House hacking is a method of free or almost free living by making a multi-unit rental small property your main residence. By doing this, you are basically helping your tenants cover the cost of your accommodation.
The idea is very simple. You will buy a duplex, a triplex, a foreplex, a single-family home, or any other creative property such as garage apartments or mobile homes. The income from the rental unit can cover all or most of your expenses while you are there. Once you move out of this property, it can turn into a long-term rental investment.
House hacking can reduce or eliminate your housing costs, which is a big part of your personal budget. There are other benefits – for example, occupants get the best financing terms. Since you are an owner and owning your own home, you are paying lower interest rates and there are more attractive terms than investment financing. You can make small down payment.
House hacking teaches you how to invest in real estate – learning how to live in a property and how to invest in it. This allows you to make a smooth transition to investing in rental properties so that when you are just a landlord and you are no longer renting out your property, you know how the type of tenant attracts your property and how to take care of the property to retain value.
What is Airbnb House Hacking?
The internet is full of “life hacks”. I’m sure you’ve seen them, clever tricks like storing your pancake mixture in an old ketchup bottle or dipping your oreos through frosting with a fork. Of course, these are fun little tricks – but how much do they improve your life?
House hacking, on the other hand, is an epic, life-changing thing. When implemented properly, it can dramatically affect your wallet and your family’s financial fortunes.
I’m talking about hacking your residence and living for free. I’m talking about creating assets automatically and paying to do it. I am talking about buying owner-occupied multipurpose property and paying your mortgage to others.
What are you waiting for?
You hear me it’s often called “owner-occupied multipurpose property,” but you’ve probably heard of other names for it, such as “duplex,” “triplex,” or “foreplex.” These features have multiple units but do not fit perfectly in the “Apartment Complex” section. There is a good chance that you have rented a unit in one of these places in the past or know those who have.
They live in every market, in every neighborhood, and at every price – and by purchasing a small multipurpose property, living in one unit and renting other units, you can live for free and even make money on top of that.
In order to make this conversation understandable, we must identify some key elements. The key to any house hacking effort is the desire to make money; This is the essential truth. However, making money is not in vain. Making money in any enterprise is associated with a certain amount of risk and time commitment.
Therefore, it makes sense to take any opportunity to make money as a combination of income (or wealth) generation potential, risk level and time commitment. In other words, there is a golden medium through which we can get maximum financial gain with minimum risk and time commitment. The same is true of house hacking.
If I were to say (which I am) that using vacation rent in your home hack is a very good idea, what I want to read is: The most financial gain if you use vacation rent in a hack will be the least adjusted-to-gain risk and the least adjusted-to -Gain time commitment. We won’t be able to explore the minutiae here, but let’s see if we can get a bird’s eye view.
Not ready to make long-term investments? In that case you can do something like Airbnb House Hacking. With Airbnb, you often rent one or two rooms in your home and guests pay you to stay there. Paying them can lead to a mortgage on your home.
More about short-term rentals from BiggerPockets
What Makes Airbnb House Hacking Successful?
In a home hacking situation it is certainly most important that the income is stable. Income stability is, perhaps, the whole reason you are hacking the house in the first place. And in this section, it would seem that long-term rents will win. After all, you have a tenant on a 12-month lease and you can rest assured that the money will come. .
Have you ever heard of an economic policy called VOM? To draw a picture too early, what happened in the Great Depression is that the flow of money into the economy has stopped. We live in a debt economy, where credit is the equivalent of oil in your internal combustion engine. If the oil stops flowing, the engine catches up. In the same way, the flow of credit should stop, the economy will freeze. Why? Because buyers can’t borrow money to buy things – and sellers, therefore, can’t find anyone to sell.
VOM measures the speed of money transactions flowing through the economy. During the Great Recession, VOM was frozen. This is never a good thing. However, as it relates to hacking into your home, the opposite is true: the faster the money speeds up (assuming the money flows to you), the more likely the strategy is to make money.
