Why House Hacking is the Best Way to Build a Rental Portfolio

Real estate investing can be an excellent way to build long-term wealth and achieve financial stability.
However, it can also be a challenging and expensive endeavor, especially for those who are just starting out.
That's where house hacking comes in.
This innovative real estate investment strategy allows you to live in a property while renting out additional bedrooms, additional units, etc - helping you to build a rental portfolio more quickly and easily than traditional methods.
Here are five reasons why house hacking is the best way to build a rental portfolio.

1. Lower Barrier to Entry

One of the biggest advantages of house hacking is that it has a much lower barrier to entry than other real estate investing strategies. You don't need a lot of capital to get started, and you can use owner-occupied financing terms to purchase your first property. This means that you can start building your rental portfolio even if you don't have a lot of money to invest upfront.

During the course of your house hacking journey, if you purchased a $200,000 property each time at 5% down on each purchase - you would have FIVE properties with the same down payment as you would with ONE $200,000 property with 20% down. This is the power of house hacking!

2. Increased Cash Flow

By renting out additional units in your house hack property, you can generate significant cash flow that can be used to pay down debt, save for retirement, or reinvest in other properties. This can help you build your rental portfolio more quickly and efficiently than traditional methods (with less money needed and better financing terms).

3. Reduced Risk

House hacking also comes with reduced risk compared to other real estate investing strategies. By living in one of the units, you can keep a closer eye on your property and tenants, reducing the risk of damage or missed rent payments. You truly get to "understand" your property as opposed to purchasing an investment property you have never lived in. Additionally, if one of your rental units is vacant, you still have income coming in from your own living situation.

4. Faster Equity Building

When you own a property, your mortgage payments go towards building equity in the property over time. By house hacking, you're able to build equity more quickly, since you're not only paying down your mortgage but also generating rental income. This can help you build wealth faster and potentially even provide you with a source of retirement income down the line.

5. Versatility and Flexibility

Finally, house hacking provides versatility and flexibility that other real estate investing strategies simply can't match. You can choose to live in one of the units and rent out the others, or you can rent out the entire property and live elsewhere. Additionally, you can use the rental income to pay down your mortgage more quickly, or you can reinvest it in other properties to continue building your rental portfolio.

PRO TIP: In my opinion, the BEST way to get the most out of house hacking is to purchase, live in that property for a year, purchase the next property, rent out your previous home...AND REPEAT.
The longer you do this and the more properties you build up, the better (from a financial standpoint).

In conclusion, house hacking is an excellent way to build a rental portfolio more quickly and easily than traditional methods. By lowering the barrier to entry, increasing cash flow, reducing risk, building equity more quickly, and providing versatility and flexibility, house hacking is a smart choice for anyone looking to build long-term wealth and achieve financial stability through real estate investing.

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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