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How Do I Hack My Rent?

Everything these days seems to have a “hack,” from grocery shopping and car buying to DIY projects and everyday tasks

But did you know that it’s also possible to hack your rent or mortgage payment?

You may be able to offset your housing costs and use your property as a source of revenue. These funds can help you with improvements, insurance, and utility bills, as well as put you in a better position to build your real estate portfolio. 

Sounds awesome, right? Let’s explore a variety of ways to save money and get ahead of the game in a high-demand market.

The multifamily approach

If you’re still doing the rent thing but yearn to buy a home, now is an ideal time to flip the switch and become a landlord yourself while also securing a secure place for your own household. 

There are hundreds of properties for sale in the greater Chicago area that can be considered “multifamily.” This simply means that there’s more than one housing unit available, from a two-flat to an entire apartment building. 

Multifamily homes are a smart investment, especially if you’ve got a large extended family that wants to stay close but not right on top of each other. Renting out the units you’re not living in can generate enough income to completely cover your mortgage payment, and you can reap plenty of tax benefits as well

Homes with two to four units are residential properties that qualify for residential mortgages. Properties with five or more units are considered “commercial”, but Key Mortgage has opportunities for buildings with up to 8 units. 

It also allows you to have a positive influence on your immediate environment and play a vital role in strengthening your community.

However, managing the ins and outs of rental property can be a hassle. If any of the units have issues, you’re responsible for footing the bill to rectify the situation, so if you’re considering this route, be sure to invest in a thorough inspection before buying. You may decide it’s worth it to hire a property manager — but keep in mind that this will reduce the profits of your hack. 

You may think that you can’t afford something so grandiose, but it’s easier than you think to qualify for a mortgage for a multifamily property. FHA loans allow you to purchase a residence with up to 4 units, and they have very reasonable down payment (as little as 3.5%!) and credit score requirements.

In the shorter-term

The gig economy, remote work, and the easing of travel restrictions mean that people are moving around much more than they used to. Not everyone likes to stay in a hotel, and thousands of people travel to Chicagoland every day.

Many homeowners have hacked their housing costs by offering up a spare room, a basement, a mother-in-law suite, or occasionally their entire place as a short-term rental through platforms like Airbnb or VRBO. Depending on your space, you could make thousands of dollars each month toward paying down your mortgage or expanding your real estate portfolio.

But there are drawbacks to becoming a super host. Before taking this path, talk to someone who’s actually done it. Earning income this way may add additional tax liabilities, so speak with your financial advisor or accountant prior to posting your listing. Further, there may be local restrictions, so be sure to investigate the viability of an AirBNB in your area. 

You may also be able to rent out your driveway, garage, or storage space to people who live in the heart of the city. If you have funds on hand and space going to waste, you might want to consider building an accessory dwelling unit, which is basically a potentially profitable tiny home added to your existing property.  

Flipping and finance

The concept of making money by successfully “house flipping” has enchanted consumers due to the HGTV effect. Vastly popular shows regale viewers with an idealized version of this process, but anyone who’s attempted any kind of DIY project knows it’s definitely not a challenge to be undertaken lightly.

It’s entirely possible to find success flipping property, especially if you follow these common-sense guidelines:

  • It’s critical to do your due diligence on current market conditions, the property’s history, the surrounding community, and available service providers.
  • Create your budget and timeline with realistic expectations, and stick to them religiously.
  • Don’t purchase anything without getting a comprehensive home inspection first.
  • Hire professionals when needed and get the proper licensing to ensure your results are up to code.
  • Partner with a top-notch lender and real estate team that have extensive local knowledge and a wide-reaching network.

Again, FHA mortgages are perfect for buyers that want to finance the purchase of a fixer-upper in hopes of updating it and selling it for a profit. The program does have specific property requirements and you’ll need to work with a HUD (Housing and Urban Development)-approved advisor, whose fee will be added to your total loan amount. No need to worry, if you work with me and Key Mortgage, we’ll tie together these pieces.

If living in a construction zone for months on end doesn’t sound like much fun, there are other financial ways to save yourself money in the long run. Making bi-weekly or larger payments whenever you can helps pay down your loan faster, saving you thousands of dollars in interest. 

You may come out ahead by refinancing your existing mortgage (depending on your interest rate), or if you’re a first-time home buyer, doing a mortgage rate buydown upfront. Either way, it’s vital to consult with an experienced lender who will guide you through the complexities of hacking your housing costs and getting the best value for your investment.

Ready to learn more? I can help you explore your many options — reach out today!

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