We messed up... 😅
So… Here’s the deal:
We re-branded from The Leonard Letter to Everything House Hacking.
The Leonard Letter was hosted on SubStack and you loved it.
When we re-branded to Everything House Hacking, we decided to switch our email platform.
That’s where we messed up…
We should’ve just stuck with SubStack, so here we are — back on SubStack.
You might’ve already received the newsletter below from our other platform.
If you did, you can ignore this one and wait for the next awesome edition.
If you didn’t, you’re in luck. Enjoy it!
Estimated reading time: 4 minutes, 23 seconds
Yo!
Okay, so, I don’t really say “yo” all that much — occasionally when I answer the phone, but that’s about it.
The point is, this newsletter is going to be fun — and teach you how to make money.
House hacking is a wealth-building supercharger that anyone can take advantage of, and we’re going to show you exactly how, in just a few minutes per newsletter.
Now, let’s dive in.
Lesson
What exactly is house hacking?
There’s no need to feel like you’re living under a rock if you’ve never heard of the term “house hacking.” The strategy has been implemented for quite a while, but didn’t have a name put to it until around 2012-2014.
House Hacking is a real estate investing strategy where you purchase a residential property with a pre-determined strategy to be creative and use it as an investment. When House Hacking, you are making the property an asset for yourself, rather than the traditional strategy of most homeowners, where it is a liability. The most commonly referred to way of House Hacking is by purchasing a property with four units or less, living in a portion of it, and renting out the remaining area, with the goal of reducing your personal living expenses, or potentially even living for free (or dang close to it).
It can take shape in many different ways, from having roommates, to building an ADU, to even utilizing Airbnb. It all comes down to leveraging your property to produce extra income and reducing your living expenses.
Deal Analysis
Want a deal you're looking at to be analyzed, or want feedback on your analysis? Send it to support@everythinghousehacking.com
I’m actually in the market for my next house hack right now, and this is not one that I would personally purchase. That doesn’t mean you shouldn’t (we can’t give investment advice), it just means that it’s not a good deal to me. Here’s why:
According to Rentometer, the market rent for a 3-bed 1-bath unit in this area is about $1,500-$1,650. After considering principal, interest, taxes, insurance, PMI, and the market rent, we estimate the owner’s portion of the all-in mortgage would be about $1,757. Then, if you’re going to put money aside for repairs, maintenance, CAPEX, and vacancy (which you should), you’re looking at closer to $2,061 per month as the owner’s portion.
If you can rent one of these units for $1,500-$1,650, why would you pay $1,757-$2,061? Sure, you do own it and therefore can participate in the appreciation, but what is the opportunity cost of the extra $250-$550 per month, and the downpayment?
House Hacking Related News
For the first time since March 2018, the Federal Reserve raised interest rates. The chairman of the Federal Reserve, Jerome Powell, is trying to combat inflation, but he’s in the same boat as our parents when they had to walk to school in the snow, uphill, both ways.
Inflation is wreaking havoc on consumers from all sides. We at Everything House Hacking have definitely opted out of the $2 extra guac on our burritos (what about avocado toast?), and we can tell that the 7.9% yearly hike in the Consumer Price Index (CPI) is hitting home. To put things in perspective, the Fed aims for a 2% annual increase in CPI. This is the largest CPI increase Americans have had to witness since 1982.
Okay… so what does that mean for house hackers?
For House Hackers, this means that those who have been waiting for the “perfect deal” have seen home prices increase by 20.3% in a year. With rising mortgage rates, inflation, springtime, and severe cases of FOMO taken into account, some analysts anticipate that the home supply will remain low, with no looming “crash” as we saw in 2008.
But, analysts can be, and often are, wrong (no offense, “analysts”), and no one knows what the market is going to do for sure. If anyone says they do, you should run the other way.
Not only that, but it also means your potential mortgage payments are going up. If you had bought a property to house hack prior to interest rates rising for $300,000, you would have been paying $1,265 per month at a 3% interest rate for 30 years, for principal and interest. At today’s rates, of say 5.5%, that same property would be $1,703 per month for principal and interest.
Interesting Resources
Book: The Everything Guide to House Hacking
This is your step-by-step guide to financing a house hack, finding ideal properties and tenants, maximizing the profitability of your property, navigating the real estate market, and avoiding unnecessary risk. Fun fact: this book is the reason that our founder, Robert Leonard, started this newsletter.
Social Media Post: @theficouple on Instagram
Video: The 5 BEST House Hacking Methods from our friends at BiggerPockets
Quote: “When we do common things in an uncommon way, we command the attention of the world.” —George Washington
Closing Time...
That’s a wrap on the first-ever edition of Everything House Hacking. We have a bunch of exciting new segments and content for ya’ll, so be sure to stay tuned for future editions! If you have anything specific you’d like to see in the newsletter, you can help mold Everything House Hacking and have an everlasting impact. Shoot us your feedback at support@everythinghousehacking.com
P.S. If you haven’t seen the Kanye West documentary you should check it out (I’m not really a rap fan, but it was good). Or, at least check out this clip.
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