What is House Hacking?
House hacking is when you purchase a residential property with four units or less, live in a portion of it, and rent out the area you’re not using, with the goal of reducing your personal living expenses, or potentially even profiting. There are quite a few house hacking strategies, including single-family homes, duplexes, triplexes, fourplexes, live-in-flips, basement additions, ADUs, and more.
Frequently Asked Questions about House Hacking
The house hacking method is when you purchase a residential property with four units or less, live in a portion of it, and rent out the area you’re not using, with the goal of reducing your personal living expenses, or potentially even profiting.
House hacking can be a good idea for the right person.
No, house hacking is not exploitative, as long as you run it professionally and respectfully, including providing a safe and clean place to live for your tenants.
How much money you need for house hacking entirely depends on where you live and what type of house hack you’re going to do. If you’re purchasing a $100,000 single family home to house hack, that is going to be different than a $750,000 fourplex. That said, a $250,000 property with 5% down would require $12,500 as a down payment, plus closing costs (which you could try to negotiate with a seller credit).
Generally, an FHA loan is the best loan for house hacking, especially if you’re looking to purchase a multifamily property.
The benefit of house hacking is that it can reduce your personal living expenses, provide you tax benefits, and help you learn how to invest in real estate.
The 1% rule generally isn’t used for house hacking, but if a house hack deal meets the 1% rule, it is likely going to be a good deal for this strategy, too.
Yes, you can house hack a single family home by renting out the extra bedrooms you’re not using. It can be more difficult to get approved for this mortgage since the bank won’t include the rental income from the bedroom tenants like they would from multifamily units for a house hack.
Yes, you can house hack with an FHA loan. In fact, an FHA loan is often the best loan to house hack with.
Yes, you can house hack in 2023. The higher interest rates we’re seeing in 2023 certainly makes it more difficult for the numbers to work, but it is still possible.
Yes, house hacking is real.
It is definitely harder, but it is possible to house hack in NYC.
Yes, you can BRRRR a house hack. You can do this by renovating the units in your house hack, then refinancing. You can also do it by using the house hacking strategy of a live-in-flip.
Generally, you have to live in a house hack for one year (12 months). There are exceptions to this, but generally speaking, it’s 12 months.
Yes, you can house hack in Canada. We’re mainly focused on the US here at Money Office Hours, but we do know it’s certainly possible in Canada, as well as other parts of the world.
A house hack is when you rent out additional space in your home that you’re not using with the goal of reducing your living expenses.
There is no limit on the number of times you can house hack, but you generally have to plan which types of mortgages you’re going to use and when, as you can only have one FHA at a time. You may also run into a limitation of how many personal mortgages you can have in your personal name (roughly 10-12) and/or how much your income can support.
Some people believe house hacking is risky, others don’t think it is. It really depends on your risk tolerance. That said, often times a house hacker has a larger mortgage when house hacking than they otherwise would. If the tenant doesn’t pay, this could leave them in a tough situation financially. This is the reality for nearly any real estate investment, though, not just house hacking.
Yes, house hacking is absolutely realistic. There are thousands and thousands of people across the world who are house hacking right now. In fact, I am one of them. I am house hacking a duplex.
House hacking can be smart if it fits your goals and your financial situation. It’s not right for everyone or in every situation, there are reasons why you shouldn’t house hack, but for many, it is a smart decision.