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Look, I'm gonna be straight with you. When I first heard about "house hacking" about eight years ago, I thought it sounded like some weird internet scam. But after watching dozens of my clients use this strategy to break into homeownership and start building serious wealth, I'm a believer.
House hacking is pretty simple at its core. You buy a property, live in part of it, and rent out the rest to cover your housing expenses. The rental income from your tenants pays your mortgage, hopefully with some left over, while you're building equity in a property you actually own. With median American home prices at $416,900 and median household income at $83,150, this strategy has never made more financial sense for folks trying to get ahead.
The brilliance is that it solves two problems at once. First, Americans with mortgages now spend a median 21.4% of their income on housing costs according to the U.S. Census Bureau, which is a substantial chunk of anyone's budget. Second, most people struggle to save enough for investment properties while also paying rent or their own mortgage. House hacking lets you tackle both issues with a single property purchase.
I've seen this work particularly well for folks in their mid-twenties to early thirties who are comfortable with roommate situations or don't mind having tenants nearby. But honestly? I've also helped empty nesters convert unused space into income, and families who built ADUs for aging parents that later became rental units.
Before we dive into specific strategies, let's talk real numbers for today's market. If you're buying a property right now, you need to understand the actual costs your facing. The median monthly owner cost jumped to $2,035 in 2024, up from $1,960 the previous year. That's a 3.8% increase in just one year, folks.
Say you're buying a duplex in a mid-sized market for $425,000. With an FHA loan at 3.5% down, you're putting $14,875 down. Your monthly mortgage payment at current rates around 6.8% would be roughly $2,650 for principal and interest alone. Add in property taxes, insurance and potential HOA fees, and you're realistically looking at $3,200 to $3,500 per month in total housing costs.
Now, if you can rent out the other unit for $1,800 per month, you're cutting your personal housing expense to $1,400 or $1,700 monthly. That's probably 40% to 50% less than what you'd pay renting a similar space on your own. Not bad for a first-time investor, right?
Here's a real analysis I did for a client last month that shows exactly how the numbers work.
Compare that to the market rate for a similar apartment in that area at $1,650 monthly, and the owner is saving $643 monthly while building equity. Over a year, that's $7,716 in reduced housing costs.
After five years of payments, the owner will have paid down the principal to approximately $369,000. That's $26,650 in principal reduction. Assuming a conservative 3% annual appreciation, the property value has grown to about $475,300. The owner's equity position is now $106,300.
All while living in one of the units and collecting rent from the other two.
This is the OG house hacking move, and it's still one of the most effective. You purchase a small multifamily property with two to four units, live in one unit, and rent out the others. The beauty here is you can finance up to a fourplex with owner-occupied financing like FHA, VA, or conventional loans, which means better rates and lower down payments than investment property loans.
Here's what makes this work particularly well. You maintain complete separation from your tenants. You've got your own entrance, your own utilities, your own space. When I worked with a couple in their late twenties last year who bought a triplex in Oklahoma City, they told me the psychological separation was everything. They could be landlords without feeling like they were living in their rental property.
The numbers on multifamily properties tend to work better too. When you've got two or three income streams from different units, you've got built-in protection against vacancy. One unit empty? The others are still covering most of your mortgage.
I helped a client purchase a fourplex for $480,000 using an FHA loan. She lives in one unit that would rent for $1,400 monthly. The other three units generate $1,350, $1,400, and $1,425 respectively. That's $4,175 in total monthly rental income. Her PITI payment is $3,100 monthly.
After setting aside reserves for maintenance and vacancy, roughly 15% of rent, she's living essentially for free while building equity.
If you can't find or afford a multifamily property in your area, renting rooms in a single-family house is your next best bet. This is particularly common in expensive coastal markets where duplexes are scarce or prohibitively expensive.
The dynamics here are different. You're sharing common spaces like the kitchen and living room, which means you need compatible personalities. But the financial impact can be just as powerful. In markets like Denver or Phoenix, renting out two bedrooms at $800 to $900 each while you occupy the master can easily cover half or more of your mortgage.
