Buying a multi family house is my favorite way to make money from where I live (also known as house hacking) for a few reasons…
One big reason is when you buy a multi family house hack, you can qualify for a bigger mortgage. This is because 75% of the projected tenant income is added to your actual income when you apply for a mortgage. Lenders essentially give you credit for a business you haven’t even started yet.
THAT friends… is a MAJOR freedom hack.
But multi family properties are not the only way you can create cash flow from your first house.
You can generate income by house hacking a single family house as well. But the downside is you will NOT get the rental income benefit on your mortgage application.
The last house that I bought is a single family house hack in Indianapolis.
Here are four questions I considered when I was searching for a single family house hack.
Take these and use them as inspo to create your own list of rules for your income generating home purchase.
What is my exit strategy with this single family house hack?
Whenever I buy a house it isn’t just to live in it. I want to use this one property to leverage into the next.
One thing I know about myself is if I have a large stash of cash I WILL be spending it.💸 So flipping a house or selling is not my thing…
So my strategy for this house is to rent it out when I leave. I specifically want to make it a short or medium term rental.
But when calculating how much I wanted to spend on the house, I based my numbers on a regular tenant NOT a short term rental.
This way if short term rental laws change in the city OR if short term is not as lucrative as expected, the property can still generate income.
How will I generate recurring income right now ?
Your girl likes to live for free. Ya’ll already know!
So even though this is a single family house. I bought it knowing I was going to make money from it…. by hook or by crook.
The plan for income generation was to Airbnb one bedroom in the house.
It’s important to think through your plan for now, and also to plan for later. This will allow you to consider both business plans when choosing a house to buy.
Who is my ideal tenant during and after house hacking?
Target knows exactly who they want to shop at their stores. The store design, their ads, their brand colors, the little bullseye dog…
that’s not random. It’s intentional to attract their ideal customer.
Be like Target…
Get clear on who your customer is so you can buy a house that they would want to rent or buy (depending on your exit plan).
Knowing who your customer is will make decision making when you are buying this house SO much easier.
If you want to rent out to families they are going to have different needs compared to college students. Things like the location of the building, the design, and the amenities, will all change depending on who will be using the house in the future.
My ideal customer for this building is professional singles that are new to the city.
Why?
There are three major employers in this city. Two of those three companies recruit their employees from out of state.
This means there are young professionals that need temporary housing. And this is where I will be coming in and providing a short or medium term rental option for them.
What are the non-negotiables for the house?
Your non-negotiable list should be short – as in five things max.
These should be top priorities that would create a major issue in your current and future plans house hacking plans if you don’t stick to them. Keep in mind the ideal tenant, exit strategy, current strategy, and your happiness.
For this house, these were my non-negotiables
✔️ within a 10 minute drive from my company’s headquarters This was mostly for my happiness cause I don’t like driving and I am ALWAYS running late. 🤣 But the added bonus is HQ is also downtown. Being a quick drive to downtown is essential if you are young and new to the a city (my ideal tenant).
✔️ two full bathrooms at minimum Because my income plan for right now was to Airbnb a room, sharing a bathroom was NOT an option. I have been an airbnb host and shared a bathroom, and I can definitely say that I do not want to do that again at this point in my life. 🙃
✔️ 3 bedrooms minimum The idea was to have one bedroom for me. One bedroom to Airbnb. And one bedroom as a guest bedroom and office.
✔️ A garage I like lifting weights and I really just wanted the garage to build a gym. This was NOT essential to questions 1 – 3 or my core happiness. Especially considering that we got free YMCA access through my job and there was one across the street from work. So by the time I bought the house, this ended up on the wants list and not the non-negotiables list.
✔️ Livable from day one I had just started a new job and I knew that I would not have the time or mental capacity to manage a renovation project. So I needed something that was fully functioning and livable.
What action can you take today if you want to buy a house hack that generates income from day one?
Take the time to think through and write down the exit strategy, initial strategy, and ideal tenant for the house you want to buy.
Here are some prompts to get you started…
➠ How will you generate income when you move in?
➠ How will you generate income when you move out?
➠ Who do you plan to sell or rent to?
➠ What is one thing you need in this house to make you happy while you are living in it?
As your personal needs start to align with your income goals, a strategy that works for you will start to form.
You will be able to choose a building that will make your money work for you while also giving you a nice place to live!
Making money with real estate isn’t just for investors. As a first time home buyer, you can create wealth. You just have to be intentional and make decisions as if you were an investor.
Are you leaning more toward a sell quickly strategy OR a hold the property and get a rental check every month strategy?
Drop a comment below and let’s chat about it!
