Navigating the Market::

A Guide to House Hacking

What is House Hacking?

With rising rent and home prices, house hacking has become more and more popular. House hacking refers to renting out a portion of your home to produce additional income. Because of the additional income, your mortgage is more affordable. We cover 4 ways you can do this and what to look for when buying.

Multi-Family House on Home Automation and Security Vector Background. The pattern features royalty free vector buttons on white background. This vector collage features home automation icons including Computer Monitor, Television Set, Air Conditioner, Ceiling Fan, Coffee Maker, Sprinkler, Automatic, Lawn, Technology, Wireless Technology, Computer, Thermostat, Entertainment Center, Security Camera, Speaker, Fire Alarm, Surveillance, Remote Control and Smart Phone.

Buy a multi-family home

Any home with 4 units or below is still considered a single-family residence for lending purposes. This means you can still use a FHA or VA loan to purchase these if you intend to live in one of the units. Lenders also let you put down a smaller down payment because it is not considered an investment property. This will be your primary residence and thus you could also apply for down payment assistance. You live in one unit and rent out the rest. We recommend starting with a du-plex or a tri-plex, because a four-plex might be a bit too much work for the first property you manage.

Add an ADU

This option is the most trending currently. An ADU is an accessory dwelling unit. These are fully permitted extra living spaces, and they could be attached to the home or detached (DADU). If you can buy a property that has or that permits you to construct an ADU you can either live in the ADU and rent out the main residence, or vice versa. Adding a permitted ADU is an excellent way to add real value to the home. This is probably the most convenient form of house hacking because you could buy a home and add an ADU at your convenience. Just make sure when you buy the home, an ADU would be legally permitted.

Buy a split-level home

Look for a home that has stairs as you walk in. If it doesn’t have that, then I recommend finding a home with a sperate entrance to one of the levels. Make sure each level has a living area, at least 1 bath, and at least 1 bedroom. Having a kitchenette on both levels also brings more value to the home. Live on one of the levels and rent out the other.


Finish the basement

Try to find a home with a basement that has a separate entrance. This isn’t necessary, but it makes the rental more attractive. A tenant isn’t going to want to have to walk through the whole house to get to the basement. I recommend you purchase a home near a school, or a public transportation hub, as students will be the ones that are most attracted to this type of arrangement. In the basement you at least want to construct a living area, a bathroom, and a door to the living area for privacy. This makes a nice studio for a student. If you have a large basement, you can turn it into a 1 bedroom or add a kitchenette, but I would recommend adding a kitchenette before a bedroom. Also, many basements contain the washing and drying machines., and you want these separate from the living area as you want your tenant to have maximum privacy


Continue Investing

These house hacking methods establish additional income and can increase your wealth rapidly. Depending on the location of the home, sometimes the rent would cover your entire mortgage payment. Eventually, you will be in a position to rent out the entire home and buy a home all to yourself. Keep your first purchase as a rental property in your real estate investment portfolio. Congratulations, you are a real estate investor now!


If you have any questions or are looking for someone to guide you through the process, feel free to reach out to us.

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