One thing nobody talks about enough is this strategy works really well if you're strategic about who you rent to. I've seen house hackers specifically target travel nurses, graduate students, or young professionals who are gone frequently or keep weird hours. Less overlap in the common spaces means less friction.
When you're renting rooms in your primary residence, the tax situation gets a bit more complex. You'll report the rental income on Schedule E, but you can only deduct expenses proportional to the rented space. If you're renting 40% of your home's square footage, you can deduct 40% of your mortgage interest, property taxes, insurance, and maintenance costs as rental expenses.
Now we're getting creative. ADUs, also called granny flats, in-law suites, or backyard cottages, have exploded in popularity and for good reason. Many cities have relaxed zoning restrictions to encourage more housing density, making ADU construction more feasible than ever.
The upfront investment is real. You're typically looking at $100,000 to $250,000 to build a quality ADU, depending on your market and the unit's size. But the payoff can be substantial. Because the ADU is a completely separate living space, you can often charge rental rates similar to a small apartment in your area.
I worked with a family in suburban Austin who built an 800 square foot ADU in their backyard for about $180,000. They rent it out for $1,650 per month. Even after factoring in the construction loan payment, they're coming out ahead, and in five years when that construction loan is paid off, they'll have pure rental income.
Many lenders offer specific construction-to-permanent loans or home equity products for ADU development. AmeriSave's renovation loan programs can wrap both the primary mortgage and construction costs into a single payment, which simplifies the process considerably if you're buying a property specifically to add an ADU.
The Airbnb approach to house hacking can generate significantly more income than traditional long-term rentals, but it comes with more work and more variables. Your essentially running a small hospitality business out of your home.
The income potential is real though. In tourist-heavy markets or cities with lots of business travel, renting out a furnished basement suite or separate bedroom on Airbnb can generate 150% to 200% of what a long-term tenant would pay. I've seen house hackers in San Diego pull in $3,000 to $4,000 monthly from a single Airbnb suite that would rent long-term for maybe $1,800.
The catch? You're dealing with constant turnover, cleaning between guests, restocking supplies, and managing bookings. Plus, many HOAs and some municipalities have cracked down on short-term rentals. Before you commit to this strategy, verify that it's legal in your area and allowed by your HOA if you have one.
Your standard homeowner's insurance doesn't cover short-term rental activity. You'll need additional coverage, which typically runs $500 to $1,500 annually depending on your coverage limits and location.
This one's for the handy folks who don't mind living in a construction zone. You buy a fixer-upper at a discount, live in it while you renovate, then either keep it as a rental or sell it for profit and repeat the process.
The tax advantages here are particularly sweet. When you live in a property for two out of five years, you can exclude up to $250,000 in capital gains if you're single or $500,000 if married when you sell. That's completely tax-free profit if you play it right.
I know a guy who's been doing this for six years now. He's on his third house. Each time, he buys a property 20% to 30% below market value because it needs work, spends 18 to 24 months renovating while living there, sells it, and rolls the profit into the next house. He started with a $180,000 purchase and is now working on a $450,000 property. The equity growth has been exponential.
The reality though? You're living without a functional kitchen for weeks, dealing with sawdust everywhere, and your social life suffers when you can't have people over. It's not for everyone, but if you're willing to embrace the chaos temporarily, the financial upside is massive.
Similar to the single-family roommate strategy, but more aggressive. You're buying a four- or five-bedroom house specifically to maximize the number of paying roommates. But the goal is to rent out three to four bedrooms while you occupy one, essentially living for free or even generating positive cash flow while sharing the property.
This works particularly well near colleges or in tech hubs where young professionals are comfortable with shared housing situations. In markets like Seattle, Portland, or Raleigh, you can often find four-bedroom houses where renting three rooms at $700 to $900 each generates $2,100 to $2,700 monthly, which might cover 80% to 100% of your mortgage on a $350,000 to $400,000 purchase.
