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Turning Your House into an Income Producing Asset

Jeremy:
We want to talk to you a little bit about the topic of house hacking, and we want to give you five ways to think about how to turn your house into an asset. This is really coming out of a conversation that we’re having, we’ve had with dads for years, but it’s actually erupted recently in our Five Minute Fatherhood Facebook group. I encourage you guys to get in there and chat with the dads that are in there. We’re talking a lot about how do we build assets? Because a lot of times we’re talking to you guys about, when you’re building a multi generational family team, it’s really difficult to do that if you’re not building some amount of income streams that are outside of tied to your labor or your hours. And it doesn’t have to be your entire income, but over time, as you get into your thirties, forties, fifties, that should be ramping up.

There’s a lot of reasons we get into about why that is, but a lot of times people get stuck and guys are like, “Ah, I don’t… I’m like, I’m out. I don’t have any more time. There’s no way for me to do this.” And what they don’t oftentimes realize is that basically what I’ve done, what Jeff has done, what a lot of dads that did it. I was actually surprised by how many dads in the Facebook group jumped on this and said, “Oh yeah, we do this too.” Is that you take any asset that you have, anything that you currently own and you figure out a way, how can you make income from it? And obviously for most people, the biggest asset that they’re developing is their own house. It’s a huge liability when they’ve got a big mortgage. They need to turn that into an income producing asset.

Let me give you five things that we have done and that others in the Facebook group have said about how to use their house to produce a second stream of income. One is to buy a duplex. This is very forward-thinking for a lot of people because you can’t… You’re not just thinking about your little starter house, but a lot of my friends and I’ve done this, and some folks in the Facebook group had done this as well. They actually buy a duplex, rent out the other side, or they buy a triplex, a multifamily house, and they try to actually force the entire, as a unit, the house, to produce enough income so that they can live mortgage free. A lot of people have done that in our area. That actually works financially for a lot of people.

That’s something that a lot of guys that I know have done. Turning your house into an Airbnb or a Vrbo where you’re renting out your house to vacationers who are in your area. We’ve done this with multiple houses that we’ve had in the past. We had a house out in the country that we got up to, I think, $700 a night for rental. So we would rent it out sometimes-

Jeff:
That’s awesome.

Jeremy:
… for like two months during the summer. We’d go on an RV trip, come back and our mortgage would be paid for the year. It worked out really well for us. This is something we’ve done a lot experimenting with a lot.

Rent-a-room in your house, we’ve done this a ton as well, that you can find a room, put all your kids into one or two rooms, and if you only got a three-bedroom house, we’ve done this a lot. A lot of people will not do this because they don’t want the privacy concerns, but again, this was a higher value to us, and we really wanted those people in our house for ministry reasons, which is the fourth thing you can do with your house, is that is to turn it into a ministry center, right? You can work on creating a lot of churches or ministries will give you a housing allowance if you turn your house more into a center for ministry. That’s another way to sometimes create an income stream.

The fifth way is care for an elderly member of your family in the house. We had elderly members of our families in different nursing homes and places that were costing two, $3,000 a month. And so, different people in our family have done this, we’ve done this. These are just five ideas that you could use to try to turn your house into something of an asset. A lot of people, they put a box around their house and say, “That’s absolutely off limits.” But again, this has really… It comes down to how important is this value that you create these income streams for your future multi generational family? When some guys really get ahold of this, they actually begin to realize that that starts to flip and the reasons why they’re saying, “Hey, I need my house to be my castle and I can’t let it be used for anything else.” Other values start to trump that, and that’s happened to us and it’s really been a blessing to us. But how have you guys tried to figure this out, Jeff?

Jeff:
Yeah, very similarly. I agree. And we actually have some, like I’ve told you, some plans in the future to do something with Airbnb for that exact same reason. Two, I would say is, yeah, we’ve rented. I would say the most, the biggest one we’ve done here is we’ve had probably four or five or six people live with us over seven years of marriage and a handful of those had them pay rent. One little thing we do, like you said, is we don’t do it purely to make money. We actually did it for ministry purposes or just to have them in the home or just, Alyssa discipling someone or whatever that is, but then just… And so then we would under market the rent, so then it’s a blessing to them and a blessing to us, if that makes sense, where they feel like, “Oh, man, I couldn’t get this elsewhere.” And then we feel like, “Oh, well, this is awesome. It’s just helping us pay the mortgage,” or something like that.

That’s always a fun way that we like to see it as ministry asset-producing incomes. That’s another one. Another one I would say, or two things I’ve heard too, is one, I didn’t hear about this till after we already bought a house, but there’s a real estate guru where he insists on, “Hey, don’t buy your main house. Rent where you and your family live, and then use all your money for income-producing assets on other real estate.” Use all your cash for rental incomes and cashflow properties right around you, but you rent only. Then that just totally lessens your liability. Your home is being rented and won’t be taken from you, but then you can have income producing assets with all the cash and down payment that you use for something else. That was wise.

And another one, too, is a lot of people don’t realize this, but a little addition or a little cottage in the backyard or something like that. You can even take out a home equity loan, a HELOC. You could take out maybe even a cash out refinance, but if you go up to even $100,000 for a little cottage in the backyard, that’s, I think, on average a mortgage will cost you about five, 600 bucks per $100,000. You’re going to be able to rent that thing for way more than that, right? So instantly, even if you don’t even feel like it’s in your home, you can do that. And so that’s another thing we’ve even considered and thought about is just once we get some cash doing that or doing it through a mortgage or refinance or whatever. That there’s ways to actually cashflow parts of your home pretty quickly, even if you don’t think that… Basically that more than exceeds the mortgage and that actually is giving you income and it lessens your own personal mortgage. And so stuff like that.

And I’ve seen friends do that where we call them ohanas here in Maui or mother-in-law studios or cottages, whatever they’re called, but that’s another big one. Those are what I would say is just, yeah. And it’s not even you have to do this, but I think if you have to be thinking through this lens and you have to be thinking through thinking and considering all these different options, because that then is the something that compounds, like you said, in your thirties, forties, and fifties, and really sets up the team well when you get to the finish line. Because it’s not about just doing it right now and striking rich, which I think a lot of people here, it’s more about actually just setting your team up well for compounding the team generationally speaking with assets and real estate and equity and all these different things. That’s what we would want to encourage you to think about today.

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