House Hacking: Paying $0 for my home

Uncategorized Mar 22, 2023

What is your largest expense right now?

Is it food, clothes, streaming services? What about your rent or mortgage payment?

For most people, the place you live is also the place that puts the biggest strain on your pockets.

When I was finishing up my basketball career and preparing to live in the real world for the first time, I heard about a little known way to buy a house for free and live in that house for free.

And today, I'm going to tell you exactly how I did it at just 23 years old.

What's up, guys? My name is Lili, and before I scaled my real estate portfolio to be worth over $1.3 million, I was a Division One college athlete, soon to be college graduate, and I had a pit in my stomach over my imminent entrance into the real world to get a real job and pay real rent.

But then one of the best things ever happened to me, and it put me on the road to real estate induced financial freedom.

I tore my ACL.

Okay, let me back up a little bit.

I remember my very first basketball game, when I was three years old. It was in a room in my daycare center, and the flooring was carpet, and the staff had put down duct tape to make it look like the lines of a basketball court. As I got older, I kept getting better.

I played Division One at Stanford and at Notre Dame. I was a National Player of the Week multiple times., broke UConn's winning streak my sophomore year, went to the Final Four multiple times, won a national championship, and tore my ACL.

Poof went my dreams of making it to the WNBA.

And before you come at me in the comments section, I know that people can come back from ACL tears and be better than ever but the WNBA doesn't exactly pay as much as the guy's side, and I tore my ACL at the exact worst time during the last part of my last season, so you can see why I was pretty devastated.

But then I got an offer from the Harlem Globetrotters.

I could come rehab my knee with them, and while I was going through that process, be a media ambassador and one of their trick shot artists.

Here's where I get to the free house part of the story.

While with the Globetrotters, I was Globetrotting. I was driving and flying from city to city. I even did a stretch where I had 18 cities in just 30 days.

During all of that travel time, I got my hands on as many podcasts and audio books about financial freedom and real estate investing as I could.

House Hacking

That's where I found out about house hacking and a special twist to house hacking that would not only let me live for free, but also buy the house for free.

If you aren't familiar with this term "house hack," it's the idea of buying a property for yourself to live in and renting out the extra space to help cover, if not completely eliminate your housing expense.

If you're thinking that buying a house is completely unattainable because the housing market is going up, you don't have great credit, or two years of job history, stick with me, because I was dealing with all of those things, too.

FHA Loans

Most people think that in order to buy a house, you need to put 20% down. So if the house costs $200,000, you would have to have $40,000 for a down payment and that's true, if you're using a conventional loan. But if you plan to live in the home yourself, you qualify for something called an FHA loan.

With an FHA loan, you only need to put 3.5% down. So instead of $40,000 down on a $200,000 purchase, you've just got to put $7,000 down. Well Lili, $7,000 is a lot less than $40,000, but it's not free. Is this clickbait?

There's a special program I'm gonna tell you about that you can use at closing to eliminate that entire down payment. But first, let's talk about how you actually start the house hacking process itself.

You know that you can get a house for a low down payment if you plan to live in it yourself but another great thing about the FHA loan is you can use it not just to buy a traditional single family home, but you can use it for any property that has one, two, three, or four units.

So you can get up to a fourplex and still just have to put down three and a half percent. Traditionally, if someone was going to buy a multifamily home as an investment property, they'd need 20%, even 25% down.

FHA loans also usually have more relaxed lending standards because they're made for someone who's buying their first home and not someone who's more established in their job and may have more income and savings available.

Because I was just graduating from college and I'd only been with the Globetrotters for a few weeks, I was worried that when I went to get my FHA pre-approval, they might deny me right away because I didn't have two years of job history. But the lending standards were relaxed because I had just come out of school and there was really no way for me to have that two years of job history.

So if you have any of those limiting beliefs that are telling you right now that you can't do this, let me help you get past them.

Realize that while conventional loans usually require a credit score of 620, FHA loans require just 580 and if you're willing to put down 10% for your down payment, you can have a credit score as low as 502.

Getting pre-approved for an FHA loan is a very quick and painless process and will tell you exactly what purchase price a bank is willing to let you buy a house for. If you're like I was where you're just coming into the real world and you don't have a ton of job history or income, you can have someone trusted cosign for you on the loan which will help you qualify to buy a house that's worth a little bit more.

In my case, my parents cosigned for me on the loan, so while they don't pay anything towards my monthly expenses, it did help me qualify for enough to buy this duplex. Finally, I know that some people are living in super expensive areas and if you have a million dollar property, 3.5% of a down payment is still a lot and might be out of reach.

What I would say to those people is just consider whether or not you're able to move a little bit further out of the city center or the biggest city in your market, because where the housing prices are super, super high, this will be a little bit more difficult to pull off, but even in those areas.