The management is more intensive since you're coordinating multiple tenants, handling turnover, and maintaining shared spaces. But I've seen people treat this like a business, using property management software to track payments and maintenance requests, even though they're living on-site.
Got a finished basement with a separate entrance? An oversized garage you don't actually need for cars? These spaces can become income-generators with relatively modest investment.
Basement conversions typically run $30,000 to $75,000 depending on whether you need to add a bathroom, improve egress windows, or address moisture issues. Garage conversions are similar, though you'll definitely need to add insulation, HVAC, and probably a bathroom.
The permitting process varies wildly by location. Some municipalities make it relatively easy, others require extensive inspections and upgrades that make the economics questionable. Do your homework before committing to this strategy.
But when it works? You're adding a rental unit to a property you already own, which means the return on investment can be spectacular. I worked with a homeowner who spent $45,000 converting his basement into a one-bedroom apartment that rents for $1,100 monthly. That's a 29% annual return on his investment, plus he still has all the equity in the main house.
Here's one that flies under the radar. If you've got extra land, a large garage, or barn space, you can rent storage to neighbors or allow someone to park their RV, boat, or classic car collection.
The income isn't huge compared to renting living space, typically $100 to $400 monthly depending on what you're offering and your location, but it's incredibly passive. Once someone parks their camper in your side yard, you basically don't hear from them until they need to access it a few times per year.
Rural or suburban properties with acreage can sometimes rent land for tiny homes or manufactured housing placement as well, though you'll want to verify local zoning carefully. I've seen properties in exurban areas generating $600 to $800 monthly from a single mobile home placement on their back acre.
This deserves its own category because it's such a powerful financing tool. The FHA 203(k) loan lets you borrow both the purchase price and renovation costs in a single loan with only 3.5% down on the total amount.
Here's how it works in practice. You find a duplex listed at $320,000 that needs $60,000 in renovations. Instead of needing to come up with $60,000 cash for repairs after closing, you get an FHA 203(k) loan for $380,000 total. Your down payment is 3.5% of $380,000, about $13,300, and the renovation funds are held in escrow and released as work is completed.
The catch is you need to work with approved contractors, meet specific timelines for completion, usually six months, and the renovation work must be substantial enough to warrant the program. Cosmetic updates don't typically qualify.
For veterans, the VA offers a similar renovation loan program with 0% down. I've seen service members use this to buy duplexes in rough shape, renovate them into beautiful properties, and live in one side while renting the other.
If you've got more capital to work with and value your privacy, this strategy might fit better. You buy a property with an existing guest house, casita, or pool house, or you build one, and rent that out while living in the main house.
The separation here is complete, which means less interaction with tenants and more privacy for everyone. The rental rates can be strong too, since you're offering a standalone living space rather than shared accommodations.
Properties like this are more expensive upfront. You're typically looking at $600,000 or more in most markets, but they're also easier to qualify for if you've got the income. Lenders look at the rental income potential when qualifying you, which can help you qualify for a larger loan than your personal income alone would support.
One consideration is properties with existing guest houses often appraise higher and sell faster when you eventually decide to move on, so you've got built-in value appreciation potential beyond just the equity you're building.
Getting approved for a house hacking property is different from buying a regular home because you want the lender to count rental income that you haven't even collected yet as part of your qualifying income. Knowing how underwriters look at these deals can mean the difference between getting approved and being turned down.
You must plan to live in the property as your main home for at least 12 months. This cannot be changed. Lenders check this with your loan application, and committing occupancy fraud is against the law in the United States. Don't be smart and try to get around this rule.
FHA loans are very popular for house hacking because they let you put down 3.5% on properties with up to four units. The problem? You'll have to pay mortgage insurance premiums, which are 1.75% of the loan amount up front and 0.55% to 0.85% of the loan balance each year, which you can pay in monthly installments.
FHA lets you use 75% of the fair market rent for units you won't live in to get rental income. So, if Unit 2 rents for $1,500, they will count $1,125 toward your qualifying income. You will need to show a rent schedule from an appraiser or show rentals that are similar in the area.
