House hacking is one of the most powerful real estate investment tools available for building wealth. While it's not for everyone, it is something to consider as you're starting the homebuying process in Denver or Colorado Springs.
WHAT IS HOUSE HACKING?
House hacking is buying a property, living it in one portion of it and renting the rest of it to offset your mortgage (or even cash flow).
TOP HOUSE HACKING TECHNIQUES
Rent by the room
This is the easiest model to get into, but it also requires the most personal flexibility. You buy a single-family detached home, live in one bedroom and rent the remaining rooms.
In Denver, you're looking at around $700-$800/room. (More or less depending on the neighborhood.) In Colorado Springs, you're seeing slightly lower room rental rates.
The downside is that you now have two or three random roommates. If you're cool with that, then enjoy having them pay your mortgage.
Airbnb a separate space
If you're looking for a little more privacy, finding a home with a lock-off basement or even a full-on basement apartment is the way to go. (And we have searches designed to find these properties.)
Live upstairs and then rent the downstairs. How you rent the downstairs is up to you. We like short-term rentals, especially if you're in a popular area, because the returns are pretty good. (We've seen between $1,000 and $2,000 across the Denver metro area for basement units -- some of them with a kitchen, some without.)
Buy a multi-unit
This is the original house hacking model. Buy a duplex or triplex, live in one unit and rent the other(s). This is great ... if you can find a property.
These units seem to fall into one of two categories. A) They're nice and really pricey, so much so it doesn't seem to make financial sense to buy if you're looking to make some passive income. Or B) They're not nice and either you have to be open to a less-than-stellar space or you are competing against institutional investors who will pay cash to pick this up in a heartbeat.
BENEFITS OF HOUSE HACKING
By renting out the remaining portion of your living space, you are having other people pay your mortgage. In a best-case scenario, you might even cash flow a bit (i.e. live for free and get a little extra cash at the end of the month).
An intro to real estate investing
House hacking is a great intro into being a landlord. You handle leases, deposits, and the emotions of tenants. All right inside your own home. You can take this experience on to your next investment property.
You can rent the space when you want and then stop when you don't. If you need to move to another city, you just rent out your space and now you've got a full-on investment property in Denver or Colorado Springs.
There is no "best" way to house hack. It depends on your goals and your personal comfort with roommates. The point is that you can live almost rent free while letting other pay off your mortgage all while you get experience with real estate investing and build reserves to repeat the whole process.