House Hacking – Live For Free & Build Over $400,000 of Wealth

– What’s goin’ on y’all? Welcome to back to Wealth Hack Wednesday, and today, like usual,
I’ve got a special treat. Today we’re going to learn how this person lived in their house for free, and built a $400,000 net worth. This is what we call house hacking y’all. We’re gonna learn this
story, how he’d do it? How did he live in his house for free and build a 400k, $400,000 net worth? We’re gonna find out
that, and more, right now. (upbeat music) – Hey, everyone. I’m Chad Carson, from the
website, and author of the book “Retire
Early with Real Estate”. You know I love Jeff’s
Wealth Hack Wednesdays because they’re so darn
practical and useful. So today I’m gonna bring you a hack that helps you save money and build wealth with a place you’re probably
using every single day, your home. The strategy is called house hacking. About 16 years ago, I
was in my early twenties, and I had sort of reached
that transition stage where you’re ready to move out of your friend’s spare bedroom, you’re graduated from
college into the real world. My career was going pretty well. I was a real estate investor, I was making a little bit of money. Kind of like my other friends at the time, they were all buying houses,
they were moving into a home, and that was really tempting. You deserve it, you’re making
money, why not do that? Well, I took a little bit different route. I actually bought a four
unit apartment building, so a fourplex, and I moved into one unit. I fixed it up, it was kind of ugly. It actually had merry
Christmas spray painted across the front of it,
so it was a little scary. It was a foreclosure property. But I spent some money on it,
put some sweat equity into it, fixed it up, and I got the
other three units rented out. And the income from those
three units was able to pay for my mortgage, my principle
and interest payment, my taxes and insurance payment, and have some money left over
to pay for some maintenance. Essentially, I was living for free in my lovely little fourplex building. While my friends, who
were living in the house, were paying a thousand bucks
a month, 1,200 bucks a month to live in their nice beautiful house. Not to mention all the furniture and everything else they bought. The point was, I got into house hacking. I want to tell you a little bit more about how this house hacking works. Here’s how I would define house hacking, it’s essentially turning your home into a income generating asset. So you live there and
you also figure out a way to generate some kind of income. And I’ll give you some
examples here in a minute. The other thing is, you look at your home through a little bit different lens. You look at it and you evaluate
it more as an investment, in addition to being your home. Now that doesn’t mean you have to live in house hacks your entire life. I think there’s a case to be made for it being a short-term
period in your life, and then move on and live
in your dream home later on. But there are a lot of
benefits to doing a house hack, to having a house hack or
two, early in your life, maybe later in your life. And some of the benefits, number one, as I already mentioned, is that you can reduce
your housing payment. Either have an incredible deal like I did, and completely eliminate
your housing payment, or, in many cases, you can just reduce it. You can go from what
would be a $1,500 payment to maybe a thousand dollar payment. Maybe 1,500 bucks to $750. With housing and affordable housing, and being able to afford your payments in so many areas being a big
issue, that’s a big deal. You are watching Wealth Hack Wednesdays, you know about the power of compounding. So if you can save some money right now, especially early in your life,
your twenties, your thirties, look at how much that
saved money could be worth down the road. I’m gonna show you, a little bit later, what that number, what
those numbers meant for me at the end of this video,
show you how much money that potentially could of been by living in a house
hack early in my life. But in addition to reducing
your housing expense, this is a great way to get
into real estate investing, if that’s something you’re interested in. So, look at me. I bought that fourplex building, I lived there for a few years. I actually got married
and my wife moved in, that was our first place that we lived in for a couple years, until we transitioned to another smaller
house to start a family. But we kept the building. So that four unit building
is still a rental property. I still have it rented, and
the really interesting part about that is, getting into real estate can be hard sometimes if you’re
directly owning real estate, but I was able to use
an owner-occupant loan. So some of the best
loan programs out there, with the smallest down payments,
the lowest interest rates, are available if you
move into the property. So I did move into the property, I lived there for several years. But then, once you move out,
if you move on to another house and buy that house, you can keep that. You can keep the loan, you
can keep the rental property, and very often it becomes
a nice positive cash flow rental property. And I was able to learn to be a landlord without just jumping into it and owning a bunch of rental properties. I lived next door to the tenants, I could kind of learn as I go, I can fix things if I need to. I’m not that handy myself,
but I can hire people and kind of watch what they’re doing. So it’s a very smooth
transition into getting into the landlording and
buy-and-hold rental business. So you can continue to own that, maybe you do that two or three times. You have a few rental
properties and then you move on and you live in a regular
old house at that point. So it’s an excellent way to save money, to transition to real estate investing, and then eventually to
hold a rental property for the rest of your life. Now you maybe wondering
how you can do this. Perhaps you don’t have a fourplex building in your local market, or
maybe you’re not that excited about living next door to your tenants. So let me give you a few
examples of how this concept of house hacking can be
more broadly applied. Now that the more traditional
house hack is something like buying a duplex with just two units, a triplex with three units, or maybe a fourplex with four units. The nice thing about that
is you can live in one unit, rent the others out, but
you can also get financing as if it was a single family house. A lot of the conventional
mortgage programs are made for one to four unit buildings. So all of the programs
with lower down payments, like FHA, which is the federal
housing administration loan, and other programs are built for these small residential units. That’s a good place to start