If you qualify for VA benefits, this is the best way to finance house hacking. There is no down payment, no mortgage insurance, and you can buy up to four units as long as you live in one of them.
The VA's rules about rental income are like the FHA's. For units that aren't occupied, they usually count 75% of the fair market rent. I've helped veterans who have used VA loans several times to buy and rent out different properties, which has helped them build up large real estate portfolios.
If you have good credit (680 or higher) and can make a larger down payment (usually 15% to 20% for a two- to four-unit property), conventional financing can work well. Some programs even let you put down as little as 5% for a duplex.
Several of AmeriSave's standard programs are great for house hacking. The good thing about conventional loans is that you can get rid of the mortgage insurance completely once you have 20% equity. FHA loans, on the other hand, have mortgage insurance that lasts for the life of the loan.
Most lenders want to see a debt-to-income ratio of less than 43%, but some programs let it go up to 50% if there are other factors that make up for it. When they figure out your DTI for a house hack, they'll take 75% of the expected rental income and subtract it from your housing payment. This can make a big difference in what you can afford.
Your gross monthly income is $7,000, for example. The PITI for the duplex you want to buy is $2,800. Your housing ratio is 40% without rental income, which is close to the line. The lender will count $1,050 toward your income if the other unit rents for $1,400. This lowers your effective housing payment to $1,750. Your housing ratio is now 25%, which is great.
I wish I could say that buying a house and renting part of it out was as easy as putting a tenant in place and getting checks. But you have to follow a lot of rules, and not knowing them isn't a good excuse if you break them.
This is the first place you should go before you even make an offer on a house. But a lot of single-family zones don't allow rentals at all or only let a certain number of unrelated adults live together. Accessory dwelling units are allowed in some areas, but they have to meet certain size, parking, and utility requirements.
Call your local zoning office and ask them directly about how you plan to use the property. Just because you see other rental properties in the area doesn't mean you can use yours. But enforcement isn't always consistent, and you don't want to be the one they pick to set an example.
Homeowners associations can and often do stop people from renting out their homes. People have bought townhomes thinking they could rent them out, only to find out after closing that the HOA rules don't allow any kind of rental, short-term or long-term.
During your due diligence period, ask for a copy of the HOA documents and read them carefully. Check for rules about short-term rentals, rental restrictions, and any requirements for tenants to pass background checks or get approval. Some HOAs need the board to approve all tenants, which can put your plans on hold for a long time.
Where you live makes a big difference in what you have to do as a landlord and what your tenants can do. California has some of the best laws for renters in the country. For example, it has strict rules about rent control and protections against eviction. Texas is more friendly to landlords.
You need to know at least the following: what you have to tell people about lead paint, mold, and past flooding; the limits and requirements for security deposits; the rules for giving notice before entering the property; the rules and timelines for eviction; and the standards for habitability and what you're responsible for.
You need to have formal written leases with your tenants, even if you live on the property. You have to do this. The lease protects both sides and makes it easy to prove the agreement in case of a disagreement.
Don't ever shake hands or make a verbal agreement that lasts for a month, even with friends or family. But I've seen too many house hacking deals go wrong when people don't follow through on their verbal agreements, and there isn't any written proof of what everyone agreed to.
What they don't tell you in the books about house hacking is this. The quality of your tenants will have a direct effect on your quality of life. Even if the numbers work out on paper, a bad tenant can make house hacking miserable.
Take tenant screening as seriously as any landlord would, and maybe even more so since you'll be living close by. You should at least check their credit to make sure they are financially responsible, check their employment and income (usually looking for rent to be no more than 30% of gross income), check their rental history with previous landlords, check their criminal history, and check their identity to stop fraud.
For $30 to $50 per applicant, you can use services like Zillow, Apartments.com, or Cozy to screen tenants. Don't skip this step just to save money. You could lose thousands of dollars in rent, damage, and legal fees if you have one bad tenant.