If you can find a property for the purchase price that you're pre pre-approved for, I'm still going to show you how you can get the entire down payment wiped away for you at closing.

Just hold on.

So let's dive into the next step. This is where the house hacking strategy really shines.

Let's say you get pre approved for a purchase up to $200,000 and you know that your down payment is going to be 3.5% or $7,000.

We're going to come back to how to erase that down payment, but on that loan, your monthly payment would be around $1,100 even when you include the extra cost that comes with using an FHA loan called PMI.

You're also going to want to set aside money each month for repairs and vacancy because you are the owner of this property now, anything that goes wrong is going to be on you. So let's add an extra $100 to that every month that you're going to set aside as just in case money. So at the end of the month, you're going to owe $1,200 towards the expenses and upkeep of the property, not including your utilities just yet.

But while you're living in one side of that duplex or multi-family property, you can rent out the other unit. If it is a single family home, you can still rent out the extra rooms or if there's a basement or a mother-in-law suite in the back, you can rent out whatever extra space you have. Let's say it's a duplex and you rent out the other unit for $1,400 a month.

After paying your monthly fees, you still have $200 a month left over to go towards your utilities, your grocery bill, your Netflix and Hulu and Disney Plus package.

Honestly, you can put it towards whatever you want.

You're literally getting paid to live in a house that you own.

Even if it doesn't turn out to be a perfect house hack like in this example where there's money left over after you take in the rental income, think about the question I asked you at the start of this video: what is your biggest expense?

If it's housing, how impactful would it be to cut that expense in half, to eliminate it completely and break even and live for free? For myself, my house hack didn't work out perfectly, but I pay only about 15% of what I would've paid in rent to someone else to live here. Plus I own the property, plus I didn't have to make a down payment.

And that's what I want to tell you about.

Down Payment Assistance

Next is a special program that I used at closing called Down Payment Assistance.

So I looked it up, and there are down payment assistance programs at the state level in all 50 states. There are federal programs that can be used by anyone purchasing a house in the United States and they are meant for people who are buying their first property, which again, are people that are most likely to be using that FHA loan to house hack.

So here's how my down payment assistance program worked.

I looked online and found a local FHA lender to get pre approved with, and I told them I'd like to use a first time home buyer down payment assistance program for the state of Oklahoma. He had a list of programs that worked well with FHA lenders and the documents that I submitted to him for my pre-approval letter, he submitted to the Down Payment Assistance Program.

So here's how the program works.

They would pay 4% towards my down payment and closing costs with these two stipulations:

  1. it made my interest rate half a percent higher than it would have been if I wasn't using the down payment assistance program.
  2. If I sell the property anytime in the first five years that I own it, then I have to pay the down payment assistance back.

These were two things that were very reasonable for me.

For the half a percentage point higher that increased my monthly payment by a couple of bucks a month, but it wasn't impactful enough that I would have to pay too much out of pocket to live here every month.

Remember, I pay about 15% of what the rent would normally be.

Second, I don't plan on selling this house ever, and so I don't have to worry about paying back the down payment because I'm not going to sell it in the first five years.

For you, if you're thinking, "Well, I may not want to live in the property for five years," the FHA program only requires you to live in the property for one year, and then you can always move out and rent out the space that you were living in and keep it as a rental property and have even more income coming in.

In fact, this is one of the best ways for people to get started being full-time real estate investors and building up a rental portfolio. 

So here's how it all wrapped up and I didn't have to come out of pocket anything at closing:

  • First, my 3.5% down payment was completely covered by the Down Payment Assistance Program.
  • Second, because they were willing to give me 4%, there was also an extra half percentage that went towards my closing cost.
  • Third, in my offer to the seller when I was going to purchase the property, I offered them about $5,000 more if they would pay the closing costs for me, which meant that, yes, I was paying a little bit more and had a little bit higher of a monthly payment, but I was able to purchase this house and move in completely for free.

This process of buying a duplex for free and saving 85% of my housing expense was the first, if not biggest, step on my road to financial freedom from house hacking.

I went on to wholesaling real estate, where I was able to close deals from $8,000 every month for about ten months straight.

I then used that capital to move into BRRRR investing, which is what I do now, buying distressed homes, renovating them, and keeping them as part of my rental portfolio.

With this strategy, I've been able to cash checks in the $70,000 range.



So, now that you've gotten an intro to house hacking, are you ready to start?

If so, you can use my Free Resource Pack to help get your real estate investing journey off the ground. It includes:

  1. My Offer Sheet Template
  2. My Phone Scripts for Calling Real Estate Agents
  3. The Wholesaling Deal Tracker

So what are you waiting for?

Start your real estate investing journey towards financial freedom today!


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