biggest expenses?
Do you have any advice or tips for me as a new homeowner?
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Gary is the author behind Debt Free Climb, a blog that shows how to live intentionally, pay off their debt, build a side income, and travel the world
Gary's favorite free financial tool he’s been using since 2017 to manage his net worth is Personal Capital. Each month he uses their free Investment Checkup tool and Retirement Planner to track his investments.
His favorite way to save automatically is Capital One Performance Saving, a bank that allows him to create multiple high-interest savings accounts and create an automatic savings plans for each account. He uses these features to meet short and long term savings goals.
His favorite way to save money on car insurance is by using Root, an app-based car insurance service. He saved $240 this year after switching from Geico to Root
- DebtFreeClimb v2- Our Debt Freedom Progress Report - June 17, 2020
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- My 2019 House Hacking Review - December 26, 2019
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