Ready to Break into Real Estate? 7 Ways to House Hack With an FHA Loan
If you're hoping to break into real estate and looking for a little extra income, you should house hack. Keep reading for seven FHA loan hacks.
Have you heard of house hacking? It’s a way to generate income from your home. In the past, people bought multifamily properties where they lived in one unit and rented out the rest so tenants could help pay their mortgage.
Or maybe your parents owned a condo in the city before they moved to the burbs and rented out their original place. House hacking is an easy way to become a landlord and learn about property management while ensuring your expenses are paid and reducing your day-to-day costs.
While FHA loans are most commonly used as a tool for first-time homebuyers to buy their first house, you can also use an FHA loan for house hacking. Keep reading to find out about FHA loan hacks.
What is an FHA loan?
An FHA loan is a popular government-backed mortgage that’s insured by the Federal Housing Administration. It’s a great option for first-time homebuyers and those with less-than-perfect credit as it offers lower down payments and more lenient credit requirements.
Some of the benefits of FHA loans include:
- Lower credit score requirements
- Your lender can accept a lower down payment
- You could still qualify even if you’ve filed for bankruptcy
- The closing costs can be rolled into your loan
What are the top 7 FHA home hacks?
The high cost of housing and inflation have many people searching for ways to make more money, and house hacking with your FHA loan is a great way to bring in extra income using your assets.
1. Buy a multifamily home
As long as the property is four units or less, you can buy a multifamily home using an FHA-backed loan. That means you can buy a duplex, a multi-unit condo or a townhouse and rent out your extra space.
2. Offer a room in your home
If you don't own a large home and don't want to commit to a long-term rental, you could offer a spare room on a short-term rental platform like Vrbo or Airbnb. Female property owners can rent out to other women on Golightly, which is an invitation-only site that offers gender-exclusive memberships.
3. Build an extra place on your property
You can also build an Accessory Dwelling Unit (ADU), which is also known as a teenager suite or an in-law apartment. If you have a detached garage or a basement with a separate entrance, you could convert it into a rental unit.
4. Get roommates
Share your place with some roommates. Not only will you receive a monthly rent payment, but you could also use it to pay your mortgage. Plus, you'll be able to split utilities and maintenance costs.
5. Add rental space on your property
If you have land, you could convert that space into something people can rent out. Whether you rent out your garage, your driveway, or let someone park their RV on your street, you can rent your space for extra income. Just make sure you check HOA rules and local zoning regulations first.
6. Flip a house and move in
House flippers are known to hack houses. You can buy a place in need of repairs and live in the house while you while you fix it up. After you've fixed it up, you can sell it, walk away with a profit, and save money on rent.
7. Hack a house near public transportation
Since a lot of people take public transportation, you could buy and live in a home near a busy train station, bus stop or the highway. Occupancy rates will be higher due to location and all the nearby restaurants, bars, and events.