Looking to Shift from House Poor to House Rich? Look No Further!
What Does "House Rich" Mean?
The term "House Rich" means that your investment in your housing is good. In short, it means that your investment in your housing doesn't take up much of your income. Ideally, you should be spending approximately 30% of your income on your housing. However, in the modern rental and home buying world, this ratio can be quite tricky to maintain.
Due to the COVID-19 pandemic, many people have found themselves either becoming increasingly not "House Rich," and some people have even found themselves homeless. Many states have passed legislation or executive orders to pay off rent and mortgages for citizens who are eligible for the benefit.
What Does "House Poor" Mean?
As the polar opposite to "House Rich," "House Poor" means that your housing expenditures make sense. Ideally, you should have money left over to do stuff and buy things. Many people find themselves to be this status out of pure necessity. In some rental markets, the combination of a lack of affordable housing and skyrocketing crime rates leave citizens with no actual choice in their housing.
Unfortunately, greedy landlords often take advantage of people who can barely afford rent. While wages don't necessarily go up in times of need, rental prices shot up during the COVID-19 pandemic because many people were seeking any housing that would accept them.
Why Is It So Important to Be House Rich?
As you can likely imagine, being house rich is key to unlocking your future. It's a dream many people strive for, but thankfully there are bulletproof measures you can take that we will discuss in the next section to increase your odds of becoming house rich.
Once you're house rich, you can meet your needs and wants. A good exercise to try out now is to make a list of items you'll do once you are house rich. This means calculating income and subtracting roughly one third of it. This is the amount that ideally would be going towards your rent or mortgage.
Below are four tips on your quest to become house rich.
1. Look Into Family Alternatives
One option that has become increasingly popular with Gen Z members in particular is to move back into their parents' homes. Other family options may be on the table. If your extended family has properties, for example, they would likely be willing to extend a discount.
2. Become a Part Time Landlord
Becoming a part time landlord is an option for people struggling to pay the bills. You can use popular home sharing services to rent out your house to pre-vetted people. This isn't a source of guaranteed income; however, it can net a surprising amount of money for you. Given that these services provide easy to use apps for their customers, much of the work of being a landlord gets cut out.
3. Look Into Low Tax States
Tennessee became the eighth state to not levy income taxes when they repealed their "Hall Tax," a tax on wealthy investors in effect. Seven more states do not tax income. You should do your fair share of research, though, to ensure that you don't get scammed by a low tax state. Sticker shock in these states is more common because people who can afford to move will move to them and increase prices of just about everything. Additionally, some of these states have a huge amount of sales tax and may or may not attach more taxes to the real estate you'd be assuming in them.
4. Consider Downsizing
If you're noticing that you have extra house space and don't wish to rent it out to strangers, downsizing may be an option. You might be surprised at the value of your home. Selling your home either to a company or to an investor and buying a smaller one can be a huge infusion of cash.
A Final Reflection
Some of these tips may seem impossible, especially if you're a renter. Keep in mind that many people lack the connections and fiscal means to utilize these tips. However, you can always use these to plan your future regardless. Many of these tips can also be translated for renters; a common example is that renters can sublet their apartments and make money. You should take these with a grain of salt.