House Hacking is literally one of the best financial decisions you could possibly make. Period. Allow me to explain.
House Hacking is available only to those who do not yet own their first property. And it can set your financial life on a track towards security and profit.
In the United States, CMHC loan options allow you to invest in your first property with only a 3.5% down payment.
In Canada, we have similar options available, where first-time homebuyers only require a 5% down payment for their first property.
Well, we all know that Adam, but how does that help us with our money and our finances?
Here’s how. House hacking can take place in 2 ways.
The first way is to buy a specific type of house through leveraging the banks and putting a small percentage down payment. You then want to live in one room of that house and rent out the other rooms. You want to buy a small multi-family property that has at least 3–4 rooms, and that is cash-flow positive (a little bit less than cash flow positive is also okay in this case — because you are not making a profit on one of the rooms). As long as the area you are investing in is a growing market, you will make money on appreciation in the long run. And you are now paying for virtually no living expenses, which is obviously one of the biggest monthly expenses we all pay.
The only catch is that a mortgage like this is a high-ratio insured mortgage, and so you will have insurance expenses to add to your expenses. As long you factor that into your expenses when analyzing a deal, you can still find yourself property with solid cash flow.
The catch here of course is you might now want to live with roommates. And there are solutions to this problem as well. You can get your friends on board, in which case you will find yourself in a positive and friendly environment. Win-win. You can establish a tenant-screening process, that enables you to find secure, on-time paying tenants. Also bear in mind that you only have to live in the property for one year for it to be considered a primary residence. After your first year is up, you can move out to another place, buy a second property and repeat the process, and make even more money through rental income by renting out the last unit!
Obviously, house-hacking will have its downsides like anything else, but the amount of stress relief and financial freedom that comes with eliminating your big monthly expenses is absolutely priceless. This is your chance to prove to all the naysayers that think that the millennials and the new generation will not be able to afford houses given the current market WRONG.
If you live in Ontario and want to learn more about the exact steps you need to take to house-hack your first house, feel free to contact me at facebook.com/realadammalik or text me at 4372270401. My team of mortgage brokers, contractors, and real estate professionals will provide you with concrete steps to reach your financial goals.