5 Reasons the Fourplex Is the Perfect House Hack

Today's blog post is from an article on Bigger Pockets:

I've written about Bigger Pockets before and I found this article to be pretty interesting.

House hacking is a common topic of conversation on BiggerPockets. And why wouldn’t it be? House hacking is an efficient, practical tool to reduce or eliminate what’s likely your largest monthly expense and accelerate your journey toward financial freedom.

For the uninitiated, house hacking is simply a co-living arrangement that generates income to offset your own living expense. While many house hacking strategies exist, each offers varying degrees of cost savings, expectation of privacy, risk mitigation, and upside potential. However, in my opinion, one such asset type is better than the rest.

Another article on Bigger Pockets explains house hacking a little more:

I’m talking about hacking your housing and living for free. I’m talking about building wealth automatically and getting paid to do it. I’m talking about buying an owner-occupied multifamily property and getting paid to live for free.

The current article talks about why living in one unit of a fourplex is a such a good housing hack:

1. Greater Privacy 
2. Greater Cash Flow
3. Exceptional Financing Terms
4. Maximized Economies of Scale
5. Training Wheels for Commercial Multifamily Buildings

Number 3 is what really got my attention because I had thought it would be better to go with 5 or more units because you could receive commercial financing but I've since seen the error of my ways. The VA will let you borrow on 1 - 4 units, as long as you live in one...so that means no money down plus the rent from the other units can be counted in your income, allowing you to qualify for a more expensive property (plus lower interest rates).

And yesterday I read another Bigger Pockets article (I'm on their mailing list so I get an email every day with several articles in each email) that changed the way I thought about how much money I would need to be financially free.

The truth is much kinder and one that puts financial independence in closer reach for everyday Americans. The beautiful reality is that the strategic and intentional pursuit of financial freedom through income-producing real estate means that several of life’s largest expenses can be eliminated altogether.

Consequently, you will not need nearly the income you earn now to sustain yourself indefinitely!

Here are the four biggest expenses you can eliminate when you pursue financial freedom through residential income property. As I go through them, I’ll also show you why this means you can retire from a $50,000 job on just $25,000 of rental income.

What are these four expenses that can be eliminated?

4 Big Expenses Eliminated by Replacing Your W-2 With Rental Income

Expense No. 1 – Housing Payment
Expense No. 2 – Retirement Savings
Expense No. 3 – Income Taxes
Expense No. 4 – Job-Related Expenses

I'm only going to talk about the first and last ones here.

Since you're house hacking, you can reduce or even totally eliminate your housing expenses. And since you're no longer working you can eliminate your commute and possibly some eating out expenses.

I'm going to use some examples that are loosely based upon my income and expenses (I'm going to go through my actual expenses and come up with more accurate numbers for my own use):

Income: roughly $3,000 per month (take home)

Expenses:

Rent and utilities:  $1,300
Gas: $500 (especially now that gas is over $4.00 per gallon)
Everything else: Loans, credit cards, groceries and eating out): $1,200

If I'm able to eliminate my rent, utilities and gas (and reduce my other expenses by only $200 per month), I'll need only $1,000 per month to be financially free!

Also, in a Bigger Pockets webinar, the instructor said he wants to get at least $100 in monthly cashflow (after expenses) for each unit he's considering buying. For me to receive $1,000 per month income, I would need 11 units (10 to produce income plus the one I'm living in), so let's round it up to 12 units since it's a nice, round number.

That's as far as I've gotten now...using a VA loan to buy a 4 plex with one unit available and to reduce my miscellaneous expenses. I'll probably spend the next few months paying off some credit cards and other debt and to reduce my eating out budget.

As I do more research, I'll be sure to share it with you!

Interesting days

Today - Pig In A Blanket Day, Administrative Professionals Day and International Guide Dogs Day

Tomorrow - World Penguin Day, Hug A Plumber Day, Malaria Day, Thank you Thursday, Anzac Day and Love Your Thighs Day

May will be Hamburger Month, Deck Safety Month, Bike Month, Lyme Disease Awareness Month, Get Caught Reading Month, Photo Month, Barbecue Month, Asian Pacific Heritage Month, Cystic Fibrosis Awareness Month, Golf Month, Lupus Awareness Month and Military Appreciation Month

Next Wednesday - Golf Day, World Stationery Day, Lei Day, School Principals’ Day, New Home Owners Day, Mother Goose Day, Executive Coaching Day, Global Love Day, School Bus Drivers Day, International Workers’ Day and Purebred Dog Day

Week long celebrations:

Apr 28 - May 4: Go Diaper Free Week

May 24 - Tiara Day, Aviation Maintenance Technician Day, Brother’s Day, Escargot Day and Don’t Fry Day

Week long celebrations:

May 20 - May 26: Italian Beef Week