In this video i'm going to teach you how to Live for FREE by House Hacking, its effectively where you buy a house and rent out a room. This can also work by renting a house and renting out a room.
What is house hacking? - 00:00 - 03:14
If this is done right you can live for free or get paid to live wherever you want and you don't even have to live with mum or dad or live out in the wilderness somewhere.
If you buy a house using a residential mortgage and live in it, you can rent out the rooms without needing a buy to let mortgage. This comes with many advantages such as using a smaller deposit (10% vs 25%) and the method for qualifying for the mortgage is also different, instead of using a rental stress test it uses a salary based stress test of 4.5x annual salary (not always guaranteed). It also comes with a lower interest rate and you can even use the rental income to help qualify for the mortgage in the first place.
Alternatively you could use a lodger mortgage to draw down additional cash on your existing mortgage which could be used for property investment or stock market investing.
Actual example - 03:14 - 05:45
Say you purchase a 3 bed house for £300,000 using a 10% deposit or £30,000. You could rent the additional 2 bedrooms for £600 a month each bills included. Therefore, your monthly income would be £1,200. The mortgage payment on a £270,000 loan would be around £900 a month. Bills and council tax would be around £300 a month and therefore total expenditure would also be £1,200 a month. Therefore, the total property expenditure would be £0 and you would be living for FREE.
You will also benefit from capital paydown of around £600 per month and capital appreciation of around £250 per month. Therefore, you'd be getting paid over £800 a month to live in and own a £300,000 house.
Benefits of house hacking - 05:45 - 08:08
Renting out rooms in your house actually has a whole bunch of taxable benefits. There is a 'rent a room allowance' for the first £9,000 rent received. As such, on £1,200 a month income, only around £5,400 would be taxable which is about £90 per month.
Capital appreciation is also a huge benefit, because you own the house you also benefit from capital appreciation which you don't get if you're renting a property.
This can also be compared with the Buying the Gap strategy where you buy a house in need of renovation for considerably less than a modernised comparative (much less than the renovation costs).
There is also PPR (principle private residence) relief where you pay £0 tax on any profits generated between sale and purchase price if you live in the property.
Drawbacks and downsides - 08:08 - 10:11
The main downside is that you have to manage tenants and live with other people that you don't really know too well. However, if you focus on running credit records, getting references from other landlords, checking their employment history and even social media pages you can reduce the risk of getting a bad tenant. However, no matter how much referencing you do, you might not find out about their bad or messy habits. Unfortunately it might also limit your privacy. But, it could be a great way to make a new friend and have some additional security/help to look after pets.
Social media
Instagram - ThomasJamesYT - https://instagram.com/thomasjamesyt
TikTok - ThomasJamesYT - https://tiktok.com/ @thomasjamesyt
Subscribe for more property related content - https://youtube.com/channel/UCRTndpz_fpcVcoVe0QF1IgA
The information in these videos shall not be construed as tax, legal, insurance, construction, engineering, health and safety, electrical or financial advice. IF stocks or companies are mentioned, Thomas MAY have an ownership interest in them -- DO NOT make buying or selling decisions based on Thomas' videos. If you need such advice, please contact a qualified accountant, solicitor, insurance agent, contractor/electrician/engineer/etc. or financial advisor.
This is not an advertisement of property for sale and shall not be construed as anything other than an opinion for entertainment purposes only.
#LiveForFree #PropertyInvesting #RentARoom
What is house hacking? - 00:00 - 03:14
If this is done right you can live for free or get paid to live wherever you want and you don't even have to live with mum or dad or live out in the wilderness somewhere.
If you buy a house using a residential mortgage and live in it, you can rent out the rooms without needing a buy to let mortgage. This comes with many advantages such as using a smaller deposit (10% vs 25%) and the method for qualifying for the mortgage is also different, instead of using a rental stress test it uses a salary based stress test of 4.5x annual salary (not always guaranteed). It also comes with a lower interest rate and you can even use the rental income to help qualify for the mortgage in the first place.
Alternatively you could use a lodger mortgage to draw down additional cash on your existing mortgage which could be used for property investment or stock market investing.
Actual example - 03:14 - 05:45
Say you purchase a 3 bed house for £300,000 using a 10% deposit or £30,000. You could rent the additional 2 bedrooms for £600 a month each bills included. Therefore, your monthly income would be £1,200. The mortgage payment on a £270,000 loan would be around £900 a month. Bills and council tax would be around £300 a month and therefore total expenditure would also be £1,200 a month. Therefore, the total property expenditure would be £0 and you would be living for FREE.
