Whether you’re a first-time homebuyer or a seasoned investor, house hacking is a great way to get into the real estate market. And with the abundance of large single family homes in the US, there are plenty of opportunities to rent out extra bedrooms to earn some extra income.
Here’s a quick guide on house hacking a single family home.
Why House Hack a Single Family Home?
Many markets do not have access to small multi-family properties that house hackers often love. And even if they do have small multi-family properties, they’ve often prohibitively expensive.
But pretty much every market has an abundance of single family homes (at least in the US). And many of those single family homes have extra bedrooms that you can rent out.
This abundance can make it easier to find a deal that would work well as a house hack.
And, in some cases, you can convert a large single family home into a multi-unit, assuming you can get approved for any required zoning changes.
How to Find a Single Family Home to House Hack
If you’re interested in finding a single family home to hack, there are a few things you can do.
First, try to find a neighborhood that you’re interested in. Once you’ve found a neighborhood, drive around and get a feel for the area. Make note of any potentially neglected houses while you’re at it.
Simply put, you want to become an expert on that particular area so you can quickly identify a good deal.
A real estate agent can help you with this. A good agent will be able to filter deals based on your specific criteria, and may be able to connect you to an off market deal every now and then.
When you analyze a deal, run the numbers as though you were renting out all of the extra bedrooms. Then run the numbers as though you were renting out the entire unit to one person. You want to know what kind of options you’d have if you ended up moving out of the house yourself.
With a little effort, you should be able to find a single family home to hack that meets your criteria. Just remember to research the property and its neighborhood thoroughly before making any decisions.
Tips for House Hacking a Single Family Home
When it comes to house hacking, single family homes offer a number of advantages.
For one, they tend to be more affordable than multi-unit properties. Additionally, single family homes offer more privacy and space than an apartment or condo. Not to mention, they tend to have less regulatory burdens from something like a home owners association.
Here are a few tips for house hacking a single family home:
- Consider a fixer-upper. A fixer-upper will be significantly cheaper than a move-in ready home. At least a portion of the money you put into fixing it up can often be used as a deduction on your taxes. For a more detailed article on house hacking taxes, click here.
- Get creative with your floor plan. If you’re open to living in a less traditional layout, you can save money by utilizing space in clever ways. For example, you could wall off a section of a large living space to create an additional bedroom. Just make sure you follow local laws before starting your project.
- Screen roommates. Having roommates is a great way to split the cost of living and reduce your overall expenses. Make sure to screen them carefully, using something like TransUnion SmartMove, and put everything in writing to protect yourself in a potential conflict down the road.
- Offer furnished options. If you’re renting out individual bedrooms, you’ll likely want to offer a fully furnished room. Chances are someone looking for a small rental unit is budget conscious and would prefer to have an option where he or she wouldn’t need to buy furniture. This will likely increase your overall tenant pool, though it does depend on your particular market.
By following these tips, you can get started towards successfully house hacking a single family home!
The Benefits of House Hacking a Single Family Home
There are many benefits to house hacking a single family home.
One of the biggest benefits is that you can live for free or close to free. House hacking a single family home also allows you to build equity and wealth in real estate.
Another great benefit of house hacking a single family home is that you can have rental income to help offset your mortgage payments. This can allow you to live in a nicer home than you could otherwise afford.
But house hacking a single family home is not without its drawbacks.
The Drawbacks of House Hacking a Single Family Home
There are a few potential drawbacks to house hacking a single family home.
First, it can be more difficult to find tenants for a single family home than for a multi-family unit. This is because many people are looking for apartments or condos, not individual rooms.
Second, if you have any problems with your tenants (noisy, messy, etc.), it can be harder to deal with them when they share the same commons areas as you. You have to establish clear ground rules from the start and enforce them.
Finally, if you have a mortgage on the property, your monthly payments will likely be higher than if you were just renting an apartment. Thankfully, your rental income should largely offset that payment, so your net housing costs should still be much lower.
Be sure to keep adequate reserves to cover any unforeseen repairs or maintenance on the property, as well as any potential vacancy.
Unforeseen situations will come up. So have cash reserves ready to go.
Is House Hacking Right For You?
If you’re thinking of house hacking, first ask yourself if you’re prepared to live in close quarters with other people.
Are you comfortable with the idea of sharing common areas like the kitchen and bathroom?
Are you OK with having less privacy overall compared to a standalone unit?
If you’re someone who likes their privacy and quiet time, living in a house with several other people may not be ideal.
On the other hand, if you’re outgoing and enjoy socializing, house hacking could be a great way to meet new people and make some great memories. Though, remember, it is a business first.
Another important consideration is your financial situation. Can you afford to take on a mortgage or rent payments, plus the added costs of utilities and maintenance if you didn’t have rental income for some time? This is where reserves shine.
Only you can decide if house hacking is right for you, but it’s definitely something to consider if you’re looking for a significantly more affordable way to live that also allows you to build wealth in real estate.
Conclusion – House Hacking a Single Family Home
House hacking a single family home can be a great way to live for free or close to free, build equity and wealth in real estate, and learn the real estate investing game.
There are a few potential drawbacks to house hacking a single family home, but if you’re prepared for them, it can be a great option for you.
One thing is clear: in many cases, house hacking can turn a bad deal into a great one. You just need to be ready to think creatively.
What is house hacking?
House hacking is the process of living in a property that you also rent out to tenants. This can be done with any type of property, but it is most commonly done with single family homes.
What are the benefits of house hacking a single family home?
Some of the benefits of house hacking a single family home include being able to live for free or close to free, building equity in the property, and having rental income to help offset your mortgage payments.
Are there any drawbacks to house hacking a single family home?
There are a few potential drawbacks to house hacking a single-family home, such as it being more difficult to find tenants for a single-family home than for a standalone multi-family unit. Additionally, if you have any problems with your tenants, it can be harder to deal with them when they live in the same house as you do.
Is house hacking right for me?
Only you can decide if house hacking is right for you, but it’s definitely something to consider if you’re looking for a unique and affordable way to live.
I’m interested in house hacking a single family home. Where do I start?
If you’re interested in house hacking a single family home, the first step is to research properties in your area that would be suitable for your goals. Once you’ve learned more about your target area, reach out to a real estate agent and lender to help you move forward in your search.
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