Welcome to the Livingsmith blog! Today, we're diving into an exciting and innovative financing strategy in the real estate market, especially for those interested in Coliving rentals: House Hacking 2.0, a.k.a Beyond House Hacking. If you're looking to invest in Coliving properties and want to make the most of your capital, you're in the right place.

What We Won't Cover

Before diving into the financing secret, let’s clarify what we won’t be covering:

1. Financial Criteria: Your chosen house must be profitable enough that you’re happy you bought it.

2. Functional Criteria: A house should have a suitable number of bedrooms and bathrooms, sufficient parking, and various other necessities. These are essential but not today’s focus.

The Financing Magic: House Hacking 2.0

If you've heard about house hacking, you might know it as a strategy where an investor buys a property, lives in one part, and rents out the rest to cover the mortgage. Here’s how it becomes a potent tool for Coliving investments:

Primary Resident Financing

When purchasing a house as a primary residence, you only need to make a 5% down payment, opposed to the 20% down payment required for an investment property. For instance, on a $100,000 house, that’s just $5,000 instead of $20,000.

This method allows you to stretch your capital effectively:

• Lower Down Payment: Needing 15,000 fewer dollars means substantial savings.

• Buying Power: With $20,000, you could now buy four houses instead of just one.

Roles in Team Dynamics

To execute this strategy effectively in Coliving, you need to assemble a team covering four key roles:

1. Primary Resident: Someone who lives in the property and qualifies for primary residence financing.

2. Loan Qualifier: A team member who qualifies for the loan.

3. Cash Provider: Someone who can provide the down payment and initial furnishing costs, totaling approximately $15,000.

4. Manager: A person to handle day-to-day management, ensuring smooth operation and tenant satisfaction.

Beyond House Hacking

With this method, instead of merely covering mortgage payments, you can transform properties into highly profitable Coliving investments. Combining house hacking with professional property management can significantly boost your portfolio, reducing cash needs, and opening endless opportunities.

Strategic Partnership and Longevity

You don't have to fill all these roles by yourself. You can partner with others, let them wear one or multiple hats, ensuring all needs are met. This strategy worked wonders for my first seven properties without me investing a single cent personally.

Motivating Team Members

The key is to ensure every team member benefits. They should bring something to the table and, in turn, gain from the property appreciation and rental income.

Practical Application: An Example

For example, in an expansion project I’m currently working on in El Paso, we have two options:

1. Traditional Investment: Buying a house for $94,000 without a primary resident.

2. House Hacking 2.0: Acquiring a property for just $15,000 down because we have a primary resident.

Being able to choose the latter means immense capital efficiency and the ability to scale our property investments rapidly.

Conclusion

In summary, House Hacking 2.0 is a revolutionary financing strategy enabling you to multiply your investment properties while minimizing cash outflow. Whether you’re new or have an extensive portfolio, this approach can hypercharge your growth.

At Livingsmith, we offer in-depth lessons on this and more in our toolkit. Ready to take your Coliving investments to the next level? Join us and start living your Coliving daydreams.