As a result of soaring demand and tight supply, property prices have risen rapidly in recent years nationwide. The present real estate market is heating up for anyone looking to enter it, whether a first-time home buyer or an experienced investor. Individual first-time homeowners are acutely aware of the impossibility of finding an affordable primary residence. On the other hand, house hacking could be the solution to your desire to own a home. House hacking can assist you in becoming a homeowner without straining your financial resources.
What is House Hacking?
In its most basic definition, House hacking is when a homeowner rents out a piece of their principal dwelling to create monthly rental revenue, which is then used to balance the homeowner’s monthly mortgage payments and other associated costs. When purchasing your first home, you can use this strategy to reduce your monthly expenses and build up your savings account. Following this method will ensure you get the most out of your investment when you buy a home.
Considerations
When selecting a property or home, the priority must be to locate one in a desirable neighbourhood that draws tenants and maintains a low vacancy rate. The second-best choice to consider is the job market or career options in the neighbourhood. Demand for rental properties will rise as more individuals relocate to the area to work. Along with employment prospects, it’s critical to locate property in a neighbourhood with facilities such as parks, eateries, theatres, playgrounds, and public transit. Along with the area’s existing characteristics, you should check with local governments to see what new changes or development may occur in the area in the coming years. Owing to the fact that new regulations and zoning changes could affect the use and value of your investment. Let’s say you are buying a home with a plan to rent out the lower unit, but a new apartment building is coming around the corner, which might make it difficult for you to find a tenant in the future.
Home Buyer Benefit
When you rent out a portion of your primary dwelling, you can take advantage of the majority of first-time home buying perks and tax credits. This could include government incentives for first-time homebuyers, land tax rebates, GST/HST rebates, and RRSP access, among others. Additionally, because this is your primary house, you will qualify for better financing. In addition, this might provide you with added tax benefits as well.
Build Home Equity Free
Consider it from the standpoint of accumulating home equity, which typically increases with each mortgage payment. As a result, when your tenant’s rent helps pay for your mortgage, you build equity in your house without having to pay it out of pocket. Additionally, if you can rent out the entire property for more than the expense plus mortgage payment, you may end up accumulating equity for free. Now, you may invest this accrued equity in your new investment venture.
Landlording Experience
As a result of implementing this strategy, a homeowner receives valuable hands-on experience as a landlord with minimal risk. You will learn how to manage tenants, manage expenses, and generate revenue. Now, assume you intend to invest in more prominent real estate enterprises in the future, such as multi-family houses or apartment buildings. In that instance, you can leverage your landlord knowledge to research and acquire a piece of real estate with a higher return on investment. Additionally, you will gain proficiency in managing tenants, resolving repair and maintenance concerns and expenditures, bookkeeping, and tenant screening, among other things.
House Hacking Multiple Residence
The most recommended technique for getting started with home hacking is purchasing a multi-unit building, such as a duplex, triplex, or fourplex. Even if you are a first-time purchaser, you can begin your real estate investing career by acquiring a multifamily unit where you live in one unit and rent out the other. Compared to a primary residence, each dwelling unit in a multi-unit construction is self-contained, complete with a living room and kitchen. Some properties allow tenants to share shared facilities such as laundry and parking. Additionally, you may set up a separate electric meter for each unit, simplifying charging and managing utility bills. As a result, you will get valuable experience that will be beneficial if you decide to invest in large apartment buildings in future.
As with any other endeavour in life, home hacking might present some difficulties and pain points. However, in reality, the advantages much exceed the drawbacks. Nevertheless, if you have the option of increasing your real estate wealth through this method, why not give it a try?
