House Hacking for All!
House Hacking is taking the world by storm. I do it, and my two friends who retired in their 30's also do it as well. House Hacking is an incredibly powerful tool for saving money, wealth creation, and Financial Independence.
It costs money to live. The biggest expense for most people is Housing. Your rent, your mortgage, your property taxes, your home maintenance; all of it takes huge chunks out of your paycheck. In the US, the average cost of housing is between 18-30 percent of people's take home pay, and there are many people who spend much more. I haven't been able to find the typical percentages for the cost of housing in the UAE, but housing can easily cost 3,000-10,000 AED per month all over the country.
What if I told you that you could take this biggest item in your budget and reduce it considerably or even make it free to have a place to stay. Some talented people even make their housing pay THEM, and turn it from an expense to a source of income.
I first started taking House Hacking seriously when I went to visit my two friends. They lived in shared villas near the beach in Jumeirah. They had cool houses, giant bedrooms, huge kitchens, lovely gardens, and interesting house mates. That got me over the fear of it, because I had been worried that such a situation would be oppressive, with tiny rooms and no privacy. The first friend was splitting a room with his wife, and they were living a great life paying around 40,000 AED a year for rent in a great neighborhood by the beach in Dubai. The other friend even rented out the whole house and sublet to other people, which made him a small profit, completely eliminating that item in his budget by taking the initiative to advertise and manage the other tenants.
My job as a teacher gives me the option of a decent housing allowance, and they will give me that amount no matter if I pay more in rent that year or less than what I’m given. For the last two years, I'd lived in a serviced apartment and it had cost me slightly more than my housing allowance, so I was about 8,000 AED out of pocket each year. I liked my neighborhood and the service that came with the hotel apartment, so I was pretty happy.
But my lease was up in May of this year, and I thought it might be time to try my hand at House Hacking. I was able to use Dubizzle to find a great big room in a villa that is both 10 minutes from my job (cutting my commute by 2/3), that only cost me 4,000 AED a month. This left me with a surplus of over 20,000 AED compared to my housing allowance. That 20k went straight into my investments. I kind of look at it like I got a 1,500 AED per month raise for doing nothing but living in a mansion.
It is a little weird living with people again, but my housemates seem very nice and welcoming, and the kitchen has plenty of space for my pots and pans, so it's been great thus far.
This is one method of house hacking, simply downsizing so that your rent is less per month. If you get a housing allowance, you can find a place that costs less and pocket the difference. You can do what I did and find a shared villa, or just move from a one bedroom to a studio like another good friend.
Another method of house hacking is called the "live-and-flip". To do this, you get a property that needs some work, but not so much you can't live in the part that you're not remodeling. This is great if you're the handy type who knows their way around a tool box. As you fix up the property, you increase its value, so that at the end, the profit you make from the now more valuable house more than covers your living expenses. Some people turn this into a full time job and move from house to house, fixing them up then moving once the house is great and expensive again.
I personally don't have the skill for that sort of house hacking, so I just went with the old roommate solution. This can work even if you have a family, as there is a family living in the detached, more private part of the villa where I'm living. If you're living in a place where there are "duplexes" or "triplexes" which have multiple independent apartments in the same building, you can buy the building, live in one flat, then rent out the rest. This is also a common way for those who aren't as handy to House Hack. Some people rent out an extra room on AirBnb as well, to defray the cost of their mortgage.
Any way you cut it, there is a House Hack for you. Sometimes it takes a little creative or effort or sacrifice, but the benefits can be huge. Imagine what you could do with the money that you're spending on rent if you could spend that somewhere else! Would you take a family vacation? Get a nicer car? Buy assets that will support you in your retirement? Only you can answer that question, but I'll bet that you can think of a bunch of great things to do with the extra dosh.
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