House Hacking
Ever heard of it? What does it mean - to “house hack”?
House hacking is simply: how financially savvy people live in an “expensive” real estate market while saving money.
If you have been searching for homes in this current real estate market, you may have noticed that the price increases are indicating a seller’s market is here. Inventory is low, and bidding wars are becoming the norm. Some markets are simply out of reach for buyers.
Hence, “house hacking”! If you wish to become a homeowner but aren’t sure how to make that work, there are options.
Perhaps investing in a multi family property will get you there. You can live in one of the units, while the other(s) pay the mortgage. This creates your ability to save money while being a homeowner. Sure there are pros and cons, and maybe this won’t work for everyone, but it’s an option.
The biggest opportunity, and one that is catching on, is purchasing a single family home that allows someone (friend, relative, co-worker) to “rent” space from you. Think: 4 bed house - you live in one bed while friend and co-worker live in the others. You share the expenses, utilize the shared spaces and save in the long run.
House Hacking can save you money in the following ways:
Lowering your monthly housing allowance through generating revenue renting out portions of your property.
Lowering your taxable income base by acquiring extra tax write offs (mortgage interest deduction).
Decreasing transportation costs like gas.
Decreasing unproductive time spent sitting in traffic.
Having the possibility of removing your car payment, insurance, and maintenance expenses completely.
Learning how to be a landlord and transitioning into the world of real estate investing.
And more!
Another huge benefit to House Hacking is the fact you don’t have to put down 20-25% of the properties value when you purchase. House Hacking strategies we use allow buyers to purchase a home with very low or no money down because they are buying a home to be used as their primary residence. This allows investors to save their capital for better purposes, and allows those who are not in a position with large amounts of expendable capital to still make their way into the housing market.
The entire idea of a successful House Hack is to find properties with as many spaces as possible that can be used to generate revenue. These can be additional units in a multi-family property, extra bedrooms in a single family house, additional spaces that can be converted into bedrooms, or additional units that can be converted into livable space. The very best deals involve a hybrid of all these strategies combined to create massive value for the homeowner.
When analyzing a property as a potential House Hack opportunity, look for the following features:
Multi-Family properties
Multi-family properties were literally designed to House Hack, so we always start there. When it comes to analyzing them, there are a few things to keep in mind. First, the neighborhood where they are located is important. Not every multi-family property is created equal. In some areas, multi family properties are only located in specific neighborhoods that are “zoned” for multi-family housing. This means there is likely to be a higher concentration of tenants living in the space which is usually considered less desirable for those looking to invest there.
You’re better off buying multi-family properties in neighborhoods where the multi’s are mixed in with the single family properties. This diversity of style encourages less investors to flood the area with tenants and usually improves pride of ownership, and with it, rising home values. Speak to me, your local real estate professional, to learn more about zoning laws in the areas you’re interested in.
2. Finished basements
Often times, homes with finished basements can be used as sleeping areas. Always check with me, your professional real estate agent regarding legal requirements. Safety is top priority!
3. Additional Dwelling Units (ADU’s)
ADU’s are permitted structures added to a property, usually in the backyard, where plumbing, electrical, and other necessities required for habitation are available. These are also referred to as “in-law units’ or “guest houses”.The ADU is a space that can be lived in, or rented to create additional revenue. ADU’s are a great asset to look for in a House Hack property.
Whenever analyzing a property, keep in mind not all ADU’s are permitted. You can check with the local city department to see if permits were ever pulled and if city ordinances allow for the space to be legally rented out. If they are, this is a great property to look deeper into!
So if you think house hacking is something that may appeal to you, don’t hesitate to contact me at (401) 378-3000.
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