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Minnesota house hacking for cash flow
What’s becoming very popular in Minnesota these days is to buy a duplex, triplex or 4 plex in adding in Airbnb to do house hacking.
The reason for this hot trend is that as a homeowner living in your home you get to have the other renters pay down your mortgage over time and give you monthly cash flow which can allow you to live very affordably each month.
Sometimes you add a bedroom or an egress window after you buy your mn home to make this happen. It can be a great return on your investment.
This is a great way to learn investing. Some choose renting out rooms to roommates, some do long-term rentals and others rent out with Airbnb’s program.
Generally speaking 3 bedrooms rent out for a lot more than 2 bedrooms and accommodate a much larger audience and demographic for demand, so focus on homes and units with that.
The house hacking is a lifestyle strategy and offers you more monthly cash flow and monthly cash flow after all of the bills are paid for each month.
Many will take advantage of the owner occupied status and keep upgrading to bigger properties.
Minnesota House hacking with more units, bedrooms and Airbnb
Buying your first Minnesota property this way up to a residential 4 plex can make it much easier to purchase because you would need much less money down when it comes to financing with banks and lenders.
As an example I know people who rent out 5 bedrooms in a house for great cash flow.
Another investor may buy a duplex and live in one unit and rent out the other unit. Another investor may buy a huge 4 plex and live in one unit and rent out the other three units.
Remember that 4 units or less is deemed as residential by a lender and if you live in it as owner occupied the risk to the lender is way lower and very little down payment is needed.
With long-term renters 3-5 bedrooms really get max rents, but with AIrbnb you could likely do well with all bedroom types as travelers are a different dynamic.
Some lenders may care if your property is going to be used as an Airbnb, but also keep in mind that the strategy is you living in the property for awhile and you’ll have more foot traffic with people from out of town with Airbnb rentals. People use the Airbnb platform due to the higher rents and more cash flow.
Please keep in mind with flight restrictions and covid-19 concerns Airbnb investors are experiencing high vacancy rates with a lower demand for now, so you may need to adjust your strategy for awhile.
Minnesota House Hacking provides easier financing
At this time 100% financing or 3.5% down is for owner occupied, where as buying an investment property requires a 15% to 20% down payment. I think some mortgage experts can get you that first investment with 15% down, but additional ones are 20% down payment or more.
Owner occupied financing is so much easier to qualify with your credit score and the lower down payment, so take advantage of that when possible.
Also when you own and live in the home 2 of the last 5 years you get a great tax advantage. Google the ‘universal tax exclusion’.
The tax advantage is so amazing that many investors will live in a place for awhile , then move out into a bigger home to live in and move out to an even bigger property like a 4 plex, this creates huge advantages to taxes and cash flow for their lifestyle and offers freedom of their time by having a good long-term strategy. How long you live in each property is a conversation that you should have with your mortgage expert.
Different lenders will view Airbnb differently. If it’s a house you live in that you later rent out some rooms it should be favored well. This investment will be your main residence and you may even add value by adding square feet, egress windows and bedrooms.
In the uncertainty of environments in today’s world with employment, minnesota house hacking really lowers your monthly payments and risk when you lack steady income in other areas.