The ROI of House Hacking: Why It's a Smart Investment Strategy for Long-Term Wealth Building

House hacking is a smart investment strategy for long-term wealth building because it offers a high return on investment (ROI) compared to traditional investing.
In this article, we'll discuss the ROI of house hacking and why it's a smart investment strategy for those looking to build long-term wealth.

1. Higher Rental Income:

One of the biggest advantages of house hacking is the ability to generate higher rental income. By renting out the unused space in your home, you can offset your mortgage payments and other expenses. This extra income can help you pay down your mortgage faster, which can ultimately lead to a higher ROI. For example, if your mortgage payment is $1,000 per month and you can generate $1,500 in rental income from your house hack, you're already generating a 50% ROI on your investment.
Now just imagine in this scenario if you purchased ANOTHER property and rented out the bedroom you were living in! $1,500/mo in rental income could easily turn into $1,750/mo or even $2,000/mo!
This is why I love House Hacking. You're generating income on where you live, and paying for your housing (which you would already be paying for anyways... Everyone needs a place to live!) PLUS It's flexible & repeatable!

2. Appreciation: 

Another way house hacking can generate a high ROI is through property appreciation. Real estate tends to appreciate over time, meaning the value of your property will increase. By house hacking, you can take advantage of this appreciation by owning a property that will likely appreciate in value. For example, if you purchase a house hack for $200,000 and it appreciates by 3% per year, it will be worth over $300,000 in 10 years.
Don't forget, your mortgage is at a fixed rate which means it can't go up! AND you will likely be increasing your rents over time as well!

3. Tax Benefits: 

House hacking can also provide tax benefits that can increase your ROI. By renting out part of your home, you can take advantage of deductions for mortgage interest, property taxes, and other expenses related to your house hack. These deductions can significantly reduce your tax liability, meaning more money in your pocket and a higher ROI.
Remember, this is a business and it should be treated like a business! I recommend consulting with a local real estate attorney or your state's business bureau to set up an LLC for EACH property you purchase!

4. Lower Expenses: 

House hacking can also help you reduce your expenses. By living in the same property you're renting out, you can keep an eye on expenses and make sure you're not overspending on repairs, maintenance, or other costs. Additionally, you can save money on utilities, as you'll be sharing them with your tenants. These savings can add up over time and increase your ROI.

5. Leverage: 

Lastly, house hacking allows you to leverage your investment. By using an FHA loan or conventional loan with owner-occupied financing terms, you can purchase a property with a low down payment and take advantage of historically low interest rates. This means you can use less of your own money to purchase a property, which allows you to invest in more properties and increase your ROI.

In conclusion, house hacking is a smart investment strategy for long-term wealth building due to its high ROI compared to traditional investing. By generating higher rental income, taking advantage of property appreciation, using tax benefits, reducing expenses, and leveraging your investment, you can build wealth faster and achieve financial freedom.

Check out my YouTube channel for more helpful information on the Pro's & Con's to House Hacking, along with other content around real estate investing!


Location: 1606 S Duff Ave #100, Ames, IA 50010, USA

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