but it’s not the only thing. What if you found a house, or you look for houses in your area, that have a basement apartment, or a garage apartment, or a guest house, or what’s called an
accessory dwelling unit, also called an ADU, are
becoming much more popular these days. I’ve even seen little tiny houses, people building tiny
houses in their backyards. Well, what if you could rent one of those and live in your house? Maybe you find a grad student, or a young person who
just needs to rent that, or a retired person
who needs to rent that, so that that could be a possibility even in a single family
house neighborhood. Another idea is I have a friend
who rented spare bedrooms. He had just recently
graduated from college, he couldn’t find a duplex
in the Washington DC area where he was, and so instead
he got a three bedroom house. And he talked to his
roommates from college, who are also just recently graduating, and they started making payments to him, they lived in the second
and third bedroom, and he was able to do
a house hack with that. And with the advent of Airbnb, and a lot of the shared economy,
renting out spare bedrooms, and spare spaces is becoming
much more mainstream. So you could turn your
home into a house hack if that’s what you wanted to do. You can also even go beyond
that and be even more creative. I’m constantly amazed as I
talk about house hacking, how many different
possibilities there are. If you’re in an urban area, I’ve heard of people,
where parking is a premium, renting out space in their
driveway for parking, if that’s allowed with your local zoning. Or if you’re out in the country, or any kind of places like where I am, out in the country of South Carolina, maybe you could rent out
some extra space to an RV. Or, to a mobile home and just find, if you had some extra
land or some extra lots that allowed you to do that,
you could generate income. The point is, thinking
about your home not just as a place you live, but also as an asset that could potentially generate income, and maybe turn into an
investment later down on the road if you were to move out. Now I know what some of you are thinking. You’re thinking, not over my dead body will
I be doing a house hack. Either I’m not gonna
live next to my tenant, that might be your situation. Or, maybe you just have a big family and there’s just no way
you’re gonna cram yourself into a little tiny apartment. That’s fine, there’s no
one-size fits all strategy but I will encourage you
with a couple of things. Number one, remember what I said earlier, that this is not a forever strategy. This is a good strategy that you do for a certain period of your life. Maybe it’s three years, maybe
it’s five years, 10 years, and then you move on. If you are willing to do something a little bit out of the ordinary that’s good for you financially right now, compounding is on your side, the future is on your side financially. You can then do a lot
more of the dream home and the things you really
want to do later on. So, that’s one idea. The other idea is that
you can have variations on house hacking that
don’t involve renting it while you live there. Just think about your house, buying a more affordable
house that could be rented, that the numbers would work as a rental if you didn’t live there. And then, down the road, you move out, maybe a few years later, and
you then keep it as a rental. So kind of like a house hack, I call that a live-in-then-rent. Very similar to that,
but while you live there you have your privacy, you
have room for your family, and then later on it becomes a rental, and you rinse and repeat
and do that again. The point is there are
possibilities out there if you think a little bit differently. I promised you early
that I would come back with a little bit of math to show you the power of compounding and what this house hacking strategy could mean for you down the line. So I just want to give
you a real brief example. Let’s say you did house hacking and, similar to my situation, you
saved about a thousand bucks for a five year period of your life. That’s it, five years. You’re gonna live in
this fourplex building, you’re gonna rent out a spare bedrooms, or whatever you’re gonna do, you’re gonna save a
thousand bucks per month, and you’re gonna invest
that money consistently. Every single month you’re gonna save it, you’re gonna invest it. And let’s just say you
dollar cost average it, invest it in the stock
market, or something, and let’s say you make a 7% return going forward on annual basis. So that’s $1,000 per month turns into about 69,000 five years from now. And that’s with annual compounding, if you like to use a financial calculator, and you’re figuring it out alongside me. But the story’s not over
yet because you move on, five years from now, you’ve
been doing this house hack, but you move on and you move into your dream house, for example. But your original savings is still there, so you still have that 69,000
and it continues growing and compounding at 7%
well into the future. So if fast forward, if you go 20 years from the very beginning
when you first started, or 15 years from when you
moved out of that house hack, that $69,000 that you had after five years has increased to about $190,000 at the end of those 20 years. So the different between
me and some of my friends, who went and lived in that
dream house right off the bat, and made those thousand dollar payments, and what I did with a
house hack for five years, is like 200,000 bucks 20 years from now. That’s also not the end of the story because I also have this asset, I have this building that I bought. And let’s say 20 years from now, I’ve got that thing paid off, it’s appreciated a little bit in value. It’s very possible that
the building I bought that was originally worth 150,000 is now worth 200 to 300 thousand bucks. I got the debt paid off. So I have an asset worth
200 or 300 thousand. I’ve invested some money
and have another 200,000. The power of house hacking
is that future value. It’s the fact that you save money now, you let it compound, and
it grows into huge numbers. Maybe a half of million dollars, and in bigger cases, if
you’re more aggressive, maybe even a million dollar decision just from choosing to do house hacking. So that’s why I’m excited about, that’s why I brought you
this Wealth Hack today. But I’d love to hear
from you in the comments, is house hacking something
that you’ve done? Is it something you’re
interested in doing? Do you have any questions for me about the situation I was in, or about house hacking in general? We’d love to hear from you. Appreciate your time. My name is Chad Carson
from, and the book “Retire
Early with Real Estate”, hope to hear from you soon.

