House Hacking
Also known as having roommates.
This just about above anything else is what set me up in my first three years of building my financial background. There was this term, house hacking which seemed really cool - turns out it literally meant getting roommates or an additional way to cover the cost of your mortgage.
For example:
You buy a home for $200,000 in the midwest - or any market which has these on the market, even if they’re not perfect.
It’s an FHA Loan so you only need $7,000 for a down payment + closing costs. Maybe 15k saved in total.
It has 3 bedrooms and 1,600 sq ft. Each bedroom is just at 10*12 and the living spaces are just big enough.
Assuming a 4% interest rate and PMI, this would put you about $1,200 as a monthly payment.
First, this is already cheaper than many rents in your LA - NY zip codes. Additionally, if it’s still in an area like KC, you can rent out these rooms for a decent price.
The goal of house hacking is that the price you can charge for rent of the two rooms mostly or completely covers the cost of your mortgage. The example above is incredibly similar to my first home, and I would charge the renters $600 monthly allowing me to break even on my home.
What this meant was that after 2 years, I was getting equity on my home without paying anything towards the mortgage. We split utilities 3 ways and I had to cover the cost if something broke, but that ended up being well under $500 monthly, a steal for a rental in KC. And I got a house out of it while waiting for the market to inflate.
By breaking even on the home, this also meant I could eventually rent out the third room for an additional $600 monthly. This way, if I ever wanted to move out, which I ended up doing, it would be a cash-flow positive income.
Other Ways to Break Even on Your Mortgage
~Spoiler Alert: We’ve done each of these!
1) Airbnb
If you don’t want someone permanently living with you, this could be a great option! We did this at a home we moved out of, but I also had my permanent house ready to list in case we had an empty room. We would do somewhere between $30-80 nightly depending on week vs weekend and if there was something in town driving up hotel costs. If you can get $50 a night, just renting a few nights a month could really decrease your mortgage burden.
2) Rover (or Wag)
Dog sitting companies are another great way to make a little extra cash! When March/April 2020 hit, we took on two roommates into our basement suite which helped cover part of our mortgage and gave myself and my husband super cool people to spend all this new time with. I then hopped on Rover and signed up to be a dog walker (only one dog at this point) and noticed you could house sit during the day as well! I ended up connecting with a travel nurse who wanted her doggo to have some love during the day while she was at work. She would drop off this beautiful pup every morning, we would snuggle, play, and she would sleep while I was at work, then she would get picked up in the afternoon. I ended up getting paid $25 a day, 4 days a week (aka $400 a month) for this beautiful and lazy pup to sit at home with me. It was awesome and possibly the best roommate I ever had!
See if these are something which may work for you! If you’re already living with roommates or love having them (like myself) this could be a great way to afford your first home!