House hacking, real estate investing and getting started

For many first-time investors, the biggest hurdle isn’t finding a property, it’s figuring out how to afford one. House hacking can be one of the most practical ways to get started.

House hacking means buying a property you live in while renting out part of it to help offset the mortgage. That could mean purchasing a duplex, triplex, or fourplex and living in one unit while renting the others, or buying a single-family home with extra bedrooms and renting those rooms to roommates.

In some loan programs, lenders may be able to consider a portion of projected rental income from the additional units when determining how much you qualify to borrow. That can make a multi-family property more attainable than many buyers expect. Room-rental income may be treated differently depending on the loan program and lender, so it is important to review the strategy with a knowledgeable mortgage professional before shopping.

The immediate benefit is simple: someone else is helping pay your housing expense. Instead of carrying the full mortgage on your own, rental income can reduce your out-of-pocket monthly cost and potentially help you save faster for your next investment.

The long-term benefits can be even more significant. Each additional unit, or “door,” creates another potential income stream. Over time, tenants may help pay down your loan while the property has the opportunity to appreciate. You may also benefit from tax deductions, increased equity, and the ability to leverage that equity toward future purchases.

A buyer who starts with a duplex or fourplex may eventually move out, keep the entire property as a rental, and purchase another home. That is how one property can become two, two can become several, and a personal residence can become the foundation of a long-term real estate portfolio.

Real estate investing does not always have to start with a traditional investment property and a large down payment. Sometimes the smartest first step is simply buying a home that can also produce income.