I don’t think enough people understand the true power of house hacking. For my part, I attempt to talk about its benefits across most of my articles. But, I will keep trying until more people recognize its life-changing effects.
Today, I will continue to beat the drum of house hacking and making money from your primary residence. In my article “10 Creative Ways to Beat Inflation,” I talked about house hacking to get ahead of raging inflation. Let’s explore this topic further.
What’s so special about house hacking? House hacking is using your primary residence to make rental income. The goal is to eventually make a profit from your home, allowing you to live rent-free and build cash flow—I call this “Mortgage Positive.”
Cash Flow 102: Creating Passive Income for Retirement
To understand the magic of house hacking, we will have to do some math. Let’s say you make $60,000/month at your job. That means you take home $5,000/month or roughly $32/hour.
If your roommate pays you $1,000/month, that would be the equivalent of you working another 31 hours in the month. All you would have to do is manage the roommate.
The downside of house hacking. The main downside of house hacking is having tenants. Yes, most people don’t want to deal with others; but, that’s life. However, I will have to challenge your thinking.
In one of the books I read, I can’t remember which one, I found a fantastic quote. “To have millions, you need to serve millions.” This quote means that you have to serve others to obtain wealth.
How did Mark Zukerberg become wealthy? He serves billions of people through Facebook. The same with Jeff Bezos and Amazon. Grant Cardone, author of “Be Obsessed or Be Average,” serves thousands of people via his real estate ventures.
How Much Money Do You Need For Your Dream Retirement?
If you are trying to get rich by going to work and funding your retirement account, have fun. In the book “The Millionaire Fastlane,” MJ DeMarco calls this the slow lane. House hacking can accelerate your wealth tremendously.
The book “The House Hacking Strategy” helps us do the math on house hacking. There is a crazy formula that the book recommends we use for determining your house hacking return on investment.
I don’t use this formula, but I can attest to its value. House hacking works like almost no other wealth generator. It doesn’t cost much to get started, and all you have to do is sacrifice some space and peace of mind.
Buy your freedom from house hacking. Essentially what you are doing with house hacking is catching up after leaving your parents’ house. If your parents didn’t give you a large nest egg upon departure, you are behind.
What is a Sales Funnel?
Now, it is incumbent on us to catch up and get our investments moving in the right direction. Saving 10% of our income is not going to be enough. Enter house hacking.
If you are house hacking correctly, you can pay off all your debt and build an excellent dividend portfolio in five years or less. If you stretch it to seven years, you can get close to $1 million.
Sound impossible? If the average family spends 40-50% of their income on housing, what if you got that number to zero? Then, what if you invested all that additional cash flow into a dividend portfolio earning 5-8%.
At this point, the power of compounding can take effect. Your money will start to snowball, plus you will also be debt-free. With this formula, how can you lose: no debt, massive cash flow, and dividends?
Become a Private Money Lender
Your friends won’t understand. Having roommates or living in a small home are strange ideas for most Americans. The standard American wants to earn $100,000, buy a 3,000 square foot house for $700,000, and live there with a spouse and one child.
You add the expensive wedding, wedding ring, honeymoon, private school, vacations, nice cars, and Americans are in deep debt. So, here you come, living below your means and having roommates—it’ll blow their minds.
Your friends will literally be astounded that you have roommates. They will always ask why you have roommates, to which you can say “to become financially independent.”
Most Americans don’t even have a retirement plan or can even envision a way to retire. When you have roommates or house hack a garage, basement, or attic, you’ll start to see the light.
Introduction to REITs IV: REITs vs. Rentals
This month, my wife and I will get close to $1,000 in dividends. Can you imagine having an additional $1,000 in your pocket just for waking up? That’s the power of dividends.
The power of house hacking + dividends. Thus, that’s the goal of house hacking—to fund your dividend portfolio. You aren’t house hacking for a random reason. Eventually, your dividends will overtake your rental income, and you can decide if you want to continue to house hack.
For example, we have two roommates, each paying $800/month. Since we are close to $1,000/month, we can forgo one roommate if we choose. It only took us three years to get to this point, and that was because we started with debt.
When you combine a wealth generator (house hacking) with your money system (dividends), your life and purpose become evident.
Maximum Leverage: Buy Homes with Little Money Down
Most people try to combine their job (not a wealth generator) with a money system (401K), and it moves slowly. A wealth generator is something that makes money while you sleep. Your job is not a wealth generator.
House hacking is a wealth generator because you make money from thin air. You aren’t selling a product, advertising, or having employees. You are printing money that you, in turn, invest into dividends to make you more money. It’s the winning formula.
To get different results, you have to try something different. If you want to get the same results as everyone else, follow their path. The American way of life is proving to fail en masse. The number of divorces and bankruptcies is out of control.
Create.
Once you have financial security, your view on life changes completely. When you understand that you could live for free for the rest of your life, would that relieve a lot of stress?
Once you get the hang of house hacking, you’ll prove that you can live for free—forever. As your rents increase, you’ll turn an even bigger profit. You can remove roommates as your dividends grow or keep them to build more wealth.
Conclusion. Yes, no one wants to deal with tenants. However, it’s a necessary part of life until you buy your independence via dividends.
Mentorship is Dead
Even better, your dividends can buy your children’s freedom as well. That way, they can start their journey with a leg up in the universe. Don’t we all want that for our kids?
You won’t just be buying your freedom; you’ll be setting your kids up for financial success. Plus, you can teach them the importance of sharing and house hacking so that they can profit early in life.
I see the benefits of house hacking every month as my dividend portfolio increases from $3,000-$5,000. Remember, the average American can’t pay for a $1,000 emergency without a credit card. My wife and I are putting our family ahead in life, one month at a time. Thanks to house hacking.
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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. All Right Reserved Military Family Investing
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