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Are you a homeowner who is looking for additional sources of income? Hacking your home could be your best business idea. I like to call this “House Hacking 2.0” – using your existing home to generate rental income while you are still living in it.
The origin of house hacking
You’ve heard of “house hacking” –buying a small multi-family unit, such as a duplex, triplex or fourplex, and living in one unit while renting out the others. Real estate investor and Bigger Pockets podcast host Brandon Turner coined this ingenious term. If done correctly, the rental income covers your mortgage, interest, taxes, and maintenance, and may even result in a surplus. It’s a brilliant way to get started in your first home and in rental real estate investing at the same time.
House hacking 2.0
But what if you already own your own single-family home and you don’t want – or are not ready - to move into a multi-family property?
Here are some ideas to explore:
#1 Rent all or part of your home when you’re not using it
That trip to New Orleans or the weekend spent visiting your parents could pay for themselves. Consider renting out your entire home when you’re away for a vacation. If you’re adventurous and welcoming, you could even rent out an extra room or suite in your home while you’re in it.
Take some time to prepare and do your research before getting started on hosting. Start with the resources on Nolo: Short Term Rentals of Your Home
#2 Rent out your garage or extra parking space
Do you live in a dense, urban neighborhood and have a driveway, parking space or garage that you don’t use while you’re at work (or that you don’t use at all)? There’s a frustrated commuter driving around right now, unsuccessfully looking for a parking space, who would love to use your driveway – and pay you for it.
FYI, this isn’t legal in every city, so before you ink an agreement, make sure it’s allowed in your residential neighborhood. Verify your coop or condo association agreement before renting out your parking space. Parking share apps will also require you to verify that you’re the owner or a renter who is legally able to rent their space.
#3 Rent your unique home or garden for an event or film shoot
Do you have a beautiful home with excellent natural light, a fairytale garden, or a stunning outdoor pool area? Consider renting it out for special events or a film shoot.
Be prepared to have a team take over your home for the duration of the shoot or event. You’ll probably want to find somewhere else to stay, and you’ll need to be comfortable with strangers rearranging things. Make sure you check out all the local regulations before listing your home, and verify that your renter has appropriate insurance (your homeowner’s coverage won’t cover you here). Don’t forget to take a security deposit to cover accidental damage!
Check out SetScouter or LocationsHub to list your home for a film/TV shoot, or submit photos to your local or state film commission. Splacer or Peerspace are places to start for listing your unique home or business location for special events, such as weddings or corporate parties, as well as for production shoots.
#4 Find a housemate
Got an extra bedroom? Why not rent it out? Yes, I know you like your personal space. But what if I told you that the extra income could help you pay your mortgage, pay off your student loans or credit card debt, or save for the down payment on a new rental property?
This house hack is best for people who have a pleasant space to rent with some private areas for yourself and your housemate(s), and who are comfortable with sharing their space with someone they don’t know or know well. It’s also better for someone who doesn’t have kids or who has kids who are already grown up. Chances are you’ve had some good and bad experiences with roommates already as a young adult, so keep those in mind when you look for a tenant.
Ways to find a roommate include references from friends and family, neighborhood social media groups on Facebook and Nextdoor, local media, and roommate finder sites such as RoomieMatch, Roomster, Roomi, or Roommates.com.
#5 House share in retirement
Homesharing has advantages for people of any age – and has considerable benefits for retirees. If you’re living alone in retirement and are unhappy with the financial or emotional costs, consider taking a housemate, or even multiple housemates. The extra rent can go a long way in supplementing Social Security and retirement savings. This house hack can be particularly helpful if you still have a mortgage or live in a high property tax state like NJ.
If you’ve been living alone for a long time, you’ll want to make sure you know what you’re gaining – and giving up. Start with this Nolo guide for senior homesharing.
#6 Welcome a foreign exchange student
Are you a friendly person interested in learning more about another culture or language? Do you have the interest, the free time, and a lovely extra bedroom available to welcome guests? Consider hosting a foreign exchange student.
Homestay services like Ameristudent and American Homestay pay qualified hosts a stipend for hosting international university and high school students during their period of study in The United States. You can host students for short stays or an entire school year.
Financially, hosting an international student is like renting out a room in your home, with some differences. Before being approved as a host, there’s a background check. You’ll need an available private bedroom with a closet (bonus points for a separate bathroom), live near campus or public transportation, and provide meals to your student.
#7 Pay off your mortgage early
Why is paying off your mortgage early a house hack? That’s because getting rid of your monthly mortgage payment frees up a big chunk of your cash flow to spend on other things, such as investing in income-producing property. By reducing your must-pay expenses, you will also have more financial flexibility for retirement or entrepreneurship, as well as an unexpected illness or unemployment.
You could event “double house hack” by using your house hacking 2.0 income to pay down your mortgage.
Treat your house hack as a business
If you are earning income from house hacking your home, treat this as a business. Make sure:
You have legal agreements that cover both the financial responsibilities of your renters or roommates and essential rules for using the property.
You have the right insurance. Let your homeowner’s insurance carrier know about any rental activity you plan for your space. Make sure you understand what is covered – and what your policy does not include. Depending on the house hack you’re considering, you may need to purchase additional coverage, or require your renter to have insurance.
You get professional tax advice. Rent and fees paid to you are considered income, and you may be able to deduct certain expenses. See Nolo: Tax Issues When Renting Out A Room In Your House and IRS Tips on Rental Real Estate Income Deductions and Recordkeeping.)
You know your legal responsibilities before you start. Although the Fair Housing Act (FHA) generally does not apply to owner-occupied properties with less than four rental units, there may be a local or state housing law that applies to your property. See Nolo: Does the Federal Fair Housing Act Apply to Your Rental Property?
The bottom line: house hacking 2.0 strategies can help you earn extra money from your home while you're still living in it.
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