Should you start your own ‘Monopoly Project’? Should you start acquiring rental properties? In this series we examine ways to start your own “Monopoly Project”.

In our first post of this series, we explained by the first thing you should do is to get into shape – Financial Shape. We explained how and why we started in ‘Start Your Own Monopoly Project – Step 2: Our Way’. Then we explained a method you should never use: Step 3: OPM – Other People’s Money

A great way to get started on your own monopoly project is “house hacking”. What is “house hacking”?

House hacking is a real estate investing strategy through which an investor earns rental income by renting out their primary residence. For example, one might live in one of the units of a multifamily property while renting out the others. House hacking a single-family home is also a popular option for those who don’t want to buy a multifamily property. Renting out one or more bedrooms, “hacking” the garage into a living space, or putting a tiny home on the premises are all valid examples of house hacking.

This can take two forms; 1) renting out a room in your single family home or 2) purchasing a duplex, triplex, or fourplex (as discussed in our blog post, “TMP Floating Book Reviews – ‘Investing in Duplexes, Triplexes & Quads’ by Larry Loftis, Esq”).

First, I will give two anecdotal examples: one not so good, one good.

  1. Peter owned a SFH in the San Francisco Bay area in the 1980s. He worked in Oakland so spent most of the day at work. Being a single guy, he didn’t come close to using all the space in his house. He decided to rent out two rooms to unrelated people. He found a male and a female “roommate”. It went well until they coupled up and one day, he returned to find his house cleaned out! Did that stop him? No, he rented out a room again to another “roommate” and… We will have the end of the story in a video interview with Peter soon.
  2. Cover model Joey bought a SFH with a curious configuration: the master suite was on the ground floor; all the other rooms including the living room and kitchen are on the second floor. Initially he preferred to live in one of the upstairs bedrooms. So, to offset the mortgage, he rented out the ground floor master suite. How did it work out? Great! Joey offset 75% of the mortgage (principal plus interest) and got a good roommate in addition. Later he took ‘house hacking’ to an extreme and rented out his bedroom to “Katie” while he slept in the sink!

What is the lesson learned from the above two anecdotes? Most important, tenant selection is EVERYTHING! Second, you must pay attention to the details. Third, a sink makes a surprisingly good bed.

House Hacking is a good starter method that yields immediate financial benefits and valuable experience in being a landlord. It’s a great strategy for a single person, young or old, to leverage their existing home to get started. House hacking is a great way to get started in the residential real estate business as I explained in a previous blog post:

Is buying duplexes, triplexes or fourplexes “The Fastest and Safest Way to Real Estate Wealth”? Maybe. It does bridge the gap between SFH and large apartment complexes; both in the price sense and experience.

Author Craig Curelop explains this strategy in his book, “The House Hacking Strategy: How to Use Your Home to Achieve Financial Freedom”. I like Craig’s approach; especially his advice that “no team is needed”. Often real estate books make things too complicated initially by stating that you need a team of lawyers, CPAs, inspectors and so forth. Those are necessary but will come later. House hacking is a good way to start simple, generate some income and gain experience. We will review Craig’s book soon.

Some additional resources on house hacking:

  1. The House Hacking Guide – How to “Hack” Your Housing, Live For Free, & Start Investing in Real Estate by Chad Carson
  2. WHAT IS HOUSE HACKING?
  3. The Landlords Guide to Successful House Hacking