31 thoughts on “House Hacking – Live For Free & Build Over $400,000 of Wealth

  • House hacking was how I got my start in real estate (which I talk about on my own channel). Over the last four years, I’ve built a net worth of $250k, all starting from the one deal. It just builds and builds and builds.

    Great advice, Jeff! Keep it up.

  • Great straight forward and clear video! This is definitely one of the strategies I teach people on The Freedom Strategy, but I never knew it was called House Hacking! I always love learning stuff! Very informative video. Nothing like living for FREE!! 🙂

  • Did this 40+ yes ago when,I started college. Bought a foreclosed duplex for $9000.09 cash + 2000.00 for renovations. Then bought 12 unit complex. Still own them today and many others.

  • I like the "house hacking" phrase, I will his book. Thanks For Sharing Some Insights, Getting Started, Shared 😁

  • is the overly focus on $$ a distraction from living your life's purpose though? There has to be a balance I think. If you always focus on money you will miss the more meaningful things in life like doing what you love, bc your fixated on the money. What do you think?

  • Extremely well explained in a way that shows it is attainable! I really want to learn more about this and similar ventures. Thank you for sharing.

  • How can one afford such a property now that prices skyrocketed and they keep going up all the time? While incomes are more or less staying the same. Taking a loan for 30 years that amounts to over 100 montly pays sounds really scary. I’m speaking about prices of ONE flat/housing unit and I live in Europe. I’d appreciate some advice, thanks in advance!

  • Great information. The key is executing and taking action. Too many people watch and do little to nothing with the information.

  • I want to get started on something like this! Isk how id be possible in California but this sounds amazing to build wealth to move on like he says! 😅

  • Plan on buying a duplex, tri-plex, or four-plex, as my first home! The house hacking is TOO GOOD not to take full advantage of in some way shape or form 🙌 👏 great video

  • FinBrain's Machine Learning algorithms beat the traditional financial analysis and prediction methods significantly, you can visit our website for more.

  • Great ideas, but, I don't know if your compounding interest rate at a 7% return is truly achievable these days… Show me where I can get "reliable/low risk" 7% return over the next 10 years and that will be EXTREMELY useful! Thanks.

  • Thanks Jeff and Coach. Wish I saw this video 10 years ago. This is great on condition you can get a home loan (or parent loan) to acquire that initial property. Banks (in South Africa) aren't very keen to give money when you tell them things like this, unless you're in the real estate business already.

    I will definitely try to get my kids to be a lot smarter with their money.

  • My family has been poor for generations when I grow up I Senna use these techniques and be one of 1st of my family out of poverty.

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