If you're looking for a way to make your personal homeownership more affordable and potentially even profitable, house hacking is something you may want to consider. Whether you're a first-time homebuyer or a seasoned investor, house hacking can be a game-changer for your financial future.

“House hacking” is a term coined for the practice of generating income from your primary residence while living there. This can mean purchasing a home and having tenants live in other rooms, or more commonly, it is accomplished by purchasing a multi-family home, living in one unit and renting out the others so that your tenants are paying all or most of your mortgage.

Our team has successfully helped many clients house hack and build their wealth and I have personally lived in multi-family properties that I have owned. If this sounds like something that would work for you, check out the full post on tips, tricks and what to look for in a property to help you start building wealth.

Here are a key things to consider when it comes to house hacking:

1. Choosing the Right Property:

This sounds a bit obvious, but it's essential to choose a property with multiple units or extra space that can be rented out. Keep in mind that you will be living there, so try to envision yourself with tenants surrounding you and figure out what space or boundaries you would put in place to make you feel most comfortable. 

2. Cost Benefit Analysis:

House hacking can significantly reduce your housing expenses or even eliminate them completely. By renting out a portion of your property, you can use the rental income to cover your mortgage, property taxes, and other expenses. If you are purchasing a multi-family home you can use projected rental income to qualify for a higher loan amount. Work with your agent to determine what your projected rents would be and run the numbers to see what would make the most financial sense for you. 

3. Long-Term Wealth Building:

House hacking is not just a short-term cost-saving strategy; it's also a powerful wealth-building tool. By living in a property that generates rental income, you can use this property as a stepping stone towards future investments. The rental income can be used to pay down your mortgage faster, save for future investments, or reinvest in additional real estate properties. We often encourage first time home buyers that are interested in real estate investing to start by living in a multi-family home and move out after they have saved enough money to purchase their “dream home”.

4. Considerations for Becoming a Landlord:

We will be the first to admit, being a landlord isn’t always easy or fun but it’s not rocket science. We can help you find and thoroughly screen potential tenants, but you’ll have to deal with them after. It is helpful to familiarize yourself with landlord-tenant obligations and laws to ensure compliance with regulations. Setting clear guidelines for shared spaces and responsibilities ahead of time is also helpful. 

5. Exit Strategy:

While house hacking can be a fantastic way to jumpstart your real estate investment portfolio, it's important to have an exit strategy in mind. Whether you eventually move out and rent the entire property or sell it for a profit, understanding your long-term goals is crucial for maximizing the benefits of house hacking. We encourage you to retain the property and use as a long term investment strategy (retirement, college funds, etc.) but we also are realistic with our clients and will discuss their goals and set a strategy that will help achieve their goals. 

House hacking offers a unique opportunity to turn your primary residence into an income-generating asset. By strategically leveraging rental income, you can reduce your housing expenses, build wealth and pave a solid path to financial freedom.

If you're considering house hacking, we can help! Our team works with investors quite frequently and we understand the numbers, know what to look for in a property and can even help you with rentals.