How to Combine House Hack Strategies to Live for Free
How to Combine House Hack Strategies to Live for Free
One of the great things about house hacking is its versatility—house hackers aren’t locked into just one strategy. In this deal analysis, we’re looking at a single family home in Aurora in which first time investors are using both a rent by room and Section 8 rental strategy. They’ll almost live for free while there, and are poised to get fantastic returns when they move out.

This is a deal that is one of my favorites.  The clients are motivated first time house hackers eager to start their house hacking journey.  They found a great split-level single family home in Aurora that will allow them to try out multiple strategies and gives them flexibility in the future.

This deal was part of our webinar on underwriting for house hacking.  Check out episode #424 to hear all of the details.

Three Learning Options!
  1. Listen to the podcast “#424: Yes, House Hackers Can Still Cash Flow in Today’s Market” Denver Real Estate Investing Podcast
  2. Watch the YouTube video.
  3. Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.

Client Profile

My clients were first-time house hackers who were all-in to try any creative strategy.  Their ultimate goal is to get to the next level while living for free, or as close to it as they can get.  They were willing to live anywhere and just wanted to have multiple options to choose from.

They opted for a property that will allow them to use a combination of strategies–Rent by Room and Section 8—in a split level 6 bedroom/2 bathroom house.  This is the same setup I used in my property featured on House Hackerz. They were inspired by the video and wanted to try it for themselves.

Investment Property Details

This is a fully renovated split level ranch home that still has room to add value in the upstairs unit. There are 2 kitchens, 2 laundries, lots of parking, and an overall great setup for a first-time house hacker. 

The property has a separate entrance to the basement with a kitchen and laundry room, plus three egress windows already in place. It is evenly split with 3 bedrooms and 1 bathroom upstairs and 3 bedrooms and 1 bathroom downstairs.

Property Contract Details

Because of the slower market, the seller accepted our offer with $11K in seller credits.  We then got another $7K for repairs that were fixed before closing.  The repairs weren’t major, just some deferred maintenance items. 

Property Financing Details

My clients are first-time home buyers, which allowed them to take advantage of a first-time buyer grant program. 

Their interest rate is 6.8%.  They weren’t deterred by this rate because they currently pay $2K a month to rent in City Park. Their number one goal right now is to get on the property ladder. 

I used the Rental Property Spreadsheet to run the numbers while they’re living there and after they move out.

Property Overview While Living There

Spreadsheet screenshot of Property Overview while living there

We confirmed that Section 8 will allow the basement to rent as a separate unit in Aurora. Based on that information, my clients will be able to achieve anywhere between $2200-$2449 per month in rent for the 3-bedroom unit in the basement.

Even going more conservative with the middle number of $2324 combined with renting 2 bedrooms upstairs, my clients will pull in 3,824 to go against a mortgage of 3,900 per month.

They are excited to take their monthly living cost from $2K down to almost $0 in a matter of a couple of weeks!

Monthly Operating Expenses

Spreadsheet screenshot of Monthly Operating Expenses while living there

First Year Returns While Living There

Spreadsheet screenshot of First Year Returns while living there

Their cash flow will be negative $2100 a year, which comes to about $175 a month to live there.  They know that the journey is long and that there are variables that could affect that number.  If they end up getting more in rent for the Section 8 unit, for example, they really will be living for free. 

They wanted to drastically cut their living costs, which they are achieving in this home.  Don’t get too hung up on hitting the exact $0 mark—getting 90% of the way there will make a huge impact in the long run.

Property Overview After They Move Out

Spreadsheet screenshot of Property Overview after moving out

After they move out, they plan on renting the master bedroom for $750 as well. 

First Year Returns After They Move Out

Spreadsheet screenshot of First Year Returns after moving out

The returns on this property will jump after they move out.  Thanks to the home’s proximity to Fitzsimons Hospital, there are a lot of options for multiple strategies in the long-term.  They can try out medium term rentals, or continue their combination of Rent by Room and Section 8.

Finding a Property in Today’s Market

This is a great property, but it isn’t a unicorn.  It was on the MLS for 3 weeks, and the seller was motivated to negotiate.  There are a lot of properties sitting on the market today that can work for multiple house hacking strategies. 

Don’t get too distracted by the market and interest rates as an investor because you’ll want to buy and hold the property long term.  That will give you many options down the road.  

Want to learn more about house hacking from other local investors?  Be on the lookout for our monthly House Hacking meet ups!  

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Rental Property Spreadsheet • House Hacking Spreadsheet BRRRR Calculator Spreadsheet • Fix and Flip Deal Analyzer Investing Maps • Rehab Pricing Estimator
Start analyzing your Colorado investment properties today
Rental Property Spreadsheet • House Hacking Spreadsheet BRRRR Calculator Spreadsheet • Fix and Flip Deal Analyzer Investing Maps • Rehab Pricing Estimator
Jeff White
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