1. House Hacking
If you don’t have an entire unit to rent out, you can:
- Rent out a spare bedroom to a friend or on Airbnb.
- Buy a house with an extra storage unit and rent that out.
- Buy a house with extra land for RV or mobile-home lot rentals.
- Buy a house with space (and appropriate zoning) to rent parking.
- Rent a house or apartment and sublease extra bedrooms with the landlord’s permission.
Chad says the important thing is to think outside the box. You don’t have to rent your space out to people and you don’t have to do it full time.
Likewise you’ll want to make sure you live in an area with a demand for rentals if you’re going to pick this option.
2. Live-in Flipping
If living that close to other people gives you anxiety, or you want to live in a bigger home in a nicer neighborhood, then a live-in flip might be a good fit for you.
A flip is good for a house that’s a great deal but isn’t in an area where rentals are popular or affordable. In this method, you move in, fix it up, live there for two to five years and sell the home for tax-free profit.
After two years of living in a place, profits of sale up to $500,000 for married couples filing jointly and $250,000 for singles are tax-free.
Flipping is hard work so spreading renovations out over two years might sound like you’ll be living in a construction forever, but you’ll really be giving yourself time to recover and gear up for every project without the stress of rushing it.
3. Live-in, Then Rent
Similar to live-in flipping is live-in, then rent. What sets this method apart is that it’s for those who want to eventually have a portfolio of real estate rentals.
In this method you’ll buy a home, fix it up, and live in it. Then, once you’re ready for your next home, instead of selling your current home, you’ll rent it out.
Location and size are important in this method. You have to buy a house that’s small enough to rent affordably in a place that’s nice enough for renting, even if it’s not somewhere you’d want to live long term.
The house shouldn’t be fixed up to luxury standards either. A low-maintenance, durable and economically viable home is where you’ll get the most bang for your buck.
After living in his fourplex for a while Chad inadvertently used this strategy.
He was scouting neighborhoods and found an ugly rental house less than a mile from the Clemson University campus. It wasn’t for sale but Chad sent a letter to the owner expressing interest in it.
He didn’t hear back until the next year, but at that point the owner was ready to sell. Chad and his wife put $45,000 into fixing it up and then lived there for two years, once they bought another fixer-upper.
Whatever method you choose, going into your first or next home purchase with the mindset of an investor can help you drastically reduce your housing costs. And for many, that could be even better than having the dream house.