You can't treat people differently because of their race, color, religion, national origin, sex, family status, or disability. That's it. Federal law protects these groups, and many states add more protected groups.
When you rent rooms in your main home and share common areas, things get complicated. You might have real concerns about how well you get along. You're a woman who would feel safer with female roommates, or you're an older person who would like a quiet roommate. Be careful how you say what you want, because even choices that are meant to be good can break fair housing laws.
One of the hardest parts of house hacking is keeping the right distance between your job as a landlord and your relationship with your tenants, who are basically your neighbors.
Set up clear ways to talk to each other from the start. A lot of house hackers set up a simple system where maintenance requests are sent by email or text instead of by talking in the hallway. You don't have to pay rent in cash; you can do it online. Professional systems keep things from getting mixed up, which can cause problems.
Obviously, tax implications can be confusing and complex, so you should always seek advice from a tax professional. It can be hard to figure out how to tax house hacking because you're turning one property into both a home and a rental property.
You must report all rental income to the IRS on Schedule E. This includes rent from roommates, separate units, ADUs, and so on. If someone is renting your extra bedroom for $500 a month, that's taxable income.
The good news? You can deduct costs that are in line with how much you rent the property. You can deduct 30% of your mortgage interest, property taxes, insurance, utilities, repairs and maintenance, and depreciation if you rent out 30% of your home's square footage.
This is one of the best tax breaks for real estate. You can write off the value of a rental home over 27.5 years with the IRS. If you own a $400,000 property with 40% rental space and 60% your own home, you could deduct about $5,818 a year for depreciation.
The problem? When you finally sell the property, you have to pay taxes on any depreciation you claimed at a rate of up to 25%. But the benefits of not paying taxes on the property for years usually outweigh the costs of having to pay them back later.
You might have to pay self-employment tax on your rental income if you do more than just basic property maintenance for your tenants, like providing meals, cleaning every day, or concierge services for short-term rentals. This is especially important for house hackers who use Airbnb.
If you're just providing housing for typical house hacking, rental income is usually passive income and not subject to self-employment tax. But if you're doing more, you should talk to a CPA because the way taxes are handled changes.
If you house hack for two years and then decide to move out and rent the place you were living in, The tax effects change a lot. You can deduct all of the eligible expenses once the property is 100% rental. You'll also need to change how you calculate depreciation.
You also can't use the property for personal use without breaking more tax rules. If you use the property for personal reasons for more than 14 days a year or 10% of the days it's rented, whichever is greater, it becomes a mixed-use property and the tax rules get more complicated.
I've worked with a lot of house hackers over the years, and I've seen the same mistakes happen over and over again.
New house hackers often think, "I'm handy, I can take care of maintenance myself," but they don't realize that tenants don't care if it's 11 PM on a Saturday when the toilet starts overflowing. When you're the landlord on the property, emergencies are your first concern.
Even if you're on-site, plan your time or think about hiring property management to do certain tasks. If you're not very good at plumbing, it's better to pay a plumber $50 to come fix something than to spend three hours trying to do it yourself.
What makes a great neighborhood for you to live in isn't always the same as what makes a great place to rent. Some house hackers buy homes in quiet suburbs with good schools, but then have trouble finding tenants because people who rent in that area want to be close to universities or have easy access to the city.
Before you buy, look into the rental market. Who are the people who are most likely to rent in this area? What do they want? What do similar rentals cost? If you can't find other properties that are renting well, that's a sign that something is wrong.
The 3.5% down FHA loan is a great tool, but it also means you have very little equity and a lot of debt. If you use all of your savings to pay for the down payment and closing costs, you'll have nothing left when the HVAC breaks or you have to pay for a month of vacancy.
Before you buy, make sure you have at least $5,000 to $10,000 in savings on top of your down payment and closing costs. More is better. Real estate is not easy to sell. Without a HELOC or cash-out refinance, it's hard to get to your equity in an emergency.
