In my opinion, house hacking is one of the easiest ways to get started investing in real estate. If done correctly, it can help you save cash and build wealth. To invest in real estate, you need capital, and by increasing your savings rate, you can build more capital to invest. House hacking lets you reduce or eliminate your housing costs.

At an early age, I started looking at things differently. When I was 19 years old, and living on my own, I was spending $700-$800/month for rent on a decent place. I wanted to save money, so I looked at getting a roommate and moving into a two-bedroom apartment which would cut my housing costs down to $400-$500/month. At the same time, I was working in the mortgage industry refinancing peoples home and working with new home buyers. I was closing loan after loan for first-time home buyers that would buy a place for $100-$125k with mortgage payments around $700-$900/month. And with the new home buyer loan programs at the time, they were putting little to nothing down.

One day, it clicked. Why did I want to rent a place when I could buy my own home and spend just about the same amount per month on mortgage payments as I was spending on rent? Then, to make it even better, I could get a roommate who would pay a majority of my mortgage. I would be building equity through appreciation of the property and principal pay-down, plus get a tax write-off. At the young age of 19, this seemed too good to be true.

So, I started planning. What type of place did I want? I knew I hated doing yard work (one of my weekly chores in high school was cutting the grass), and I wanted a house that was setup for maximum privacy if I had a roommate. What would have been best at the time was to find a small multifamily property, but at that time I didn’t even know what a small multifamily was. What I found was a new development community. My dad explained to me if you bought in the first phase, you got a price discount, and the builder would raise prices for each additional phase in the development process. But he also explained that this was a little bit of a risk, as there was no guarantee the community would be finished. I also figured that if everything was brand new, it meant I wouldn’t have to worry about fixing anything for a long time. I ended up buying an end-unit townhouse with a first-floor master bedroom, then two additional bedrooms upstairs. At the age of 20, I become a home owner!

I bought the place for roughly $122k. (You will have to forgive me on the rough numbers, as this was over a decade and a half ago.) I moved in and got a roommate. I made one of the upstairs bedrooms an additional living room for my roommate while I lived in the downstairs bedroom and used the main living room. This meant we really only shared the kitchen and eating area. I charged him $500/month, plus half of the utilities. My mortgage with taxes and insurance ran just under $900/month. I went from renting a play for more than $700/month (and I had utilities) to about $450/month in housing costs. This gave me plenty of room in my monthly budget to build my savings.

I lived in this home for almost 6 years and had a roommate for almost that whole time. When I sold it, I sold it for roughly $154k. If I were smart I would have kept it as a rental, but I didn’t know any better. Also, because it was my primary residence, all the appreciation was tax-free.

If I was smarter at that young age, I should have taken those savings in my housing costs and used it for investing. But, like my folks in their earlies 20s, instead of investing my savings, it went to partying. But, you live and learn. This was my first foray into real estate investing.

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