Okay, on a 12 month lease, you’re going to pay once a month. But in a holiday rental situation like mine, I get paid three to six times a month. Because of this, instead of earning $ 600 per month, I’m earning $ 1,000 to $ 1,800 per month, with an underwritten average of $ 1,300 – which is what I’m performing so far.
To truly understand how Airbnb makes house hacking a success, you need to determine the most important things. Are you thinking of making more money or less money but staying on a predictable schedule? If you care about the latter, Airbnb House Hacking is for you.
Selecting a property for airbnb house hacking
If paying more than once a month (diversifying your revenue) is your goal, you can get it. Luxury home hacking puts you in a position where you not only want to live but where many people want to go for both business and pleasure. For this reason, instead of having three tenants who pay once a month (which they can afford), you can host three short-term guests who pay you three times a month through an automated process performed by a third party.
In this setting, paying more than once per month not only makes you more money due to the increase in VOM but also reduces the risk of loss of income. And now, you will not be in a dirty foreplay in a so-called place, but in a class-A area of a high-class construction. Talk about killing three birds with one stone!
But we are not finished yet!
When choosing a property for airbnb house hacking, you need to consider how many tenants you can reasonably live in and maintain your own sanity. After all, you don’t want to be stuck with tenants on a long-term basis that you absolutely can’t stand. You do not want to be frustrated if you cannot get the right pitch so invest in a good capo.
So usually, when choosing a house to hack a house, especially as an airbnb, you have to decide on the maximum number of tenants and usually, it will be according to how many bedrooms or beds you have in your house. You need to decide if your tenant can have a pet and if a tenant can rent for a longer period of time. You should also decide how much you want to charge for the room and what kind of tenants you want to attract.
Now that you’ve thought about your income and the diversity of VOM, the next question to ask yourself is, “How do I attract the most stable short-term rental income?”
It’s an engaging and versatile conversation, but in short, you want to deal with those who have the money! You don’t want to hire people who can only pay 20 20 per night for one night. You want to deal with people who are willing to pay $ 250 per night for a quality room but will gladly accept your equally beautiful place at a discounted rate. Why? Because these people think about their credit, which makes them easier to manage.
What kind of property are these people attracted to? Think luxury! They can carry it. They expect it. And they will get it.
What kind of people are easy to manage? Those who can afford an apartment in such a place (most months) or those who think about their credit and have money to spend on travel?
Create a stable financial foundation
Are you bound to nine to five working weeks? Do you want to “retire” from paying wages in ten years? Are you in your 20s or 30s and want to be financially free? One of a kind free that makes sure you have the best part of your day and week and the best years of your life doing what you want?
Advantages of Airbnb House Hacking
First, I ask you: Have you ever evicted a tenant? I can recommend that unless you experience all the colorful behaviors that tenants experience while you are in tension, you shouldn’t assume that having them next to you and your family would be a great thing.
You see, if you sign a lease and then don’t like them, or if they become bad tenants, you have to go through the process of evicting them. And of course, if you used the lease, if you thought, I want a stable income, so I need a 12 month lease. But are you sure that the best solution for a house hack is a situation where you can show yourself knocking on your neighbor’s door and tell them that they have three days to get out? At this point, you may have been with this person or family for months. You may have become friends – even friends. How much would you enjoy expelling them?
Airbnb House Hacking is great for creating equity, and it gives you flexibility because you can now choose to rent your property and how much you want. Basically you are choosing your own salary. If you have guests or need your own home, you can deactivate the list and evict your tenants. Meanwhile, if you find a new job or have problems with your family, you can always go out and rent the rest of the property and earn more money.
Renting through Airbnb will ensure you pay on time, and you don’t have to worry about failing to pay the rent on time as you did with the traditional fixed rent. All transactions are done through Airbnb, which gives you financial stability. Short-term rental properties also receive substantial tax breaks. You can deduct guest fees and deduct 100% of the furniture and equipment used for rented rooms. Airbnb house hacking can offer many benefits over many years.