House hacking has become the latest trend in the market to earn revenue from real estate. Do you know how exactly it works? It is an alternative to the concept of the paying guest.
For example, Srinivas, who draws a salary of Rs 70,000 a month, wishes to buy a 2 BHK costing Rs 70 lakh. He has some money to pay towards the down payment. The rest of the amount he wishes to avail of as a home loan, Rs 55 lakh, comes from banks at 8.5% of the rate of interest. The EMI works out to be Rs. 42,290.
He feels it is burdensome to pay his salary. Therefore, to generate additional income, he thought of adopting the house hacking technique.
Accordingly, he rented out the second bedroom of the house. The rental income should be used for reinvesting or foreclosing the loan. The concept works for a property that enjoys good rental demand and is located in a good geographical location. To give the house a bed, a rental agreement would do. The parties to the agreement should include various rules and conditions since both the tenant and house owner share the same roof. The house hacking helps reduce the living costs of the house owner.
While choosing the tenant, taking precautions is unavoidable. If the tenant is a complete stranger, efforts should be made to know the background. The facts to be verified are: Where does the tenant work? What is his or her profile? The house owner should get acquainted with the family members. The owner should check the history of rent payments by him or her. The house owner should know about the local rules and laws about giving room for rent.
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