The idea of house hacking can sound like an amazing opportunity. With this lifestyle strategy, you can build equity in a property while covering the mortgage payment with rent from tenants.
Once you dive into the numbers, you’ll notice that you need a sizable amount of cash to make the down payment on your first property. Don’t worry! It is completely possible to build your savings and start your house hacking journey.
Let’s take a closer look at exactly how much money you’ll need. Plus, strategies to generate this cash as quickly as possible.
How much money will you need for a down payment?
When you embark on your house hacking adventure, the goal is to reduce or eliminate your housing expenses. You can do this by renting out extra space in your property. For example, you could buy a single-family home and rent out the spare bedrooms to help cover the mortgage.
If you are excited about the dream of house hacking, then you’ll need a down payment to get started. One of the benefits of house hacking is that you’ll have access to generous owner-occupant financing opportunities.
A common strategy for house hackers is to take out an FHA loan. With that, you would only need a 3.5% down payment to close on the property. Let’s say you are planning to buy a $200,000 property. That would lead to a $7,000 down payment obligation.
How to come up with $7,000 in six months or less
Once you set the goal of building a down payment of $7,000, the next step is to make it happen. Although it can be a challenge, it is absolutely possible to generate an extra $7,000 in six months. After you have the down payment on hand, you can move forward with your house hacking plans.
Here are some helpful strategies that can help you reach your down payment goal in six months or less.
Sell your car
If you are like many consumers, then you might have a monthly car payment that eats into your budget. According to Experian, the average car payment for a new vehicle is $552. For a used car, the average payment is also fairly high at $391 a month.
With that in mind, Catherine Alford from Millennial Homeowner says, “if you need to come up with money fast, one of the first places to look is right outside in your driveway. If you're driving a newer car with a high monthly payment, consider selling it immediately and switching it out for a car that's much cheaper.”
Alford continues, “services like Carvana and CarMax make it very easy to sell your car, and if it's worth more than you owe, they might cut you a check. That check gets you part of the way to your $7,000 goal.” Beyond the initial check, you can tuck away the money you were spending on a car payment each month towards your savings goal.
If you are mechanically inclined, then flipping cars could be a great way to meet your savings goals quickly. Derek Sall from Life and My Finances recommends that you “Find cars that are dirty but in good mechanical condition, buy them with cash at a discount, clean them and fix them up, then list them for sale.”
With the right skills, this can be a very profitable option. Sall says, “I consistently earned $1,000 per vehicle when I was aggressively digging my way out of debt.”
Find savings in your budget
A great way to boost your funds is to find ways to cut back on your spending to meet this short-term goal. You might be surprised to find a fair amount of savings opportunities in your budget.
Danielle from Money in Matrimony suggests negotiating lower rates on your household bills, canceling any unused subscriptions, and comparison shopping for an insurance provider that can offer a better rate.
As you look through your expenses, consider experimenting with larger cuts. For example, you could try spending fast on discretionary expenses for the next month. You may be able to save a considerable amount of money with this strategy. Plus, it can help you determine which expenses are critical to your quality of life.
Although you may have never considered the idea of selling voiceovers, it can be a fairly lucrative opportunity. Jordan Cox, otherwise known as Britain’s Coupon Kid, was able to earn $400 in just 2 weeks to boost their savings.
Britain’s Coupon Kid says, “Fiverr is a great spot to sell voiceovers on. Simply set up an account, record a demo, and wait for people to order.” Depending on your voice and current demand, you could potentially reach your savings goal.
Sell your things
Most of us have things around the house that are simply collecting dust. With too much clutter, it can be easy to allow things to continue to pile up. Instead of allowing your things to sit idly without providing any value to your life, take the time to sell it.
Amanda Claypool from Millionaire by Next Year was able to declutter her parent’s basement to bring in cash. She found “Vintage Hot Wheels cars, my dad’s collection of GI Joe dolls from the 1970s, and a bunch of household stuff no one used anymore.” Claypool shares, “Between Facebook Marketplace and eBay, we were able to sell $4,500 worth of stuff in just a couple months.”
Depending on what you have lying around the house, you could meet your goal quickly!
Participate in a medical trial
Kylie Travers from The Thrifty Issue was able to bring in $4,050 by participating in a medical trial. You may be able to find an equally lucrative opportunity in your area. You can find clinical trials happening in your area here.
It may require several studies to reach your goal of $7,000. But it can be an interesting way to generate an income.
The bottom line
Coming up with thousands of dollars for a down payment is a challenge, but it is definitely possible. Although it will take some hard work and creativity, you can reach your savings goal within a few months.
Stay tuned for part two of this series to learn more ways to reach this savings goal.