House Hacking Strategies

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Building a strong house hacking portfolio takes time and there are different ways to jump into the hacking game. Different strategies a new house hacker can use are; buying a condo, townhouse, or single-family home and renting out the rooms via Airbnb or yearly tenant, buying a multi-family home like a duplex, triplex, or quadplex and living in one unit and renting out the other units, buying a home with an additional dwelling unit like a mother-in-law suite and renting out the additional space, or buying a single-family home with enough space to park a trailer home on the property and renting out the home. These are common house hacking strategies, and I know there are more creative ways to house hack out there. Once you own a property or piece of land, you can be creative as long as there are no laws that prevent you from being creative. There is no limit on creativity to build wealth through real estate, just look at the doors Airbnb has opened for homeowners (Airbnb is big business – check out @theyoungretireeby33 on IG for ideas). If you are going to use Airbnb as part of your strategy, make sure you check with your municipalities to understand the short-term rental laws BEFORE purchasing a property. If you are purchasing a townhouse or condo that has an HOA (Homeowner Association), check the rules around short- and long-term renting as rules may prevent you from maximizing your returns. 

Picking the right strategy for your current goals and aspirations is important and I will talk about three strategies that I have personally experienced. 

  1. Renting by Room to a Yearly Tenant 

Have you ever lived with a group of friends where one of the friends owns the house? If so, you have participated in a house hack. This is one of the easiest ways to get into house hacking as you can put as low as 3.5% down using an FHA loan and rent out the rooms in the house. For example, one of my clients is purchasing a townhome and plans to rent out one of the rooms and turn the attic office into an additional room for rent. If my client rents the larger bedroom for $800 a month and the attic for $600 a month, the mortgage and expenses will be paid for and the property will cash flow (generating income after expenses). 

  1. Multi-Family House Hack

This is currently the strategy that Dana and I are using to build our house hacking portfolio. We do own a condo so we missed out on first-time home buyer perks, but we were able to use an FHA Loan, which can be used to purchase a two-to-four-unit property with a low down payment since it is our primary residence. From my research, an FHA loan is one of the most popular loans to use because it allows you to purchase an asset-generating property with the lowest amount of money down. If you are a first-time homebuyer, there may be additional grants you can use with an FHA loan, but ask your lender if it is possible, as lenders know what can and cannot be done. After running over 30 deals before purchasing our triplex, we realized our goal was to have the property and expenses completely covered from the rental income. This changed the type of property we were looking for and we expanded our search radius, resulting in us finding the perfect house hack. Set your strategy and be willing to make adjustments if the numbers do not work for what you’re trying to do. You do not need to cover all expenses and offsetting your mortgage by a certain amount still allows you to generate wealth and save more for your next deal. 

  1. Single Family with Accessory Dwelling Unit (ADU)

Recently, I have seen more homes down by the Jersey Shore that converted garages into studio/one-bedroom apartments. These mini dwellings have kitchenettes, a living area, a bathroom, and a main entrance (one of the homes turned the garage door into a framed entrance) to allow for renters or guests to easily live in the property. Another home I saw, turned the porch into an accessory dwelling unit and converted their detached garage into a unit as well. Doing some simple research, you will learn what the municipality will allow you to build and/or convert on your property but I thought it was interesting how owners turned their single-family home into a multiple dwelling, income generator. If your strategy was to reduce the cost of your mortgage, your municipality allowed it, and you didn’t have to make any foundational or external structural changes, it seems like a great way to bring in additional income to offset your mortgage/living expenses. I have never seen this before moving down the shore but it is a house hacking vehicle I will be looking into a lot more. 

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