“You are your best client” – Tom Hopkins
Just want to write a short book & presentation about the topic of house hacking, a top that is near and dear to my heart.
Most people is really serious with their real estate license in the beginning. they study and determine to become the next millionaire. Not me. I wanted a little house in a little neighborhood with a little mortgage and have someone pay for it. In this short book, you will learn about just that! How Hack your home and live in it for free.
- What is House Hacking
House Hacking is the art of buying and structuring the real estate deal, using what you already have to achieve three objective:
- To buy a home with little or no money down
Yes it is possible. The best example i can use is the night club. imaging the housing market is a night club There is always 3 time of people at the night club 98% of the people will stay in front of the main door trying to get in and pay the ticket price the marke price. the other 1% is the multi millionaire and the billionaire, they have a separate entrance. and they get in when they want, however they want it
the other 1% is you! you will get in with little or no money down, you call a friend, ask for a favor, try the kitchen door, run an errand for the chief. you will do what ever it take to get in for FREE. That you,
that’s house hacking! we will go over that in chapter 1
- have someone pay for the mortgage – or a portion of it – or ALL of it and more
Then after you get in what do you do? you have someone finance your drink. Lady it’s easy for you, men it will be harder but not impossible right?
There is always away to add values and someone will be more than happy to pay for your mortgage. we will go over all that in chapter 2.
- Be able to enjoy the home comfortably
Last but not least, what do you at the nightclub? You have a GREAT time! enjoy. If House hacking mean you have to put up with tenant, Roommate guest and ended up not enjoying your house and please DON”T do it. you will just ruin the whole experience.
I personally enjoy hosting people from all over the world in my own back yard. One time there is a performance dancer for circuit de soil le from Germany and she give us free ticket to go to the show
onetime there is this life coach from Scotland that walk from the Canada all the way to Mexico and stay at my house on her last night in the US. i ended up donate all of my booking income to her cause.
Chapter 1.
- Buy the home with little or no money down
BRRR – see my presentation on the BRRR
FHA / VA Loan
This is the easiest and straight forward out of all methods. If you never buy a home before you might be qualify to purchase your first primary home using an FHA Loan. the downpayment is typically only 3% and it will open you your door to a lot of option
The interest rate and fee might be higher on this type of loan so double check with your mortgage professional. Run number and analyze the expense before you purchase to make sure it is a good fit for your situation.
VA loan is similar to FHA except that you have to serve in the army in order to qualify for that. the 0% downpayment is super lucrative especially when you combine that with other methods (stacking) such as seller credit to achieve a true zero out of pocket deal. We will discuss stacking in the later chapter.
Usually the FHA and VA loan have a limit of one property per person so choose wisely! You might not have a 2nd chance to do another FHA or VA loan.
Make sure to thanks for mortgage lender after the purchase. You have no idea the amount of process and paperwork they have to go through to get an FHA or a VA loan done for so little money. This is why a great mortgage professional that is knowledgeable about FHA, VA, and have an Investment mindset are so key! You won’t find these professional on a bill board. You have to hunt for them. Usually FHA/VA and Investment property does not go hand in hand. But be patience. Once you find a great lender on this topic, treat the relationship like gold.
Seller credit |Builder Credit
At the type of writing this book, this is a huge deal! The age of cheap money is over. Buyer are no longer paying above asking price for a property. The market is shifting toward a neutral / buyer market and credit is being use as one of the key negotiation in any real estate transaction
Instead of negotiating on the price of the property, Buyer can give the seller what they want on the price, but ask for credit at closing. This is a big deal because it could significantly reduce, or eliminate your downpayment entirely
Seller, especially builder will be more happy to offer these credit when volume is down to get the transaction to the finish line.
Commission Rebate
I know commission rebate is a bad word among the real estate professional. This is the process where you give back part of your commission to the buyer to help them with closing cost. But wait…what happen when that buyer is YOU!?
You get the point. As a realtor, you need to take full advantage of your commission that the seller or the builder will pay you regardless, and credit the maximum amount that you legally could back to the buyer, which is also you. This is a big deal because you do NOT have to pay income tax on your commission. Let me repeat, YOU DO NOT have to pay income tax, legally, because it is applied as a credit toward closing cost. and/or downpayment of the property.
The typical real estate commission in the United state is 3%. In a buyer market, Builder typically increase this amount to 5-6% and offer BTSA (bonus to selling agent) on top of that. if you do the math on let say a $350,000 property buying using a 5% conventional loan. You will see this will make a significant impact on your return
duplex | forplex |multiple single family house on one tax record.
Let’s talk quickly about the type of property that would best fit for house hacking. LIke we discussed in the previous chapter, you generally have one shot with FHA / VA – or any type of lowdown payment loan product on the market so make it worth your shot. This is why house hacker tend to go toward Duplex, Triplex, Fourplex for to apply house hacking strategy. you have one shot, so why go for a single family homes with only one door for income opportunity? make your shot count by hunting for duplex/triplex/fourplex. Leave in one unit, lease out the rest
Don’t for get about Single Family Homes that are on ONE Tax record. this is not common but they are out there! when you stepped on it, you know you stepped on a gold mine!
BRRRR
I will just quickly mentions BRRR since this topic can be easily another book by itself. BRRR is the grand daddy of all strategy. It stand for Buy – Repair – Refinance – Rent – Repeat. Do this right and your investment game will be elevate to the next level.
There are plenty of educational book, video about BRRRR. You can find the training here:
Stacking
now come the fun part. This is the art of putting everything all together. This is where the rubber meets the road. A house hacker can combine any of the strategy above to Hack a house
ADU
Leverage your license to get the commission for downpayment (income tax free)
Use what you have – Don’t compare your situation with other people
The Gain and the Gap
2. Find a way to have someone pay for the mortgage
Have a roommate
Have multiple roommate (student housing) (buy near university)
Lease out your room – how i started
Convert your unless backyard into ADU (tiny house)
Convert your unused back yard into a ADU (big House)
create additional square footage in your room and lease it out (attic)
Trading up – buy live move and lease
Sell your backyard
3. Case study
Silver Fox
Mile
Maxim
Brookshire
Tin Vuong Case Study
Austin Jeff Case Study
