House Hacking

In better economic times, people used to daydream about building up enough equity in their homes that they could move to a bigger house and use the old one as a rental property.  There were times when becoming a mom-and-pop landlord seemed to be within the reach of almost all homeowners.  These days, good luck buying even one real estate property, let alone two.  What if you could get both for the price of one, your homestead and your rental property?  This is the idea behind house hacking, where you rent out part of your house while living in the other part.  Ideally, the same property gives you the tax benefits one gets from one’s primary residence and also the ones you get from a rental property.  As with anything involving real estate ownership, house hacking is more of a challenge than the creators of aspirational content would have you believe.  To maximize your chances of success with house hacking, contact a Bronx real estate attorney.

How to Get Passive Income From Your House Without Being a Landlord

House hacking is not the same as house flipping; it requires you to sell zero real estate properties.  With house hacking, you buy one house and simultaneously live in it and rent it out.  These are some ways that house hacking can work:

• You live in most of the house, but the tenant rents a bedroom and bathroom or a finished basement
• You buy a duplex and live in half of it while renting out the other half
• You build an accessory dwelling unit (ADU) on your property and rent it out, or you live in the ADU while the tenants live in the main house

The beauty of house hacking is that you only have one mortgage payment, and the rent payments you receive from your tenant contribute to it.  It is less stressful than owning an entire rental property; when you maintain the tenant’s home, you are also maintaining your own home.

Tax Advantage of House Hacking

No one gets rich by collecting rent payments on an ADU or half of a duplex.  The biggest financial advantage of house hacking is that you get tax breaks on the same property, once as a homeowner and again as a landlord.  For example, you get to count your mortgage interest payments as tax deductible.  Meanwhile, the money you spend on maintenance to the tenant’s living area counts as a tax-deductible business expense.  Likewise, you can count a portion of your electric and Internet bills as business expenses, proportionally to how much of the house the tenant occupies, and even more if you also use part of the house as a home office.

Schedule a Confidential Consultation With a Bronx Real Estate Attorney

A real estate lawyer can answer your questions about house hacking, which is not exactly too good to be true but which takes enough work that it is misleading to call it passive income.  Contact Cavallo & Cavallo in the Bronx, New York to set up a consultation.

Source:

realtor.com/advice/finance/house-hacking-tax-deductions/