If you are tired of being a tenant, throwing away your money on rent every month, it is time to consider House Hacking. Where you can be both a homeowner and a landlord who gets paid for people to live in your property.
House hacking is a fantastic way to become a homeowner and make some money in the process. It’s not a get-rich-quick scheme, but it’s a smart investment that can pay off in the long run. However, before you jump into it, you need to know how much money you’ll need to get started.
Down Payment
First, let’s talk about the down payment. You might be thinking, “Oh, no, here we go. This is where I’m going to get hit with a big number, and I’m going to have to sell a kidney to afford it.” But wait for it… the down payment for house hacking is usually between 0-5% of the purchase price.
Yes, you heard that right. You don’t have to be a millionaire to become a homeowner. With house hacking, you can buy a property for as little as 0-5% down. It’s like getting a free house, except it’s not free, and you still have to pay for it. But hey, it’s a start, right?
Closing Costs
Now, let’s talk about the closing costs. The fees that make you wonder if you’re buying a house or a private island. Closing costs can range from $5,000 to $8,000, depending on where you live and the size of the property. But don’t worry, you don’t have to rob a bank to pay for it. You can negotiate with the seller to cover some or all of the closing costs. Or, if you’re feeling brave, you can try to DIY the closing process. Just kidding, don’t do that. It’s a terrible idea, and you’ll end up with a headache and a half. Let the professionals handle it, and you’ll be done in no time.
Personal Expenses Safety Net
Now, let’s talk about the safety nets. While not necessary, It is a good idea to have 6 months of personal living expenses saved up before you start house hacking. Or, if you have a great safety net from family or retirement funds, you can use that too.
Why do you need a safety net? Well, let’s say your tenant suddenly decides to move out, leaving you with an empty property and no income. Or, let’s say your tenant doesn’t pay rent for a couple of months, leaving you in a financial bind. You need to be prepared for these scenarios, and having a safety net can help you weather the storm.
Mortgage Safety Net
While not necessary, It is a good idea to have 6 months of the mortgage in savings. Or, if you have a safety net from family or retirement funds, you can use that too.
“Why do I need 6 months of the mortgage in savings?”. Well, let’s say you lose your job or your income suddenly drops, and you can’t pay the mortgage. You don’t want to end up losing your property or getting into a messy foreclosure. Having 6 months of the mortgage in savings can give you some breathing room and help you avoid financial disasters.
Summary
To get started with house hacking, you need:
- A down payment of 0-5% of the purchase price.
- Closing costs ranging from $5,000 to $8,000, which can be negotiated with the seller or handled by professionals.
- 6 months of personal living expenses saved up or a great safety net from family or retirement funds
- 6 months of the mortgage saved up or a great safety net from family or retirement funds