Most people think you need a lot of money to start investing in real estate.
But what if I tell you that you can start now (even without the money) and create an INSTANT cash flow?
In today’s episode of Women Creating Wealth, I’m doing a deep dive into house hacking. This is my favorite real estate strategy to help you create passive income quickly..
Got some spare rooms around your house?
You can start with that without going to your bank asking for a loan.
And this simple method had helped countless people back then generate extra income.
If they can, then you CAN, too!
Let’s get started!
My First Passive Income Dollar
I can still remember the day I earned my first dollar from passive income.
It felt amazing that I told myself that this had to get going.
So how did I do it?
I used what’s now called the BRRRR strategy – Buy, Renovate, Rent, Refinance, and Repeat.
My friends and I bought a $90,000 house, which I had $30,000 of my own. I renovated it and rented it out.
Once I got the passive income stream going, after about eight months of owning it, I went to the bank and asked to refinance the said property.
The bank came in and checked the property and decided to appraise it for $170,000. But since it was an investment property, they could only give me about 70-80%.
So I took it and sort of got the house for FREE.
I already had my $30,000 initial investment covered, plus the money I spent to fix it, and a little extra.
House Hacking My Single-Family Home
About a year later, I purchased a new single-family house for myself.
Since it was in a nice location, the plan was to find a way for it to make money.
And so I did what’s called a “house hack.”
What is house hacking?
It may sound like a trendy term, but the concept has been around for quite some time.
House hacking is a way of using your home to generate income.
Say you have a couple of extra rooms in your house. What you can do is rent out these rooms to people. You can also include a service like making them breakfast.
And it’s so much EASIER nowadays since you can easily list your properties on Airbnb or VRBO.
As for me, I don’t want anybody else in my house.
Instead of quickly renting out my other two bedrooms, I took the time and money to divide my three-bedroom house in half.
That means that the other half got a
… new kitchen
… new bathroom
… new living room
… new laundry area
… new everything!
So I turned my single-family house into two side-by-side units with one shared wall.
This means that people coming in from Airbnb or wherever had their entrance and own space. And that worked out so wonderfully for me!
Because the entire time I lived in my other half of the house, the money that I got off from these Airbnb tenants was paying off my entire mortgage and utilities.
This is what it means to house-hack and set up a passive income stream!
And there’s nothing like looking at your bank account saying…
“Oh, look at that, I have a lot more money than I thought I did.”
3 Steps to Creating Passive Income with House Hacking
I know all of these sound good to you, and you’re now considering house hacking.
But there are a couple of things that you need to do.
So here are the things that you need to consider when house hacking.
1 – Figure out what kind of house hack person you are.
You have to ask yourself..
Do you love meeting people from around the world?
Would you love sitting down over coffee or breakfast with them and listening to their stories?
If you say YES to all of those, then you might just want to rent out your bedroom through Airbnb and list it as a shared space.
Another option is to create a partition space in your house wherein you’re giving your guests a private entrance to an existing bedroom. This means that they can’t necessarily come into your space, but you can’t get as much rent for that as you can.
And the last option is to actually create a second space within your property.
One of our upcoming guests on the Women Creating Wealth podcast has done that in her house.
She turned her spacious basement into a basement suite with a separate entrance.
In that scenario, you can easily have a long-term tenant, and not just a short-term Airbnb rental.
2 – Talk to your town about permits and restrictions.
Figured out what kind of house hack person you are?
Then this second step is CRUCIAL for you, especially if you’re doing a short-term rental scenario.
You have to check first with your town if you require any restrictions and permits.
With the rise of short-term rentals, more and more communities and states are defining a set of rules for this.
Make time to do a bit of research first before you go any further so you won’t be wasting your time and money.
3 – Set up the space.
And finally set up the space according to your preference.
Bedroom rental. You don’t really have to do anything for this type of rental, because you’re giving them access to your kitchen, and the rest of the house.
Bedroom with private entrance. This type of rental allows your guest to have their own little space. Unlike the first type, this set up doesn’t allow your guests to come to your space. So in turn, you are to provide them with some basic comfort like a microwave or tea kettle.
A whole new second space within the property. Probably the costliest option since you are going to build a separate physical space for your tenants. And it’s pretty labor intensive, and time-consuming, too, if I may say.
There are tons of ways to make money in real estate. And sometimes, you just have to think outside of the box!
We’ll talk more about those in the coming days so stay tuned!
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See you next week!