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House Hacking: Your Way into Real Estate

Written by: Tonya (she/her)

3 min read | Published: February 20, 2024

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Real estate has been a tried-and-true way of investing for decades, and many people are curious about how they can invest in this long-term, often wealth-producing product. For a person in college, buying a home may seem far-fetched. You may be questioning if homeownership is even for you, wondering:

“Am I too young to buy a house?”

“How will I afford the expenses?”

"Will I still be in this city or state after graduation?”

Let’s challenge this perspective and consider the impact homeownership could have on your financial future as a college student.

Optimal Conditions

Working past those limiting thoughts will be for another time. Here, we will be looking at house hacking through the lens of optimal conditions which include:

Step 1: Understanding House Hacking

The website Bigger Pockets defines house hacking as a real estate investment strategy where you earn rental income by renting out your main residence. What does this look like as a college student?

This could be achieved by purchasing a house within the local area and renting out additional rooms to people you know and trust. Another option could be purchasing a multifamily property that offers the ability for you to live in one unit while renting out the others. There are many rental laws to consider when renting out rooms or a house. Make sure to do your research before offering your property for rent. This will protect your rights as the owner of the property and ensure that you are protected in court with legal documents if issues with tenants were to arise.

Step 2: Running the Numbers

To ensure you profit as a landlord, you need to understand the numbers in your budget. Important numbers include your mortgage payment, utility costs, insurance, and taxes. Once you’ve totaled those, divide that by the number of people who will be living in the home. This will give you the minimum required to collect from each person to break even.

For example, if you purchased a three-bedroom home and your total monthly expense was $1,000 and you had two renters, you’d divide your cost by two people. Each person would owe you $500 per month to cover costs. This scenario changes if we add in a third renter. The monthly break-even amount owed would then be $333 per person.

An important aspect to remember is your numbers should ultimately include an increased rent cost to earn income. Why? Income — or cash flow — is important because it will allow you to pay yourself for the home costs in addition to any repairs or replacements while also making a profit.

Step 3: Don’t Do It Alone

It’s important you find people you can trust to help guide you during the process of purchasing your home and renting it. There are benefits and downfalls to buying a home while in college, and it’s a commitment that should not be taken lightly and without advisement.

House Hacking Downfalls

House Hacking Benefits

Overall, purchasing a home while in college can be an ideal way to secure an asset that will appreciate over the course of your academic career. Every person’s situation is different, and not everyone is equipped to handle such a responsibility. It will be up to you to determine if this is a manageable investment option. Real estate is an enduring investment opportunity, especially near college campuses. With house hacking currently happening in towns and cities across the country, and when taken seriously as the investment that it is, it can be a great start to real estate investing and wealth building.

Sources:

https://www.rocketmortgage.com/learn/house-hacking#:~:text=House%20hacking%20means%20finding%20ways,equity%20while%20maintaining%20the%20property.

https://www.biggerpockets.com/real-estate-investing/house-hacking-strategy

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