Mortgage Zero: The Art of Paying Zero Out-of-Pocket Housing Cost

Stop paying so much for housing! I wish I could get this into your head with just this first sentence. However, life doesn’t work like this. We will have to go more in-depth on the reason why housing is keeping the middle-class very…. middle-class. Then we will go into how we can stop this trend by creating, and executing, a plan to reduce our out-of-pocket housing cost to zero.

When buying a house, there are many different numbers thrown around about how much you should pay. I always see a number around 33-50% of your monthly salary, with expenses included. Let me tell you right now, this is too much!

This is part of the problem with the media. They want you to buy bigger and bigger homes. It behooves them the more money you spend. But these big homes come at a high cost. The cost of your freedom. Paying 33-50% just to survive is like chopping your paycheck in half. 

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Let’s take a look at a salaried family, earning a nice wage, and using 40% as their number for housing. The family brings in $10,000 a month, after taxes. This is a nice wage and one that should afford them the opportunity to save and invest for the future. We are going to break down their salary.

Living a basic life leaves this family $2,500. Keep in mind, we are not including credit cards, loans, student loans, private schools, etc. My best guess, as someone who has run a family household for 15 years, is they would be able to save and invest $1,000 a month.

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Let’s be honest, this family is not doing anything wrong. They are living the standard “middle-class” life. They are doing everything that they were taught in order to be successful in life. They go to work, pay their bills on time, and pay 40% for their housing. Why are they only able to save and invest $1,000 a month?

If they invest $1,000 a month from age 25-65, so 40 years, they would have $3.1 million dollars (at an 8% compound interest rate). That is not so bad and most people would be happy to have this lifestyle. But some people want to achieve financial independence faster. What are other options to speeding up the process to early retirement and financial freedom? Mortgage Zero.

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Mortgage Zero is the art of house hacking/business hacking in order to reduce out-of-pocket housing costs to zero. Mortgage Zero needs to be on the top of your priority list as you shop for a home. Being able to house hack your way to financial freedom takes creativity, ingenuity, and humility. 

How does Mortgage Zero work? In a perfect world, it starts before you buy a home. The best homes to start this with are smaller homes. That is why Mortgage Zero takes humility. You will be able to afford a bigger home, but using Mortgage Zero as a guide, you will most likely buy a smaller starter home. 

When you are searching for your home you are looking for homes that can be house hacked easily. Preferably, they may even be set up for house-hacking. 

What is house hacking? House hacking is using the home you live in as a source of income via renting rooms, flipping, renting garage space, etc. Let’s dive into some house hacking techniques to get a better idea of some options we can use to subsidize our living. 

Renting Rooms. The easiest to do in theory. When you are looking at homes, try to find rooms with an attached bathroom. This will help command a premium of your room rental. You have to be good with people in order to make this a standard practice. This has been our path to financial freedom. You can also rent out the master suite in order to command a large premium. 

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House Flipping live-in. Some house flippers buy a home and live in it while they are renovating it. It can be a great way to live for cheap or free. You have to have some serious handyman skills though.

Renting Garage Space. Converting your garage into a livable area could be difficult upfront because of permits. But overall, it could be worth it. 

Finished Room over Garage (FROG). This is a great way to keep your garage space but also have additional living space above the garage. Usually, the FROG has its own entrance. 

Finished basement or attic. Again, more great ways to add additional living space. Permitting is recommended. Look for unfinished areas and envision the place when it is finished. Look up rents in the area. 

Detached In-Law Suite. Also called a grandparents’ suite. This is a little house completely detached from your home. This is a real money maker. Look for these. They are worth the additional upfront cost. 

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Additional mobile home or structure. When you move away from the city, you can get bigger land properties. Depending on the zoning, you will be able to add mobile homes to your property. This is a great way to bring in additional income. 

RV hookups or RV provided. You can add RV hookups and someone can roll in their own RV. Or you can buy a nice RV and rent out the complete package. 

Tiny Homes. Similar to mobile homes, but since they are “cute” you can command a huge premium. 

Buy a multi-family home. If you really want privacy, you can buy a duplex or triplex, and rent out the additional units. If done right, you will be able to live for free. 

Airbnb. You can use Airbnb as a combination to any of these or as a stand-alone income-generating business. 

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This is just the start. Using a combination of these will probably get you to Mortgage Zero. It may be a little uncomfortable, but you are doing it for your future freedom. If you set goals like pay off all debt, pay off your home, or invest $200,000, then you will be able to end Mortgage Zero upon achieving your goal. 

Business Hacking. If for some reason you are completely against sharing your property with other people (most people are), then you can still Mortgage Zero with a home-based business. This may be harder to start up but has the potential to grow much bigger than house-hacking. It will just take time to start a business and a lot of self-education. 

Now let’s take another look at our family from above. They need $4,000 of income to offset their mortgage and completely Mortgage Zero. Let’s see how they achieve it.

Using similar numbers as earlier, they will be able to invest $5,000 a month. Investing $5,000 a month for 40 years (at 8% return) will give them $15.6 million dollars. 

Keep in mind, they would not need to Mortgage Zero for all these years. Once they hit their saving goals, they are free to do as they wish. Chances are, they would keep renting out the additional mobile home for $1,500. This is still a great source of income. 

Does Mortgage Zero work? Can it help build wealth and set you up for future financial success? Yes, it works. I know because my wife and I have been doing it for the last 18 months. We have been able to invest over $5,000 a month for the last 6 months. We have never been as comfortable and stress-free as recently.

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Having a good source of additional income has also afforded us the chance to look at new opportunities, such as starting a blog. It is incredible what a difference financial freedom can make in your day-to-day life. It is like a breath of fresh air. We both go to work completely free of stress because we know how to earn income without a job. This is very important to your psyche. 

But enough about me, what about you? I’m interested in hearing from you about Mortgage Zero. Would renting out space in your home disrupt your peace and quiet? Or would you be okay with trying to achieve Mortgage Zero? There are many different ways to achieve Mortgage Zero, including starting a business, can you find one that fits you and your family? 

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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it.  I have no business relationship with any company whose stock is mentioned in this article.