House hacking is when a person rents out a room or rooms in their primary residence and uses the monthly rental income to pay a part or even all of the monthly mortgage payment, thus living “rent-free.”
House hacking is a great way to grow a real estate portfolio due to the low down payment. However, an owner must live in the property for at least one year or face an extreme penalty.
There is nothing illegal about an owner living in one of the units of their property. However, it is unlawful for an owner to convert a garage into a bedroom for creative house hacking.
Aside from working with a hard money lender, I strongly recommend any future successful real estate investor to build a good relationship with a local in-state banker.
An FHA loan is a Federal Housing Authority insured loan. The U.S. government would insure lenders from any losses if a borrower defaulted on their mortgage payments.
The government also ensures VA loans but are designed only for U.S. military members and veterans. This type of loan requires no money down and does not include any mortgage insurance.
House hacking is one of the most straightforward real estate investing strategies and a great way to start building wealth, increase your net worth, and reach financial independence!