Now let’s move on to the 2-step plan we put to help Georges and Vanessa accomplish their goal of $100,000 per year in rental income within 5 years.
House hacking is the easiest way to buy your first rental property. And in the bargain, you get to live for free!
The traditional house hacking concept is simple: you buy a small multifamily (2-4 units), move into one of the units, and rent out the other(s). Your neighbouring tenants’ rent covers your mortgage and other housing costs, for effectively free housing.
And when you move out, you keep it as a pure rental property, and the cash flow only improves from there.
It works like this: you buy a fixer-upper with a purchase-rehab loan, which does involve a down payment. You then renovate it, financing the upgrades with the purchase-rehab loan .
When the renovations are finished, you refinance the property with a long-term landlord loan and pull your original cash back out. It works because the new landlord loan is based on the new, after-repair value (ARV) of the property, not what you initially paid for it. So, if you created sufficient equity, you can pull some cash out when you refinance, to cover your initial down payment.