I've seen house hackers take rent checks, put them in their own checking account, and then pay the mortgage from that same account. They then wonder why their books are a mess when tax time rolls around.
From the start, set up a separate checking account for your rental income and costs. The separation makes accounting so much easier, even if you're only renting out one room. You can keep track of everything in a spreadsheet or use landlord software like Avail or TenantCloud.
What do you do if house hacking isn't working? What if you get a job offer in a different city? What if you meet someone and want to live together? Sometimes, new house hackers lock themselves into homes without thinking about these situations.
Before you buy, think about what you can do. If you have to move, can you rent out the whole property and still make money? Would the property sell quickly in your area? If your plan has some flexibility, it will be less stressful when things change.
You've been house hacking for a few years, built up some equity, and now you're wondering what to do next. This is where the strategy can really help you build your wealth faster.
This is the traditional way. You live in a house hack for 12 to 24 months, then move out and rent it out completely while you buy your next house hack. Rinse and repeat.
The good thing is that you can always get owner-occupied financing, which has better rates and lower down payments. You could own three to four properties after going through this cycle five to seven times, and the tenants would pay the mortgages on all of them.
Once you've built up a lot of equity in your house hack, which is usually at least 25% to 30%, you can do a cash-out refinance to get money for a down payment on a new property. This means you can buy more rental properties without having to save for years.
But be careful. Taking cash out makes your monthly payment on the original property higher, so make sure the rental income still covers your costs. I usually suggest that you keep at least 20% equity in the property even after a cash-out refi.
A lot of people who hack houses end up moving to a home that is only their own and turning their house hack into a regular rental. This works best when the property can make money even if you don't live there.
But be sure to do the math right. If you were renting out a duplex and making $1,400 from one unit, you'll need to rent out that unit for at least $1,400 when you move out to keep making the same amount of money. But you'll also have more risk of vacancies and higher maintenance costs, and you won't be able to be on-site.
I won't lie and say that house hacking is easy or that it's the right thing for everyone to do. You are both a landlord and a homeowner at the same time. You're giving up some privacy and dealing with the difficulty of combining your own home with a rental property.
But what about people who are willing to make those sacrifices? House hacking is one of the best ways for regular people to build wealth. You are using the mortgage as leverage to buy an asset that will grow in value over time, and your tenants will pay off the mortgage for you. You're building equity, getting experience as a landlord, and maybe even living rent-free or close to it.
Because housing costs are taking up more of Americans' incomes than ever before—21.4% for homeowners with mortgages—the math works best in 2025. Anything you can do to lighten that load will give you more money to save, invest, or just live better.
If you're thinking about house hacking, start by looking at the rental market and property prices in your area. Then, get pre-approved for a loan so you know how much money you can spend.
Next, run the numbers on specific properties to make sure they'll work financially. Finally, make sure you know the legal requirements in your area, have extra money on hand beyond your down payment, and find your first property and take action.
The worst thing you can do is wait for the right property or the right time. When it comes to house hacking, good enough is better than perfect because you learn a lot by doing it.
Are you ready to look into ways to pay for your house hacking plan? Get a mortgage today and start building equity while lowering your housing costs.
House hacking with bad credit is definitely harder, but it's not impossible. A 580 credit score is the lowest you can have to get an FHA loan with a 3.5% down payment. If you put 10% down, though, you can still get one with a score as low as 500. The savings requirement is often the hardest part. You need enough money for the down payment, the closing costs, and the reserves. Some ways to make it work are to get gift money from family members for the down payment, negotiate seller credits toward closing costs into your purchase agreement, or look into down payment assistance programs that are available in many states. I've helped first-time buyers get their first house hack by getting money from a lot of different places. The most important thing is to get started, even if it's not perfect. You'll learn so much from your first property that will help you succeed in the future.
