Buying a multi-family home can be a great way to get your mortgage paid for you, but is landlording an option you want to pursue? Find out if “hacking your home payment” is a viable path for you.
How to Get Someone Else to Pay Your House Payment
Are you enthused about house hacking? It’s one of the latest trends no home ownership. All you have to do is buy a property with more than one unit, otherwise known as a multi-family property. Then you live in one unit, while renting out the rest. Your rents can be used to pay your mortgage, so you can enjoy life rent-free!
What’s a multi-family property?
A multi-family property could be a duplex, triplex, or fourplex (anything with five or more units is considered commercial property.) You may also be able to subdivide a larger single family home into a multi-family property with several units, but you’d have to make sure your municipality and local zoning allows the remodel. Typically, to qualify as multi-family, every unit must have its own entrance, bathroom, kitchen, and utility meters.
Financial Advantages of House Hacking
Obviously, if you buy a multi-family property and rent out all of the units but one, you may be able to cover ost or all of your mortgage. COnsider the following scenarios:
You buy a duplex with two 2-bedroom apartments. Your mortgage is $1400 a month. You rent out one side of the duplex for $1000 a month and pay $400 a month yourself.
You buy a triplex with three large 1-bedroom apartments. Your mortgage is $1600 a month. You rent out two of the units for $800 each and live for free.
You buy a fourplex with four 2-bedroom apartments. Your mortgage is $2450 a month. You rent out three of the units for $950 a month and clear $400, which you add to your mortgage payment towards principal to pay off your loan faster.
By taking this route, you get primary residence financing instead of commercial, meaning:
- A lower interest rate
- Lower fees
- Potentially a lower down payment
Disadvantages of House Hacking
Being a landlord has its own set of challenges. Before you buy a house to hack your payment with, make sure that if all your units sit empty you can still make your mortgage payments. You can never count on full occupance all year round.
Also consider the maintenance costs, the time and trouble finding tenants, having to evict a bad tenant if needed, and cleaning costs in between tenants. Being a landlord is not for the faint of heart!
Still, a multi-family home can be a great option if you know you can keep it occupied with rent-paying tenants. Just gop in with both eyes open and a financial cushion.
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