House Hacking Success Story: How I Saved $3850 And Lived Rent Free My Senior Year In College

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How I Saved $3850 And Lived For Free My Senior Year In College

It was towards the end of my Junior year when my dad’s girlfriend called me. She had a lead on a 3 bedroom rental that had a long term tenant who would be vacating soon. Did I want to try and get the house or my senior year? The property owner was asking well below market rent, so I said yes. My father actually cosigned the deal but it was my job to pay the rent.

We realized that if I asked the going rate of $350 per room, I could rent out the two spare rooms and live there for free. *Well, I had to pay my share of the utilities, so I could potentially live there for a year at the cost of 1/3 of the utility bill. Under $75 per month.

This is not without risk.

As the person contractually responsible for paying the rent to the property owner, I was on the hook whether or not I had roomates and whether or not they paid their rent to me on time.

Feel the Fear. Check your assumptions.  Do it anyway.

When I first told my mom about the plan, she was against it. She saw it as risky. “What if you have to pay all of the rent?”

I saw it as a smart investment where the odds were in my favor of coming out even or ahead. Here’s why: I was already used to paying market rent for a bedroom. My mom was looking at the absolute worst case scenario. What if I couldn’t find any roommates? That’s a VERY unlikely scenario in a college town if your rent price is competitive.

I figured my worst likely scenario is that I would have to pay rent occasionally if a roommate didn’t work out. Being the conservative investor that I am, I saved several months of rent in an account that I could use if the worst likely case scenario happened. My best case scenario was that I would get to live rent free for a year.

How did it turn out?

I lived in that house for 1 year. As soon as we signed the paperwork, I found two roommates ready to move in the day the lease began. We had a roommate move out mid-year, leaving a vacancy for a month, and then a new roommate moved in. So my rent cost for the year was $350, instead of the $4200 I would have spent renting a room from someone else.

This strategy for affordable living is called House Hacking, though the term hadn’t been coined at the time I was using it. Usually you will hear about it relative to home ownership, but you can also house hack as a renter who subleases to roommates (as long as it’s allowed and done with the consent of the property owner).

What is House Hacking?

To quote an article from Forbes:

“Simply put, House Hacking is a strategy that involves renting out portions of your primary residence to generate income that is used to offset the cost of your mortgage and other expenses associated with owning a home. When done correctly, it allows people to live in expensive areas completely for free, or even generate positive income through home ownership.”

“House Hacking is a means for those who cannot afford an expensive home to use creative methods in order to accomplish that goal. It is a way of squeezing every last ounce of value out of a home that you possibly can, in order to benefit yourself financially.” Find the article here

The Bigger Lesson For Investors

• Trying new things is scary. Trying non-conventional things will be viewed as risky by others. Listen to their concerns, evaluate if their argument pertains to your situation and if it changes your perspective.
• Go through risk assessments. Definitely ask yourself what happens if the ABSOLUTE worst case happens. But also consider what the worst LIKELY situation would be. It may be substantially less risky once you go through the different scenarios and exit strategies.
• If you are very conservative, like me, but have big goals…. embrace the possibility of failure while taking action steps towards your goals. Feel the fear but act anyway on beginner/small projects that allow you to learn while the stakes are relatively low and more easily recoverable if you hit setbacks and challenges.
• Thinking differently and approaching investments creatively can have huge rewards over “following the norm”.