An asset puts money into your pocket.
A liability takes money out of your pocket
Accumulate assets and get rid of liabilities. This will exponentially fast track you to financial independence.
How to Eliminate Your Largest Monthly Expense – Different Ways of House Hacking
The typical American spends 30% of their take home pay on housing. This isn’t a bad thing, but it is the simple truth in America right now. To eliminate your largest monthly expense, opens you up to many investing opportunities. Want to have a high savings rate and be able to invest more? Eliminate your largest expense. For 99% of Americans, the largest expense is housing.
How To Cut Your Largest Expense
There is one very simple way to cut the largest expense you have every month. House Hack! No reason to over complicate things. Let’s keep it simple.
What Is House Hacking?
House hacking is a term coined by Bigger Pockets that describes living in a home and renting it out. There are a few different ways to go about house hacking. Let’s highlight each one of them.
Strategy 1: Purchase a Duplex/Triplex/Quad
The first strategy involves purchasing a multi-family property. The goal is to buy a property where you can live in one of the units and rent out the other unit(s). This allows you and your family to have your own privacy in your unit. I highly recommend this strategy if you have a family and privacy is important to you. Many markets have multi family properties where this strategy will be effective. If you are able to either cover your mortgage, or come close to it, you are winning.
Strategy 2: Purchase a Single Family Home and Rent Out by Bedroom
This is a little different of a strategy more commonly used by a younger professional. It is also commonly used by someone just graduating college and used to living with roommates. This is the current strategy I am implementing in my first house hack. There are a few things you need to ensure before implementing this strategy.
First, you need to ensure there are no restrictions from your HOA to rent out by the bedroom. There are certain HOA’s that have clauses in their contract to prevent people from doing this. If the property has an HOA, make sure to read through their documentation.
Second, make sure there is enough parking space at the home. It is important everyone has enough parking at the home. Ensure you have enough parking where you wouldn’t cause a nuisance to neighbors. This will help ensure you and your neighbors get along.
Third, try to find an optimal floor plan to prevent more than two rooms sharing a bathroom. Convincing someone to share a bathroom with more than one other person is difficult. It is possible, but just more challenging. Having three people share a bathroom would also cause rents to be lower.
These are all important things to think about if you want to implement this strategy.
Strategy 3: Purchase Single Family Home With Mother-In-Law-Suite
This is a strategy I am looking into for my second house hack. I would prefer a multi-family, but I can also look at properties having a mother-in-law suite. The thought here would be to rent out the Single Family Home and live in the suite. This would be great for markets where many are looking to rent out an entire home and it’s common to have a mother-in-law suite.
- Focus on the elimination of your largest expense. Housing.
- House hacking is the single most powerful tool you can use to be able to invest more money. The more money you don’t spend on housing, the more you can invest.
- There are many ways to eliminate your housing expense. Explore the different options that might work for where you live.
Don’t forget @TheYoungRetireeBy33’s 3 Core Principles:
1 – Your money should make money for you⠀⠀⠀⠀⠀⠀⠀⠀⠀
2 – Start early to realize the power of compound interest⠀⠀⠀⠀⠀⠀⠀⠀⠀
3 – Eliminate your largest expense by house hacking