Guest post by Bradley Labrie
Financial freedom is a daunting task for the average person and a home is often the largest financial asset individuals purchase in their lifetime. While salaries have flatlined the housing market continues to soar becoming less and less affordable for the average American homebuyer, pushing them farther into debt and much more of a financial burden than a blessing.
It’s also no secret that the majority of Americans live paycheck-to-paycheck regardless of their salaries, working longer hours and feeling more pressure and stress than ever. They find themselves working harder yet not seeing the rewards of our “booming” economy. The marketing machine has lured us into over spending and showing off for people that don’t care about us, and left us hopeless in the process.
So what is the antidote in a society with so much noise, so much fluff and so much false hope? Minimalism and real estate.
At it’s core minimalism teaches people to seek after the greater things in life with purpose behind every decision. The sort of things money can’t buy and to appreciate the things in life that bring us the most joy and the most peace.
But minimalism alone won’t solve your money problems. Frugality won’t give you the freedom and ability to travel or retire or solve issues in your community. The question becomes how can a person live a fulfilling life made up of purposeful decisions and build wealth at the same time?
Fortunately, there’s a new trend in real estate that many are turning to and freeing themselves from the rat race. They’re capitalizing on this lifestyle choice and choosing to build wealth and financial freedom through their homes—utilizing what’s known as house hacking.
What is House Hacking?
Housing takes up well over 30% of the average budget and there’s no better way to eliminate that expense and even get paid in cash flow every month from a tenant than house hacking.
There are different ways people house hack, but the most common are:
Buying a 2-4 unit multi-family house
Renting out a single family house by the bedroom to roommates
Renting out basement apartments, attic apartments or onsite cottages - Renting out a mobile home or RV on a lot at a single family house
Renting out parking spaces on your property
Renting out storage in garage or shed
Basically, house hacking allows you to buy a property as a primary residence and get a loan for as low as 3% down payment and then rent the other units out and live for free or get paid to live there.
It’s the ultimate way to maximize your current income, decrease your expenses and begin to hyper-focus your newfound savings on the things that bring you the most energy in life!
The 4 advantages of House Hacking
1. Significantly decrease your expenses
Savings rate may be the most vital wealth building statistic on the planet and two things taught me the significance of it. First, I read a book titled Set for Life by Scott Trench which taught that if a person is to create financial freedom early in life, he would have to focus on his fixed expenses (Housing, car, etc.) rather than variable expenses. He also cited a blog post on the significance of a savings rate. It changed my life. The blog post was written by Mr. Money Mustache and it taught me that income and expenses weren’t the crucial numbers. It was the savings rate between them that made all the difference! In the graph he presented, he shows that the rate at which a person retires is based on just one thing: Savings rate.
It blew up my world and it can change yours too!
2. Maximize flexibility and purpose
I absolutely love to travel and often I plan my traveling around conferences or events that I can expand my knowledge and my network through. The incredibly freeing thing about house hacking is that I don’t have to pay a mortgage every month. I now have the flexibility to make all of my financial decisions based on purpose and joy- and it can happen for you too!
3. Build generational wealth and passive income
I love real estate and I love the challenges it presents that inspire creativity in delivering a quality product to my tenants. But the thing I love most about it is it provides generational wealth that generates monthly cashflow to do the things that I am passionate about and brings me joy. Additional cashflow can dramatically change your life and eventually will propel you out of the rat race.
4. Forces minimalization
Perhaps the most interesting part of house hacking is the fact that your space or unit likely won't be as large as the average single family residence. Which forces you to cut down on the unneeded and wasteful spending on things that tend to clutter a house. It forces you to be creative with a more limited space and focus on the things that bring joy.
5. Choose your neighbors
At some point in our lives we generally spend time in a apartment complex and generally have bad experiences. Whether it’s the above tenant stomping their feet at 1am or the next-door neighbor that has no regard for your space, its happened to most of us. That’s where we get the unique opportunity to have 100% control of who your neighbor is, how long they stay or when they leave. You have the control! And you will provide your tenant with a great experience having you as a neighbor which creates a total win-win.
Why house-hacking appeals to so many
The beauty of house hacking is it doesn’t have to be a stressful situation in a beat up house. People house hack in duplex condos or in upscale neighborhoods for free. And the co-founder of BiggerPockets Brandon Turner, with his wife and children, house hack on the beaches of Hawaii for practically free. The point is, just like minimalism, it is customizable to your goals and your lifestyle.
It has dramatically changed my life, wealth, and my focus on purpose and it forces me to prioritize my spending, my time and allows me the freedom to travel without the worry of a mortgage payment over my head.
With inflation, banking manipulation and the advance in technology has put a strain on the old American Dream, we must reevaluate the way we live our lives and what brings us joy and meaning.
Financial freedom affords you that ability to prioritize the things that mean the most to you, and allows you to do your work in the areas that provide the most benefit to the world at large.
House-hacking is the best way to very quickly increase your savings rate and be well on your way to Financial Freedom and the life you’ve always wanted!
Bradley Labrie lives in Michigan where he works full-time while house-hacking as a side business. His goal is to be financially independent by 30! For more information on ideas and resources in real estate, contact Bradley via Instagram or Facebook.