Here's how this millennial became a millionaire — Housing hacking and investing in index funds, strategy explained

United States-based millennial investor Todd Baldwin achieved millionaire status in his 30s by employing an investment strategy that combined earnings from his real estate and equity investments, according to a report by the Business Insider.

According to an article by Zillow, house hacking is the practice of renting a part of your own residence to generate income. Research by the platform showed that over the past five years, interest in the method has increased as a way to supplement the loan repayment or reduce mortgage cost.

Here's a look at how he used housing hacking to earn rental income and then invested that amount into index funds to build wealth.

What did the millennial investor do?

According to the BI report, Baldwin bought his first property, a six-bedroom house near Seattle (Washington, US) at 23 years of age for $5,06,000. He and his wife (then girlfriend) moved into the master bedroom and rented out the rest of the rooms for rent. It was the rental income that covered costs including the loan repayment, utilities. Baldwin told the publication he had monthly additional cash flow of $1,500.

In the next two years (age 25), his net worth crossed the $1 million mark, largely due to rent; and in another three years (age 28) he left his six-figure job to go all-in on real estate.

In 2019, he bought his second property — a single-family duplex for $9,00,000 and sold it in 2026 for $1.5 million, the report added. He rented it as an Airbnb and used this income to maintain the property and invest in low-cost index funds. In 2021, he put over $1 million in VOO, Vanguard's S&P 500 ETF, which till this year has earned him $8,00,000.

What was the strategy used?

The strategy used was to push earnings from a steady investment (real estate rent) to invest in equity (low-cost index funds) and start young (power of compounding), the report noted. The combination of real estate and index funds gave him flexibility to keep growing his investments as rental income grew. “It almost feels like a loophole. I did work hard, and also, we were just sort of right place, right time,” Baldwin told the publication.

Starting young also meant that Baldwin could rent out from the same house he lived in, because there were no children yet and thus no immediate need for the extra bedrooms. “There's no way I'd have roommates around my kids. But if you're young and you're not married and you don't have kids, it can be a phenomenal way to get ahead,” he explained.

There is also the matter of choosing your market. House hacking won't work in disproportionally expensive real estate cost markets or areas with low rental income.

For diversification, Baldwin has invested in riskier assets such as crypto. He explained to BI, “With crypto, if you bet on the right one, you can get rich overnight. With real estate, it might take you 10 years, but you're going to get rich. And with stocks, again, it might take you 10 years, it might take you 20 years, but you will get wealthy. You don't have to become lucky. It will just happen if you're in it long enough.”

Disclaimer: This story is for educational purposes only. The views above are those of individuals and not of Mint. We advise investors to check with certified experts before making any investment decisions.