In today’s jargon, any inventive shortcut for coping with modern life is being called a “hack”—and it needn’t have anything to do with computers. There are now ironing hacks (“flip shirts inside out to easily iron over the button side”) and travel hacks (“keep a bar of scented soap in the same compartment as your dirty laundry to keep your clothes smelling clean”). So it was bound to happen sooner or later: St. Cloud real estate now has house hacks.

The recent yahoo!news article about house hacking seems to hold out the prospect for “rent-free living”—but in practice, it’s a lot more involved than that. Once the value of the hacker’s time and elbow grease are taken into account, the strategy is less miraculous than it sounds.

Reduced to its bare bones, “house hacking” includes any strategy that describes a way to generate income from a home to offset its costs. Runaway housing prices and rents are incenting would-be homeowners to invent new ways to pay for their transition from renter into homeowner. When income figures won’t support home loan payments, bridging the gap means devising alternate strategies.

One profiled CPA house hacker uses a spreadsheet in a CPA-like approach to qualifying candidate properties—hard to find in many of today’s hot markets. The best hacking targets are those whose estimated revenues (“rental incomes multiplied by a HUD vacancy factor”) are greater than or equal to their monthly expenditures (principal, interest, property taxes, insurance, mortgage insurance premiums). “Most” hackers find the numbers can pencil out when, for example, they are able to take out an FHA loan with a 3.5% down payment.

In addition to the number-crunching is a disposition prerequisite for successful house hackers: the willingness to take on the responsibilities of a landlord. That includes having the time and energy to attract and manage reliable tenants, draw up leases, and to keep on top of maintenance issues.

 One unarguable starting point is emphasized by a husband-and-wife team identified as house-hacking teachers: “You have to have a plan.” The team is currently demonstrating one of the “entry-level ways” to get into house hacking: they are in the process of converting a garage into a studio apartment while complying with local housing regulations.

I’ll be pleased to serve as your go-to resource for all your St. Cloud real estate questions and ideas—do give me a call!       

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