My House Hacking Journey: Pt. One
By: Geoff Lane
Tags: House Hacking, Money, Wealth, Investment, Real Estate

Let’s do this

Happy Thursday everyone. This post will serve as the first part in a series of updates of a journey I am about to embark on. I’ll detail my experiences and difficulties as I go, so that this may serve as a tool for reference for someone else if they decide to try this out as well.

So what’s house hacking? It’s basically being a live-in landlord. There are a bunch of different ways to do it, but in every scenario, you charge people rent to live in a house you own, so that their payment covers all or part of your monthly mortgage. Hey if you do it right, you may even make some money at the end of the month!

Over the last four days, I voraciously read Craig Curelop’s book called The House Hacking Strategy: How to Use Your Home to Achieve Financial Freedom. The book had sooo much good information — kudos Craig! I became determined to make this work for myself.

But of course, there are some challenges.

Problem: I’m unemployed. Why is this a problem? Well because in order to qualify for financing, lenders want to see a debt to income ratio of 50 or less. I have college debts and will soon face payments of about $700 a month. So for example’s sake let’s say I make $700 a month. My debt to income ratio would be 100%. Not good in the eyes of the lender!

Solution: I’m applying to jobs like crazy in and around Atlanta, Georgia. Ideally, I’d like something that pays $4,000 a month so my debt to income ratio would be $700/$4,000 = .175 or a healthy 17.5%.

Why have I chosen Atlanta when I’m a Connecticut boy? Bunch of reasons. I want a change of scenery, first and foremost. The market there is appreciating very well, in part due to the fact that there’s a blooming film industry there, and a lot of development on top of that.

Did you know that like 50 of the last Marvel movies were filmed in Georgia? Okay, yes, that was an exaggeration but seriously, so many Marvel movies have been filmed in Georgia. So I want to be around that. Besides that, honestly I just have one of those faint gut feelings that says I gotta be there. Could my gut be wrong? Oh yeah. Has been before. But I’m rolling with it!

Problem: I don’t have any money saved up for a down payment.

Solution: Well there’s a couple ways I could navigate this. I could ask the seller of a home I’m interested in if they would be open to seller financing. Seller financing is a scenario in which the buyer doesn’t qualify for traditional financing from a lender, and the seller acts as the bank instead. So rather than make mortgage payments to the bank, the buyer here — me — would make monthly payments to the seller in accordance with agreed-upon terms.

If that isn’t a possibility, there are some other ways I could go about this as well. For example, Fannie Mae, a government-sponsored enterprise that makes mortgages available to low- and moderate-income borrowers, offers something called a HomeReady mortgage that reduces the typical down payment and mortgage insurance requirements, AND — here’s the key part for me — they’re also more flexible about allowing contributions from other people.

Other conventional home loans are much more strict when it comes to letting other people assist you in your down payment, but for me that could be the difference between closing on a house and not closing on it. Of course, for my pride’s sake, I’d have to repay whomever loaned me said mula.

There is always the possibility of someone gifting me the money for a down payment — which is tax deductible for the gift-er up to $14,000 I believe. But like I said, I wouldn’t feel comfortable accepting such a large monetary gift, even from family.

And of course, I could always wait and save up the money in the meantime, but with rates being so low given the current global cluster-F, I’d really like to take advantage of those rates if at all possible.

So what I’ve done so far is scout out some possible home that would serve me well as far as cash flow goes — that is, how much I’d make each month from my future tenants — as well as talk to people on Bigger Pockets who can help me out during this crazy process.

By the way, if any real estate guru reads this and I’m totally off track with anything I’ve said, please let me know so I can fix it just in case anyone in the future uses these posts as a guide for their own journey!

This is part one in documenting my steps to my first house hack. As I learn and progress in my journey, hopefully this series of blogs serve as an inspiration for those who are thinking of doing the same thing. If a broke dummy like me can do it, anyone can! Stay tuned peeps.