Hack Your Way to $250k Net Worth (and live for free!) with These 4 StepsNovember 10, 2020 by Paul Begich
I love real estate! Like LOOOOOVVEEE real estate! I love real estate because it can truly CHANGE someone’s life forever! The power that residential real estate can have on personal wealth building and finances is insane!
In this article, I’m going to share a personal experience demonstrating the power of real estate in my own personal life and how YOU can implement this same hack in YOUR life and INSTANTLY increase your net worth by $250k AND live for free in the process.
Emily and I purchased a four-plex in the Whittier neighborhood of S. Minneapolis earlier this summer (check out the full story here). We purchased the property with just 3.5% down and immediately began renovating the property upon closing. We put in a significant amount of renovations to the property which increased the rents for the property by over 30%. We used bank financing to pay for these renovations because we literally had just pennies left in the bank. After the renovations were completed we moved into one of the units while the other three were being occupied by new renters. The rents from the other three units cover the costs of the mortgage, property taxes, insurance, monthly maintenance, capital expenditure reserves, vacancy reserves, etc. and then some! In short, we’re MAKING MONEY to live at this property. Emily and I have both reduced our largest monthly expenditure costs – which is everyone’s housing expenses – and greatly increased our net worth (this article shows that homeowners on average have a $250k higher net worth than that of a renter).
Now here’s the best part… YOU can do this too!
This is a concept called…House Hacking. Maybe you’ve heard of it? It’s a concept that’s gaining A LOT of popularity especially among millennials who don’t want to be tied to their 9 – 5 jobs, want to pursue their passions, and have the flexibility to travel on a whim.
House Hacking is a relatively simple concept: Buy a property with low money down and rent out a portion of that property.
The goal of house hacking is to reduce your largest monthly expense by as much as possible, and in the instance described above, actually MAKE YOU MONEY! But really, so long as you’re dropping your rent payments from say $2,000/month to a net $1,000/month mortgage payment after the offset costs of your tenants that’s a HUGE win!
Now that you’re interested in house hacking and want to hear how to do it, let’s dive in!
Here’s a four step outlined process that’ll ensure YOU TOO can be on a path towards financial freedom!
Find a Realtor
Ok, so OBVIOUSLY I’d love to help with this journey but I get I may not be the best fit for everyone – and that’s ok! Find a realtor you can trust – in this “investment” space it’s more important that you have a realtor who is going to look out for your best interests opposed to only caring about commissions.
Where Do You Want to Live?
Do you want to live in the Northeast neighborhood of Minneapolis? Maybe close to Lake Harriet? Or how about in Whittier and then we can be neighbors! I PROMISE, PROMISE, PROMISE, by shrinking your search area you are NOT missing out on other opportunities! There are countless opportunities in every pocket of Minneapolis and what you will do by niching down is become an expert in that little pocket so when a deal does come to market you’ll be able to act quickly – opposed to being a master of none.
Establish Your Preferred Asset
There are a couple different approaches you can take with House Hacking. You can live in a single family home and rent out the rooms to friends OR you can live in a duplex, triplex, or fourplex and rent the other units to tenants. Each has their pros and cons so be sure to talk to your realtor on those items. But most importantly, ALL of the above allow you to put just 3.5% down for the down payment of the property. In most instances this is less than $20,000 even after closing costs!
Pull The Trigger!
There’s a big difference between being “interested” in House Hacking and financial freedom and being COMMITTED to financial freedom. I run into A TON of people who say, “Oh hey, I want to do that too! I’m going to give it a go!” – and then there’s the clients that I work with that ACTUALLY change their life and pull the trigger. Action is the differentiator. Not every deal is going to be a screaming deal – and that’s ok! But the opportunities that allow you to decrease your monthly expenses by a significant margin are the opportunities we want to attack. The clients that act are the people that end up changing their life for the better.
The concept of house hacking has forever changed my life (and I want it to change YOUR life too)! Emily and I are already gearing up for the next investment property because the seed has been planted – and it started with a house hack.
I would want nothing more than to share what we’ve learned and hopefully spread this to as many people as possible because I know how much it’s already changed our lives.
If you’d like to connect one on one you can always schedule time to chat with me here or follow me on instagram at @penthousepaul.