Honestly, this is one of the hardest things about house hacking. You can't just ignore a bad tenant when you live next to them or share a space with them. The best way to protect yourself is to do a lot of screening up front, but problems can still happen even if you do everything right. Write down everything from the start, keep professional boundaries even though you're neighbors, and don't let problems get worse while you wait for them to fix themselves. If a tenant breaks the lease, don't try to get them to leave on their own; instead, follow your state's official eviction process. It may feel strange to give someone you see every day an eviction notice, but it's better to follow the law than to let things get worse. You might want to hire a property management lawyer to give you advice. It usually costs only a few hundred dollars and can help you avoid making costly mistakes. And don't forget, this is why you carefully screened people and asked for good references up front.
This is a real worry, especially for people whose jobs require them to move suddenly. The owner-occupancy requirement is there to stop mortgage fraud. At the closing, you signed a document saying that you planned to live in the property as your main home. Most lenders will work with you if you need to move for a good reason, like a job transfer, military deployment, or family emergency. Call your lender right away to explain what's going on and get help. They will usually want proof of why you are moving. Some lenders may let you rent out your unit while you're gone if it's only for a short time. Others may make you refinance into an investment property loan, but that's not likely to happen if you're really having a hard time. You can't just move out and rent the place as if nothing happened without telling your lender. That is fraud in the form of occupancy, and it could cause the loan to be due right away. In these situations, it's very important to talk to your lender.
You need to take care of this before your first tenant moves in because standard homeowner's insurance doesn't cover rental activity completely. If you want to rent out a unit in a multifamily property for a long time, you'll need a landlord policy or dwelling policy that covers rental units. Usually, these cost 15% to 25% more than regular homeowner's insurance. You'll keep your regular homeowner's insurance for the unit you live in. It gets more complicated if you rent out rooms in a house with only one family. Some insurance companies will add coverage for rental activity to your homeowner's policy, while others will only cover you if you have a separate landlord policy. You need special coverage for short-term rentals like Airbnb because standard policies don't cover short-term rental activity. Companies like Proper Insurance and Steadily are experts in landlord insurance and can give you quotes. You should also make sure that your tenants have renter's insurance that covers liability. If someone gets hurt in their unit, this protects both of you. Talk to your agent about insurance. A claim that isn't covered could cost you years of rental income in one incident.
Setting the price for rental space in your house hack is both an art and a science. Start by looking up similar rentals in your area on Zillow, Apartments.com, or Craigslist. Look at homes that are about the same size, age, and condition as yours and are within half a mile of where you live. When you hack a multifamily house, you're directly competing with other apartment rentals, so set your prices accordingly. If you want to do roommate-style house hacking, check out how much other rooms in shared houses cost to rent. Because tenants share common areas, these are usually 20% to 30% cheaper than a full apartment. One strategy that has worked well for me is to set the price a little lower than the market rate for your first tenant. This will help you get good applicants quickly. When that lease ends, you can raise the price to the full market rate. Keep in mind that your goal isn't to get the most money from renting at the cost of everything else. It's better to have a good tenant who pays on time and takes care of the property than to get an extra $50 a month from someone who is a problem. When you set the rent, don't forget to include utilities. You can charge more if you pay for all the utilities than if the tenants do. I usually suggest that you price your goods competitively in your market instead of being the cheapest or most expensive option. You want good tenants who choose your property because it offers good value, not people who can't afford anything else.
Depending on the type of property you have, you will need to use more than one method to find tenants for your house hack. If you have a multifamily property with separate units, list it on big sites like Zillow, Apartments.com, Facebook Marketplace, and Craigslist. These reach the most people and are where most renters look. Include a lot of pictures, an honest description of the unit, clear rental terms, and your screening requirements right away in your listing. If you're renting out rooms in your shared home, the platforms are similar, but you'll want to be more careful with the words you use. Talk about parts of your life that are important for being compatible. Say that you work from home and are a quiet professional. Say if you have pets. Some people who hack houses have had success with SpareRoom or Roomi, which are websites that help people rent out rooms. Also, don't forget about word of mouth. Let your friends, coworkers, and neighbors know that you're looking for a tenant. These referrals usually lead to better tenants because they know they have to be responsible to their friends. When you start getting interest, respond quickly, set up showings quickly, and be ready to screen people. In most markets, good tenants are taken quickly, so being organized and professional can help you compete.
