House Hacking vs. Nomad™ Real Estate Investing: An In-Depth Comparison
Real estate investment strategies are as varied as the investors who employ them, each offering unique benefits and challenges. Today, we’re diving into two popular strategies: House Hacking and the Nomad™ Real Estate Investing Strategy. Whether you’re a seasoned investor or just starting, understanding these strategies can be a game-changer for your portfolio.
What is House Hacking?
House Hacking involves purchasing a multi-unit property, living in one unit, and renting out the others. This strategy can significantly reduce or even eliminate your living expenses, allowing you to save more towards your next investment. House Hacking is a practical entry point for new investors, offering a way to learn about real estate with lower risks.
Pros of House Hacking
- Reduced Living Expenses: The rental income from the other units can cover the mortgage and other property-related expenses.
- Learning by Doing: It provides firsthand experience in property management and tenant relations.
- Accessibility: FHA loans can be used, requiring lower down payments and making it easier for first-time buyers.
Cons of House Hacking
- Privacy: Living close to your tenants may lead to boundary issues.
- Management Responsibilities: Being a landlord comes with its set of challenges, including maintenance requests and tenant management.
- Location Constraints: You’re limited to investing in areas where you’re willing to live.
What is the Nomad™ Real Estate Investing Strategy?
The Nomad™ strategy involves purchasing a property with a low down payment, living in it for the required occupancy period (usually a year), then moving out and renting it out. This process is repeated, gradually building a portfolio of rental properties. It’s a variation on the idea of “house flipping,” but with a focus on accumulating rentals rather than selling for a quick profit.
Pros of the Nomad™ Strategy
- Portfolio Growth: Allows for gradual portfolio expansion with minimal initial investment.
- Lower Down Payments: Taking advantage of owner-occupied financing options with lower down payments.
- Diversification: Opportunity to invest in various markets and property types.
Cons of the Nomad™ Strategy
- Moving Frequently: Requires the investor to move yearly, which can be a significant inconvenience.
- Financing Challenges: Securing financing can become more challenging as the number of loans increases.
- Property Management: As your portfolio grows, so does the complexity of managing multiple properties.
Comparing House Hacking and Nomad™
Both strategies offer pathways to real estate investment with minimal initial capital. However, House Hacking is more suited for those who prefer stability and are comfortable managing tenants directly. On the other hand, the Nomad™ strategy appeals to those willing to be more mobile and invest in a broader market range. The choice between them depends on your lifestyle preferences, investment goals, and willingness to manage or delegate property management tasks.
House Hacking and Nomad™ are both viable strategies for building wealth through real estate. By weighing the pros and cons, investors can choose the path that best fits their financial goals, lifestyle, and risk tolerance. As always, success in real estate investing requires due diligence, market research, and sometimes, a bit of creativity.
In this class you’ll learn:
- A side-by-side comparison of what Nomad™ is versus what house hacking is
- Why you might decide to do each (or both)
- Some math as to why you might want to Nomad™
- A deep dive into looking for unicorn deals
- An example of what house hacking looks like in NoCo with an example
- An example of what Nomading™ looks like in NoCo with a client example
- A deep dive into negative cash flow and “financing your down payment” over time
- How roommates can fund down payments with house hacking
- Nomad™ loan basics including recommended order of loans and using roommate income to qualify
- A deep dive into occupancy limits and the devastating impact on house hacking (occupancy laws for Fort Collins, Loveland, Windsor and Greeley discussed)
- The ridiculously over-the-top financial repercussions of non-compliance with occupancy laws… or, as I like to call it, *sarcasm* what’s throwing away $1,000 per day per person in violation fees anyway? *sarcasm*
- Median rents and what roommates might pay for rent when house hacking
- Screening tenants and roommates leases
- Property selection when buying
- Plus much more