Can You House Hack a Condo?
Yes, you can house hack a condo as long as you comply with all homeowners association (HOA) rental and pet restrictions, pay all your HOA dues, and are in good standing with HOA members.
Is House Hacking a Condo Allowed?
Yes, house hacking a condo is generally allowed. However, condominium developments are usually overseen by homeowners associations that can impose restrictions on owners renting out units.
Some homeowner associations will allow you to house hack with little to no restrictions, while others might prohibit non-owner occupancy altogether.
Dealing With Homeowner Associations
The benefits of choosing to hack a condo over a house include less maintenance and little-to-no outdoor upkeep.
They’re often quite a bit cheaper to buy in the first place than a single-family home or multi-unit.
The sticking point is that HOAs have a legal right to decide whether or not you can rent out parts of your unit and what rules you must abide by if you do. They are generally made up of elected residents who are responsible for maintaining the building(s), their finances, surrounding grounds, and shared amenities.
It’s integral to become acquainted with the local HOA before buying your condo property if you plan to house hack.
If you really want to, you can also try to get elected to the HOA board yourself to influence rules and regulations more directly.
HOA Rental Restrictions
Some HOAs may charge you an additional fee for renting out part of your property, and many place restrictions on short-term rentals.
Others might restrict partial renting on units. That is, they may not allow you to rent out individual bedrooms.
Before closing on a property, check the condo association’s declaration and bylaws and all applicable rules and regulations to ensure that you can legally house hack.
If your HOA allows non-owner occupancy, be sure to watch out for any additional restrictions and limitations.
Fines and Pet Restrictions
If you violate a condo HOA’s regulations, you risk being slapped with a fine. It’s a good idea to look into the fines and penalties associated with various violations before you commit to a property.
Many HOAs place restrictions on pets. Some condos will allow pets of a certain type and size and others will prohibit pets entirely.
These restrictions apply both to you and to your tenants. You will be responsible for any fines incurred if your tenants violate HOA pet (and other) policies.
Drama with the HOA Board of Directors
Unfortunately, since the HOA board of directors is usually made up of community residents, they are often susceptible to personal drama and petty politics.
It’s a good idea to speak with current condo owners under the HOA to get a sense of the board’s reputation so you can decide whether or not you want to associate with its members.
Ultimately, if the board doesn’t like you, they’ll be less likely to accommodate your house hacking or rental strategy.
Do what you can to stay on the board’s good side.
Can You Make Money House Hacking a Condo?
Yes, you can make money house hacking a condo. Even if you’re not turning a net profit, house hacking can be a great way to cover your mortgage and even additional expenses like utilities and HOA dues.
HOA Dues
HOAs usually require owners to pay monthly dues. Fees vary greatly depending on where you live, and the development and unit that you choose.
They can range from $50 to over $1,000 a month, at least in most cases. Many HOA dues on condos will be at least a couple hundred dollars a month depending on your building and market.
If you live in a new development with luxurious shared amenities and extensive security, your fees may be quite a bit higher than if you’re living in a smaller building with less amenities to upkeep.
Sometimes HOA dues will cover certain utilities, especially in older buildings. Keep that in mind when pricing your rental listing.
Although HOA dues will add to your monthly expenses, it is possible to find a development and an association with reasonable fees. If you play your cards right, house hacking can pay for your dues entirely.
Benefits of Owning a Condo
Aside from the opportunity to substantially reduce housing costs and to even cover your entire monthly mortgage and HOA dues through house hacking, purchasing a condo comes with benefits that can increase overall profitability of your house hack.
As long as you’re purchasing a property with four units or less, you can take advantage of owner-occupied financing, which comes with relatively low down payments and interest rates.
After all, a condo unit is just one unit, so you shouldn’t have a problem there!
And condos are typically much cheaper to purchase than a single family home in the same area. So your barrier to entry should be quite a bit lower, at least in most markets.
Furthermore, a well-run condo board will maintain the common areas on your behalf.
Sure, you’ll have to pay monthly dues towards that maintenance budget, but you don’t personally have to maintain many of the common elements. Instead, you and the condo association can take advantage of economies of scale when getting maintenance done.
This can make them a great starter option for beginners wanting to get started in real estate investing.
A Successful Condo House Hack
Let’s look at a real-world example of a successful condo house hack.
This is the house hack that I did in Chicago. It was my first real estate deal ever.
I had 3 options for housing: (1) purchase a one-bedroom/one-bathroom condo, (2) rent a one-bedroom/one-bathroom condo, or (3) purchase a two-bedroom/two-bathroom condo and rent out the extra bedroom and bathroom.
Here are what the monthly numbers looked like for each option (the one on the left is what I ultimately did):
Two Bed/Two Bath House Hack
– $700 Mortgage
– $255 Taxes&Ins.
– $194 Condo Dues
– $150 Utilities
+ $800 Rent
= $469 Out-of-Pocket
+$170 Principal Paydown
= $299 Net Cost
One Bed/One Bath Buy
– $550 Mortgage
– $175 Taxes&Ins.
– $180 Condo Dues
– $150 Utilities
= $1,055 Out-of-Pocket
+$133 Principal Paydown
= $922 Net Cost
One Bed/One Bath Rent
– $1,000 Rent
– $100 Utilities
= $1,100 Out-of-Pocket
=$1,100 Net Cost
As you can see, the monthly net cost of the two-bedroom/two-bathroom house hack was significantly lower than the alternatives.
Although I was sacrificing a bit of privacy by renting out the extra benefits, the financial benefits were more than clear.
I was paying less than half out-of-pocket compared to the other options. And, after considering principal paydown, my net cost was even less.
Sure, I had to bring an investment up front to buy the house in the first place, but my cash flow situation was dramatically improved.
And with the low down payment loan options available to house hackers, I only had to bring a few thousand dollars up front to buy my condo.
Does It Make Sense to House Hack a Condo?
Yes, it makes sense to house hack a condo because even with homeowners association(HOA) restrictions and fees, the extra rental income can be enough to cover your mortgage and other expenses while you build equity with the property.
Just be sure to choose a development with an HOA that allows non-owner occupancy and doesn’t charge a hefty fee for renting out units and house hacking can make living in a condo far more affordable.
House hacking is a great strategy for beginner real estate investors. It allows homeowners to purchase property with owner-occupied loans while substantially reducing their monthly out-of-pocket costs and increasing their net worth.
If house hacking a two-bedroom condo can cover most or all of your mortgage costs, just imagine the possibilities when house hacking a triplex or quadplex.
House Hacking FAQs
What is house hacking?
House hacking is the strategy of purchasing a property, living in part of it, and renting out the other units or bedrooms. This allows a homeowner to live for free or close to free while also building equity in his or her property.
What are some of the benefits of house hacking?
Some of the benefits of house hacking include reducing your monthly expenses, building equity in your property, and gaining experience as a landlord.
Is there any downside to house hacking?
The main downside to house hacking is that you may have to sacrifice your privacy or otherwise deal with tenants at inopportune times. Additionally, your mortgage lender may require you to occupy the property for a certain period of time before you can rent it out. And, with any real estate strategy, you’ll have to maintain your property, which can get expensive.
What are some things to consider before house hacking?
Before house hacking, consider your mortgage lender’s occupancy requirements, your state’s landlord-tenant laws, and the rules of your homeowners association (if applicable). You’ll also want to make sure you have the financial resources available to cover any repairs or unexpected expenses that may arise.
Can you house hack a condo unit?
Yes, you can house hack a condo unit. Just make sure you follow any rules that the condo homeowner’s association has, including those against renting all or a portion of your unit out.
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