The VA loan benefit can be used more than once, which is very helpful for house hacking strategies. Buying a house doesn't mean you lose your VA loan entitlement forever. Until you sell the property or pay off the loan, it's just stuck there. After you sell the first house and pay off the VA loan, you can use your full entitlement again to buy another house hack. But there is an even better plan that a lot of veterans don't know about. If you have enough entitlement, you can actually use your VA loan more than once at the same time. The basic VA entitlement is $36,000, which means you can get loans of up to $144,000. Without a down payment, lenders will lend you up to four times your entitlement. In counties with high costs, there is a bonus entitlement that can be worth more than $100,000. You can still use your entitlement on a second property without selling the first if you use $50,000 of it on your first house hack. I've helped veterans who owned three or four VA-financed homes at the same time. They would house hack one before moving on to the next. This is one of the best ways for military members and veterans to build wealth. When you buy a property, keep in mind that it must meet the owner-occupancy requirement. You can't use VA loans to buy properties that are only for investment.
This is a more complicated question than it seems, and the answer depends on your situation and when you ask it. When you're house hacking and applying for a new mortgage, lenders will only consider your rental income as part of your qualifying income if you can show them proof of it. Most of the time, lenders won't fully count your rental income until you have two years' worth of it reported on your tax returns. They might count 75% of the documented rent for your first year of rental income, but a lot of lenders won't count it at all until you file your taxes. The debt side is easier. Your mortgage payment on the house hack property is a full debt obligation. So, if you can't count the rental income yet but you're still paying the mortgage, house hacking can actually hurt your debt-to-income ratio in the short term. That being said, once you have rental income on your tax returns, many house hackers can get bigger mortgages than they could otherwise because the rental income raises their qualifying income. Talk to a mortgage expert about when you want to buy another property after your first house hack. If you have rental income, sometimes it makes a difference in whether you can buy your next home if you wait a few extra months to file your tax return.
Short-term house hacking isn't as good as long-term house hacking, but it can still make sense depending on your situation. It costs a lot to buy and sell real estate. When you buy a house, you usually have to pay 2% to 3% in closing costs and 6% to 8% in selling costs, which include agent commissions. You need to spread those costs out over the time you own the property. You might not be able to get back those transaction costs if you only house hack for a year, even though your housing costs will be lower. But if the market is rising quickly or you're sure you can keep the property as a rental when you move out, the short time frame becomes more realistic. Most of the time, I tell people to plan on owning the property for at least three years to make the costs of the transaction worth it. But every situation is different. Think about the state of your market, how prices are changing, and whether you're okay with being a landlord from a distance if you move. The real value of a short-term house hack isn't always money. It's the knowledge and skills you gain about managing property and investing in real estate. If the lessons help you invest better in the future, the transaction costs may be worth it.
This is probably the thing that people don't think about enough when they hack a house. Living with or near tenants changes your life in ways that a simple financial analysis doesn't show. If you're dating or in a relationship, house hacking makes things more complicated. Some people don't want to bring dates back to a house where their roommates or tenants might be watching TV in the living room. If you have kids, you should think about whether you're okay with having tenants around your family. Privacy becomes a valuable thing. You might not be able to wear pajamas or play loud music on Sunday morning. When you can't have friends over whenever you want without worrying about your tenants' space and quiet enjoyment, your social life changes. That being said, a lot of house hackers say that the financial freedom and wealth-building make these trade-offs worth it. You're basically agreeing to give up some of your freedom in order to build equity and lower your housing costs. The most important thing is to go into it with your eyes wide open. If you really care about your privacy and freedom, a duplex or ADU with its own entrance might be better than living with a roommate. If you like being around people and don't mind sharing space, having a roommate can feel like having friends over all the time. Before you agree to a house hacking deal that won't work with your lifestyle, be honest with yourself about who you are and what you want.
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