Is House Hacking Worth it?

Is House Hacking Worth It?

Is House Hacking Worth It? 

House hacking is very advantageous investment strategy that is well worth it for a variety of potential homebuyers.

Although it does require a fair amount of work to set up and maintain, it is a surprisingly lucrative strategy for new and veteran real estate investors alike. 

What is House Hacking? 

House hacking is the strategy of purchasing a property, living in part of it, and renting out the extra units or bedrooms.

It is a great option for beginner real estate investors since it is a pretty simple strategy that allows homebuyers to take advantage of owner-occupied financing. This kind of financing typically comes with the best terms available for any buyer.

Does House Hacking Actually Work? 

Yes, if you set up your house hack properly, it can help you reduce your net housing costs, and even eliminate them entirely, while you build equity in your home.

Many homeowners have found great success in house hacking, and some even live for free or for very little by using their rental income to pay their mortgage.

How to Be a Successful House Hacker 

successful house hacker

Finding The Right Property

  • Look for small multi-family properties. Be on the lookout for small multi-family properties that will allow you to live in one unit and rent out the others. These properties are highly coveted by house hackers, although they can be difficult to find and common zoning restrictions mean they are few and far between in many areas.
  • Look for large single-family houses. Large single-family homes can also make great candidates for house hacking, especially if there are several extra bedrooms and convenient features like multiple en suite bathrooms and large common areas. You can keep one bedroom for yourself while renting out the others.
  • Keep your options open. If you’re not looking to shell out a ton of money on a multi-family home or a large single-family house, house hacking could still be a great investment strategy for you. Open up your search to fixer uppers and two or three-bedroom condos. These homes can be great options for hacking.

Research is Key

  • Know your area. One of the most important steps to successfully house hacking is taking the time to do your research. You want to become an expert on the area where you’re looking to house hack so you can spot a good deal on a potential property. You’ll also want to stay on top of rental values in the area so you can get a realistic idea of how much rental income you’ll be bringing in.
  • Stay informed on potential restrictions. Watch out for any HOA restrictions on non-owner occupants in your neighborhood. You don’t want to close on a property only to discover that you’ll be slapped with fines for renting it out. You’ll also want to stay on top of any local zoning laws and building codes that might impact your house hack, and read your mortgage agreement carefully to ensure that you are up to date on all lender restrictions. 
  • Consider hiring an agent. A good real estate agent who has worked with house hackers or investors in the past should be able to help you spot a good deal on a property.
  • Run the numbers. Consider all potential sources of income and all potential expenses. If you’re purchasing a single-family home and renting out extra bedrooms, run the numbers as if you were renting out each individual room and then as if you were renting the property as one unit. The ideal house hack will also work as a standalone rental in case you want to move out. 
  • Conduct due diligence. Get an inspection and see what work needs to be done before closing on the property, and make sure that any necessary renovations do not violate local building codes. 

Be Prepared for the Challenges

  • Keep money in reserves. House hacking, and being a landlord in general, can come with a variety of unforeseen expenses. As a general rule, you want to keep at least a few months of your future property’s cost in reserves to account for any unforeseen vacancies. If your roof gave out tomorrow, would you be able to cover the cost to fix it?
  • Get ready to work. House hacking does require a fair amount of work, especially at the onset of the process. You want to make sure that you find a good property and find good tenants. You will also need to stay up-to-date with all local laws and continuously maintain your property and tenant spaces. You’re running a business, so treat it accordingly.

Downsides to House Hacking 

In many cases, house hacking will definitely be worth the time and effort required to set it up. However, there are a few potential downsides to consider before you decide whether house hacking is right for you: 

  • You may have to sacrifice your privacy. This is especially true for those looking to purchase a single-family home and rent out extra bedrooms. In some instances, house hacking may also require you to share common spaces in your home like the kitchen and living room. If you like socializing and you find good tenants this will likely not be a problem for you, but it is definitely worth considering before you decide to house hack. 
  • It can require a lot of work. A successful house hack may require that you put in a fair amount of work. Depending on whether you’re looking for short-term or long-term renters, you might regularly need to find and screen new tenants. You will also need to screen calls and maintenance requests from your roommates/tenants. It can take significant time.
  • There are often unforeseen expenses. Maintaining the property and fronting the cost of potential vacancies can certainly add up, and you should be sure to keep some money in reserve for any and all unforeseen costs. 
  • Lender restrictions may limit your mobility. If you’re taking advantage of owner-occupied financing, most lenders require that you occupy the property as your primary residence for at least one year after purchase. If you’re trying to scale super quickly, this could throw a wrench into things.

Is House Hacking a Good Idea?

Yes, depending on your personal situation, and despite potential disadvantages, house hacking is often a great idea. 

Many homeowners have set up very successful house hacks, and it is one of the lowest barrier strategies for getting started with real estate investing. 

The extra rental income can be a catalyst towards financial freedom, and it can be especially advantageous for those looking to offset the cost of living in an expensive market.


How do I know if house hacking is right for me?

The best way to know if house hacking is right for you is to run the numbers. Look at the cost of the property, the cost of any necessary renovations, and compare that to the potential rental income. If the numbers make sense, house hacking could be a good option for you.

What are some of the potential downsides to house hacking?

Some of the potential downsides to house hacking include the need to sacrifice your privacy, the possibility of increased work, and the likelihood of unforeseen expenses. Before you decide to house hack, be sure to weigh the pros and cons to see if it is the right decision for you.

Is there anything I should be aware of before getting started?

Before getting started with house hacking, it is important to be aware of the potential risks and downsides. Remember that you will be responsible for maintaining the property and finding tenants, so be sure you are prepared to handle those responsibilities.

How do I manage the property and my tenants?

The best way to manage the property and your tenants is to treat it like a business. Set up systems and procedures to make sure the property is well-maintained and that your tenants are happy. Regular communication with your tenants will help to ensure a smooth relationship. And don’t be afraid to hire help.

What if something goes wrong?

In addition to having money set aside for potential problems, have a plan in place for how you will handle vacancies, maintenance issues, and any other potential problems. By being prepared in advance, you can help to mitigate any major problems.

This website, and any communication stemming from it, should not be taken as financial or legal advice for your specific situation. Consult directly with a licensed financial professional should you need investment advice and consult directly with a licensed attorney directly should you need legal advice. Assume all links are affiliate links. I am an Amazon affiliate.

Jack Duffley

Jack Duffley is a real estate investor and attorney based in Houston, TX.

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