The concept is pretty simple, you rent out a room or space in your home so you can create passive income and also spend less on housing. Now keep in mind, renting a room out is just one form of house hacking. There are plenty of ways that are lucrative involving house hacking.
House hacking is when an owner lives in their property and rents out other parts of the property. Ultimately, the tenants are the ones paying the monthly mortgage payment while the owner lives rent-free.
The first big benefit of house hacking is living rent-free! A mortgage payment is composed of the principal amount, interest payment, and potentially mortgage insurance.
Lenders offer lower interest rates to people who will occupy their property compared to investors who do not. Lenders offer low-interest rates to people living on their property because they tend to take better care of where they live.
Non-owner occupied properties require 20 to 25 percent of the purchase price for a down payment. The down payment for owner-occupied borrowers is significantly lower compared to non-owner occupied borrowers.
Aside from living rent-free, successful house hacking can generate monthly cash flow, known as the net operating income. You can calculate the net operating income (NOI) by subtracting the monthly operating expenses from the gross rental income.