Lately, many people have been engaging in the “housing hack” in which they buy a duplex with first-time home assistance (so they have a low-down payment and low interest rate) and move into one half of the duplex. They then rent out the other side of the duplex and use the rental income from their tenant to supplement the cost of the mortgage, the property taxes, and insurance.
If you do the housing hack well you can almost live for free without having to deal with the expenses of ownership because the tenancy leasehold is covering a lot of your overhead for the mortgage taxes and insurance.
Cost-Effective & Tax-Efficient
You still have a lot of ownership responsibilities of course. There are always things that break on a house, as well as routine maintenance and unexpected repairs, but in general this is a very cost-effective and tax-efficient way to get into the real estate market.
Young people are buying these smaller rental properties and driving a lot of mom and pop owners to sell and subsequently exchange into a different type of real estate that’s less management intensive.
It's a great time to be a seller right now. There is very little inventory, lots of demand, and cost of financing is incredibly cheap. These factors are driving demand higher, which makes it a very difficult time to be a buyer. That's where people are having trouble with their 1031 exchanges currently as they’re getting outbid or unable to lock down a replacement property fast enough. This is why it’s always important to remember the 1031 exchange time period that you have to abide by in order to complete a successful exchange.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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