Should you consider house hacking?
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Have you heard of the term “house hacking”? Over the past few years it has been floating around the real estate world, and has recently really taken off. And, for good reason. House hacking can be an amazing opportunity to leverage your primary residence to generate rental income, making homeownership more affordable – all while building long-term wealth!
What is House Hacking?
House hacking in its most basic form means buying a property and then renting out some portion of it, and using that new income to cover mortgage payments, property taxes, and other costs associated with homeownership. For some, house hacking is a great entry point into real estate investing and provides an affordable way to own a property without having to bear the entire financial burden alone.
Why House Hack?
House hacking offers a wide variety of benefits for homeowners, some of which include:
Added income: Mortgage payments and property expenses are offset by the added rental income. Depending on the situation, some house hackers even end up with little to no housing costs.
Real estate appreciation: House hacking makes it possible to build equity in a property and increase your net worth, especially when compared to renting.
Potentially afford more: When you know you are going to rent out a portion of a property and get a return, you can usually afford more. One of our clients is working with one of our favorite lenders (hi, Chad Lubben!), and was originally targeting condos/townhomes for $650K. Now that she is house hacking though, she’s looking at a $1.2M 2-flat with a bigger backyard and 2-car garage! Plus, she’s building her real estate portfolio for better returns down the road. Please reach out if you would like an intro to Chad!
Tax benefits: Owning property often comes with tax advantages such as deducting property-related expenses, such as mortgage interest, repairs, and property taxes.
How to Get Started with House Hacking
Pumped and ready to go? Here are a few things things to consider first:
Analyze your finances: Take a deep dive into your finances and figure out everything from what you can afford for a down payment, full monthly costs, and projected (realistic!) rental income – we can help here!!
Choose the right property: This part is crucial. Our favorite property for house hacking setups is a 2-flat, where the owner lives in one unit and the renter lives in the other. This way, you can keep a good eye on your property. We have a listing right now that would be the perfect house hacking opportunity. 877 Mozart is a 2-flat custom built by an architect, set on an oversized lot, and filled with upgrades and design features. Both units feature private outdoor spaces, high-end kitchens, private laundry rooms, large storage areas, central air, soundproofing and a 2-car garage. All there is left to do with this property is to move in, unpack and find a tenant! More information available here!
Get a feel for financing options: As a house hacker, you may be eligible for some really great loan programs and products. Right now, Chad Lubben with Cross Country Mortgage is working with one of our clients on a loan program where she can finance any improvements she makes to the property.
Understand landlord responsibilities: As a house hacker, you also become a landlord! Make sure you’re familiar with local regulations regarding renting out part of your property.
House hacking is a powerful tool that we love to discuss with clients. If you are considering real estate investing of any kind, please reach out! We love creative brainstorms, and sharing our expertise to help expand opportunities and open doors for our clients!
