How I House Hacked at 24 with a 730 Credit Score and $15,000 to My Name
So, what is “house hacking?”
In short, house hacking is a way to offset your living expenses by reducing or eliminating your housing expenses, or even making money off of your home.
It can require doing some research and making some compromises, but if you are interested in owning and investing through real estate, house hacking can be a great way to get started, especially if you do not have the cash to make an entire mortgage payment on your own.
The most well-known form of house hacking involves finding a duplex, triplex, or quadruplex, and then living in one unit while renting out other sections for rental income. While house hacking can be a big help in building your wealth, it definitely isn’t free money. It involves becoming a landlord in some form, doing the work it will take to buy and maintain your property, and will require that you take on the task of managing your tenants and the property. This work is not to be underestimated.
If you don’t have the cash for a downpayment, there are many other forms of house hacking that can be great for building your savings. These include:
Renting out bedrooms to roommate(s)
Renting out garage space as storage
Renting out land on your property for events
Building a separate unit (think tiny home) and using it as a short-term rental for Airbnb or VRBO
With the limited amount of affordable housing available, this strategy may be the only way some people are able to afford a home without becoming house poor. That was me in 2017. I had been curious about real estate investing for a while, was tired of living alone, and realized that I could own a home for less than what I had been paying for rent, so decided to explore my options.
Here’s how I house hacked as a 24 year old with a 730 credit score, and $15,000 to my name:
The house: A cute but old, decently located, 1,500 square foot, 2 bedroom 2 bathroom single family home with a small fenced in backyard and garden, with private parking off of the alley. It was listed for $169,950 and located in Richmond, VA.
The deal: The final purchase price was $167,500 with the seller agreeing to pay $5,000 towards the closing costs, and included a home warranty for appliances.
The financing: I put 3.0% down ($5,025) on a conventional 30 year fixed mortgage with a 3.875% interest rate. My mortgage lender had a promotion offering $3,000 in credits that was used to buy down my interest rate since closing costs were already being covered.
The living situation: I entered this process already knowing that I’d have my best friend move in as a roommate. She agreed to pay me $650 a month all-in, making this a good deal for her as well. My monthly payment was $1,009, but after utilities and lawn care, expenses came closer to $1,330.
The exit: I entered into this arrangement thinking I would eventually move back home, but keep that house as a buy and hold investment property. That particular house required a lot more maintenance than I was prepared to keep up with from a distance, so this did not turn out to be the case. The home sold for $187,000 in July 2020 when I was ready to move back to Atlanta.
My results: I’m happy with the way things turned out because I got to live inexpensively, with one of my best friends as my roommate, while gaining some first hand real estate experience. Financially, I got some tax benefits, and was able to sell the house for a slight profit even when counting the ~$10,000 worth of work I put into it over the years. Not bad for my first real estate deal!
Here are a few of the things I learned from the whole experience:
You REALLY do need a contingency fund that is in addition to your personal emergency fund, no matter how wonderful and perfect everyone around you says the house is.
Always get an inspection, copies of the receipts for work done, AND also some sort of third party confirmation that things were done appropriately. If I had gotten my own contractor to go under that house and confirm the quality of the work done, I would have bought a different house.
The Biggerpockets podcast, real estate calculators, and forums are a true gold mine if you are interested in real estate investing. The more you can find a community that you can reach out to for help navigating your specific situation, the better. Between resources like Biggerpockets, The Financial Gym, and a personal willingness to diligently do the work, there’s no reason real estate investing has to be reserved for someone other than YOU.
Start small. Be creative. We all have to start somewhere. It’s all about progress, not perfection!