House Hacking 101

Let’s cut to the chase—house hacking is the great life hack to make housing work for you. With the rising cost of living and an unpredictable rental market, it’s no wonder more people are exploring creative ways to reduce expenses while maintaining a comfortable lifestyle.

So, what’s the deal with house hacking, and why should you care? Let’s break it down.

What Is House Hacking, Anyway?

House hacking is essentially buying a property, living in part of it, and renting out the rest. It’s not just about making housing affordable—it’s about creating flexibility and security in your life. Here are some common ways people house hack:

• Renting extra bedrooms in their house.
• Living in one unit of a multi-family property while renting the others.
• Turning garages, basements, or guest houses into living spaces for others.

Basically, it’s a way to rethink your home as a shared resource.

Why Should You Hack Your House?

Let’s face it: housing is one of the biggest expenses in modern life. House hacking offers a chance to reduce costs while creating stability and opportunities for the future.

1. Lower Housing Costs: By sharing your space, you’re effectively cutting down your monthly expenses. It’s a way to make living in your dream neighborhood or owning a home more accessible.

2. Build Stability: Owning a property gives you more control over your living situation compared to renting. House hacking allows you to get a foothold in real estate while keeping costs manageable.

3. Create Affordable Housing: By becoming a landlord you can control the amount of $ you charge per room. This can help your tenants control their costs and save for their future.

4. Learn Practical Skills: House hacking is an excellent introduction to managing a property, from basic maintenance to navigating leases. It’s a hands-on learning experience that can benefit you long-term.

5. Social Companionship - Living with roommates can provide companionship and a sense of community. Having someone to talk to, share meals with, and explore new activities together can be enjoyable–especially in an era where technology is making it much easier to stay home.

How Do You Start?

It’s not as complicated as it sounds. Follow these steps to get started:

1. Pick Your Property Wisely

• Location Matters: Choose a property in a desirable area—near public transit, entertainment, and/or job hubs.
• Consider the Layout: Multi-family homes are great, but even single-family homes with an extra room or separate entrance can work. Remember each of your roommates will want to have adequate space.
• Factor in the Condition: Be realistic about any repairs or upgrades the property might need to accommodate renters.

2. Understand Financing Options

Many house hackers opt for lower down payments. Some common financing options to look into

• FHA Loans: These require as little as 3.5% down and allow for multi-family purchases.
• VA Loans: If you’re eligible, these offer zero down payment options.
• Save for the Down Payment: Even with low-down-payment options, having a cushion helps.

Pro Tip: A home is one of the single most expensive investments a person will make in their lifetime. Spent plenty of time understanding how mortgages work, options for down payment assistance grants, and other creative ways to save money.

3. Plan for Shared Spaces

If you’re sharing parts of your home, set clear boundaries and rules from the start. Think about privacy, cleaning, and shared expenses to make co-living comfortable for everyone.

Let’s Do the Math: A Real-Life Example

You buy a 4 bedroom single family home for $300K with a 3.5% down FHA loan (about $10,500 upfront). The monthly mortgage, including taxes and insurance, are approximately $2,700 per month. Renting out 3 bedrooms at $700 means your portion is just $700. That’s a significant reduction in housing costs compared to renting a similar place solo.

Take in mind. There are many hidden expenses in homeownership. We’ll take a deep dive on house hack budgeting in a future blog.

But, Wait—Are There Risks?

Of course, no strategy is perfect. Here’s what to watch out for:

• Tenant Relationships: Sharing space can lead to conflicts if expectations aren’t clear.
• Vacancies: You’ll need to plan for periods where a unit might not be rented.
• Zoning and Legal Restrictions: Ensure your property complies with local rental laws before getting started.
• Maintenance Responsibilities: Be prepared to manage upkeep for both your space and any rented areas.

House Hacking for a Balanced Life

House hacking isn’t just a financial move—it’s a lifestyle choice. It’s about living more intentionally, sharing resources, and creating opportunities for yourself and others. Whether you want to reduce your living expenses, gain stability, or just try something new, house hacking can be an accessible and rewarding option.

So, are you ready to take control of your living situation? House hacking might just be the key to making it happen—your way.