We love helping Gen Z and millennials navigate the exciting world of homeownership. Let’s face it, between inflation, student loans, monthly bills and trying to go on vacation someday, saving for a down payment can feel like climbing Mount Everest in flip-flops. But what if there was a way to hack the system, own a piece of real estate and potentially live for free (or close to it)? Buckle up, because we’re diving into the world of house hacking strategies.

What is House Hacking?

Imagine this: you buy a nice duplex in a good area with two separate units. You live on one side, rent out the other, and – plot twist – that rent covers most, if not all, of your mortgage payment. That’s the magic of house hacking! It’s all about buying a multi-unit property (think duplexes, triplexes, or fourplexes) or a single-family home with a rentable space (like a finished basement or in-law suite). You live in one unit and rent out the others, turning your home into an income stream.

Benefits of House Hacking:

With so many young adults hoping to buy homes, and rent prices are brutal these days and house hacking offers a way to save money on your living expenses. Ideally, your rental income covers most of your mortgage payment, property taxes, and insurance (PITI). That translates to living for free (or very cheap) while building equity in your property – a major win-win! 

But house hacking goes beyond just saving money. It’s a springboard for ambitious young adults or anyone interested in financial independence. Here’s how:

• • Jumpstart Your Investment Journey: House hacking gives you valuable real estate experience. You learn the ropes of being a landlord, from screening tenants to managing minor repairs. This knowledge becomes a steppingstone for future real estate investments, allowing you to build wealth and diversify your income streams. It’s often said that the average millionaire has around 7 income streams. So, add rental income to your other income stream(s) and you’re one step closer to retirement!

• • Build Equity While You Live: Remember that house you’re living in? As you make mortgage payments and property values hopefully increase, you’re building equity – essentially ownership – in your property. This equity can be tapped into down the line for various purposes, like a bigger investment property, upgrading with renovations to your current property/properties, or even paying down consumer or student debts.

• • Become a Mini-Landlord Boss: House hacking equips you with valuable life skills. You’ll learn business budgeting basics to manage your property’s finances, hone your people skills when screening tenants, and even develop some DIY prowess for minor maintenance tasks.

House Hacking Strategies:

House hacking isn’t a one-size-fits-all strategy. The beauty lies in its flexibility. Here are some popular house hacking approaches to consider:

House Hacking with Roommates

Maybe you’re not quite ready to jump into managing a separate unit. House hacking with roommates is a fantastic way to test the waters. Here’s the idea: you find a single-family home with extra bedrooms and share it with responsible roommates. Their rent contribution significantly reduces your monthly housing costs, freeing up cash for other goals.

Pro Tip: When screening roommates, prioritize responsible individuals who align with your lifestyle. Open communication and clear house rules are key to a harmonious co-living experience.

Hacking a Multi-Unit Property

Ready to dive deeper? Look into multi-unit properties like duplexes, triplexes, or even fourplexes. These properties offer dedicated rental units that provide a more consistent and potentially higher rental income compared to roommates.  Live in one unit, rent out the others, and watch your rental income potentially cover a significant chunk of your mortgage payment.

Things to Consider: Multi-unit properties come with additional responsibilities like managing separate entrances and potentially maintaining shared yards. Make sure you’re comfortable with the extra workload before taking the plunge.

House Hacking with an ADU

Does your dream home have a finished basement or a separate in-law suite? An Accessory Dwelling Unit (ADU) could be your perfect house hacking setup. You could rent out the additional space for a steady income stream while still enjoying the privacy of your main living area.

Keep in Mind:  Pay attention to local zoning and permit regulations for specific requirements for renting out any type of ADU. Do your research and ensure your property complies with all the rules before advertising the space. Your friendly real estate agent should be able to help you understand your local limitations (let us know if you’d like us to connect you with someone we trust!)

Getting Started with House Hacking:

House hacking might sound complex, but with the right guidance, it can be a smooth and rewarding experience. Here’s how we can help you navigate the house hacking journey:

The Financials:

• • Loan Options: The absolute best part (in our opinion) of house hacking is that these homes can be purchased with a traditional mortgage (think FHA, VA, USDA and Conventional loans) with more competitive interest rates, depending on your credit score and financial situation than if you were to purchase an investment property separate from your primary residence.

• • Down Payment Assistance: There are fantastic programs available to help first-time homebuyers with their down payment. We’ll explore these options and see if you qualify for any additional down payment assistance programs.

• • Affordability Calculations: House hacking isn’t just about finding a cool property. We’ll do a deep dive into your finances to ensure you’re comfortable with the ongoing costs of ownership, including property taxes, insurance, and potential maintenance needs. We’ll also factor in projected rental income to create a realistic picture of your monthly expenses.

Building Your Dream Team:

House hacking doesn’t have to be a solo act. Here’s how I can help you assemble your dream team:

• • Realtor: A good realtor is your partner in crime when it comes to finding the perfect house hack property. If you aren’t already working with someone, we have trusted, experienced partners we can connect you with who understand the house hacking market and can guide you through the buying process.

• • Property Management (Optional): If managing tenants seems daunting, consider partnering with a reputable property management company. They can handle everything from tenant screening and rent collection to maintenance requests and repairs, freeing up your time and minimizing stress.

• • Lawyer: When contracts are involved, it’s always a wise decision to lawyer up and make sure your lease or rental agreement is rock solid. You don’t want to take on the financial burden of someone else’s mistakes if it can be helped.

Finding the Right Property:

• • Location, Location, Location: Just like any real estate investment, location is key. Discuss with your real estate agent neighborhoods that have a high rental demand and good potential for stable tenant occupancy.

• • Rental Potential: Not all properties are created equal for house hacking; analyze factors like the number of bedrooms and bathrooms in the rentable units, overall square footage, and amenities that might attract tenants and command higher rent.

• • Property Types: It’s obvious to say that different house hacking strategies require different property types. Whether it’s a multi-unit property with separate entrances or a single-family home with a rentable basement, all of that will be covered while you work with your homebuying team.

Conclusion:

House hacking isn’t for everyone. It requires some upfront effort, financial responsibility, and a willingness to learn. But for ambitious go-getters, who are ready to take control of their financial future, house hacking can be a game-changer. It allows you to live for free (or close to it), build equity, gain valuable real estate experience, and potentially set yourself on a path to financial freedom.

Ready to chat? Let’s schedule a consultation to discuss your financial goals and see if house hacking aligns with your vision.