You will also benefit from capital paydown of around £600 per month and capital appreciation of around £250 per month. Therefore, you'd be getting paid over £800 a month to live in and own a £300,000 house.
Benefits of house hacking - 05:45 - 08:08
Renting out rooms in your house actually has a whole bunch of taxable benefits. There is a 'rent a room allowance' for the first £9,000 rent received. As such, on £1,200 a month income, only around £5,400 would be taxable which is about £90 per month.
Capital appreciation is also a huge benefit, because you own the house you also benefit from capital appreciation which you don't get if you're renting a property.
This can also be compared with the Buying the Gap strategy where you buy a house in need of renovation for considerably less than a modernised comparative (much less than the renovation costs).
There is also PPR (principle private residence) relief where you pay £0 tax on any profits generated between sale and purchase price if you live in the property.
Drawbacks and downsides - 08:08 - 10:11
The main downside is that you have to manage tenants and live with other people that you don't really know too well. However, if you focus on running credit records, getting references from other landlords, checking their employment history and even social media pages you can reduce the risk of getting a bad tenant. However, no matter how much referencing you do, you might not find out about their bad or messy habits. Unfortunately it might also limit your privacy. But, it could be a great way to make a new friend and have some additional security/help to look after pets.
Social media
Instagram - ThomasJamesYT - https://instagram.com/thomasjamesyt
TikTok - ThomasJamesYT - https://tiktok.com/ @thomasjamesyt
Subscribe for more property related content - https://youtube.com/channel/UCRTndpz_fpcVcoVe0QF1IgA
The information in these videos shall not be construed as tax, legal, insurance, construction, engineering, health and safety, electrical or financial advice. IF stocks or companies are mentioned, Thomas MAY have an ownership interest in them -- DO NOT make buying or selling decisions based on Thomas' videos. If you need such advice, please contact a qualified accountant, solicitor, insurance agent, contractor/electrician/engineer/etc. or financial advisor.
This is not an advertisement of property for sale and shall not be construed as anything other than an opinion for entertainment purposes only.
#LiveForFree #PropertyInvesting #RentARoom
Hello Thomas great video. Can you discus multiple family house to house hack. For example buying a town house and converting into flats. One to live in and one to rent
Recently been watching “Meet Kevin” on YouTube. He recommends pll to buy real estate with 5% down house hack for a year then rent out the full property after, is this possible in the uk. If so how would u go about doing this?
Top video fella. Been searching to find a UK based House Hacking video for weeks & this explains everything so well! Thanks again.
-My Husband was so speechless after he found out i have been monitoring his secret relationship with my best friend all these while. a massive thank you to @benjayhack on Instagram for this great opportunity.
Thought my laptop monitor was cracked glad it was just the wall
Where is the news here ???!!!!!!!!👎
Nice video, but please put up more figures on the screen for those of us who are not audio processors! Very hard to keep track of all the (wonderful) numbers flying around. Thank you!
When looking for your tenants would you look for them before purchasing or after purchasing your property also does anyone help you find tenants that would live in your property
Could you do a video on what you need to do to a house when you buy it to make it HMO compliant, thanks!
please more life hack videos like to become rich……
The reason property value increases by around 3% a year is because that’s the rate of inflation…
Do you work for Goldman Sachs?
Another positive is that lodgers have fewer legal rights than tenants. So even if you do pick a bad lodger, it will be easier to evict them from your primary residence than it would be from a buy to let, this helps mitigate tentant risk quite substantially.
Another great vid!
Top video
Hi thanks for video I have one question What is best strategy to buy firts House?
You have abstract thinking 📍 Profit about $700 on my Channel 💰
Would you not have to have a hmo licence to do this?
Another really good video, explaining the ups and downsides to this, thanks for sharing!
Brilliant information that is shared really clearly and accurately. The videos have been improving massively! Keep going with it. Thank you for sharing your knowledge
Great video Thomas!
One thing I want to point out is that the rent-a-room allowance is £7,500 per year.
Correct me if I'm wrong, but that's what it says even on the Government's website.
I've actually done a video on that subject a couple of months ago 😁
I love the idea. I Didn’t think this was possible tho. I mean my first house was a 5 bed student house. I bought it as a residential knowing I would want to rent after a few years. The mortgage company was concerned that I would be renting it to students. I remember I had to assure them that it was not the case and made up some bull why I wanted a house with so many rooms. Just said my son visits me often etc. This was back In 2004 so maybe it’s all changed. If this works that’s great
Keep in mind not all lenders would allow for this. In addition, your insurance needs to cater for this.
Let me know what you think of this technique to live for free, could you live with lodgers?