Landlording & Rental Properties

Why You Shouldn’t House Hack to Get Started in Real Estate

Expertise: Real Estate Investing Basics, Personal Development, Landlording & Rental Properties, Real Estate News & Commentary, Business Management, Flipping Houses, Real Estate Deal Analysis & Advice, Personal Finance, Real Estate Marketing
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A handsome young businessman tries to call the boss over the phone while sitting with his colleague in front of a laptop.

Let’s talk about why you shouldn’t house hack. In my opinion, it is a big cop out. People are lazy, and people want something for nothing.

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“Oh yeah, I’m going to put down a $50,000 down payment, I’m going to buy a duplex, I’m going to live in one side and rent out the other, the property is going to appreciate in value, and there’s going to be fairy floss and mermaids coming out of the ocean.”

Seriously? Come on, guys. Nothing comes easy.

It Takes Money to Make Money

For instance, I rent. You know why I rent? Because all of my money is out there making more money for me. I don’t want to own because why would I? When you own, you are anchored to one particular location when you put a down payment on a duplex or a big property with 17 bedrooms so you can rent it to stupid college kids or whatever it may be.

Guys, money makes money. It takes sacrifice to achieve success, to achieve financial freedom, to get to where you need to be.

Related: 7 Steps I Took to Land My First House Hack (& Rent it Out) With Ease

I moved to this country with $15,000. I absolutely worked my butt off to be where I am today. I’m up at 5:00 a.m. every morning, and I do not stop until 7:00 p.m. Instead of house hacking, get out there, work two jobs, save hardcore, be frugal, and rent a bedroom or a crappy little apartment.

Don’t anchor yourself down to a particular location. Adapt, be mobile, and move.

If you’re now saying, “But I can’t find great deals” in San Diego or New York or wherever, know that neither could I in Australia, so I moved to Toledo, Ohio out of all the places. It’s not the most glamorous, but the numbers make sense, and it’s a great real estate investment market. That is what you have to do.

Stop Taking the Easy Way Out

I think house hacking is an easy way out. It’s like everyone jumping on the bitcoin bandwagon. I’ve got no freaking clue what bitcoin is. I don’t understand it.

House hacking I more so understand, but I still think you should rent, be mobile, and keep overheads at a minimum. You do not want to have any expenses associated with your house hack property that you’ve put a down payment on to where you have to put your hand in your pocket to cover all kinds of stuff.

You’re better off investing money in buy, fix, and flips. You’re better off wholesaling once you have enough capital to cover the contingency of the times you don’t have someone to close on that contract. Buy, fix, and flip a few times over—and then hold so that your cash flow will be able to support your rental expenses.

Don’t buy and own, and don’t house hack. Money makes money. Invest in real estate, and once you can make enough capital and comfortably afford to buy and hold, then buy and hold.

Related: Why I’m Not House Hacking (& the Strategy That Will Cover More of My Rent)

Here’s another tip for you. When less than 10 percent of your net wealth buys you your dream property, that is when you should pull the trigger. For example, my dream property is a $5 million penthouse condo in Manhattan. So my net wealth needs to be at $50 million. I’m not quite there yet, but I’m getting there. 

Guys, that’s my opinion. Take it or leave it.

Comment below.

Engelo Rumora, a.k.a."the Real Estate Dingo," quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate al...
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    Jacob Karasch from Greenville, South Carolina
    Replied almost 2 years ago
    I understand your points and I respect that you are choosing the route that works best for you, but everybody has their own situation/motivation/skills. House hacking worked great for me. Quick numbers: I was paying $850/month for a 1 bedroom apartment. I bought a 3bed/2bath with a monthly PITI of $700/month with only $7k. Then I got 2 roommates paying $410/month each. That’s a net change of $970/month. I completely got my money back in 7 months with almost no effort. I’m not suggesting house hacking is going to make you rich, but it is a fantastic strategy for a first purchase when you have low money and no experience.
    Jennifer Nicole Lapinsky Rental Property Investor from Dover, DE
    Replied almost 2 years ago
    I get what you’re saying about sinking $50k into a down payment, but blanketing everyone who chooses to buy a duplex and living in one side/renting the other as less-than seems a bit extreme. I’ve never heard of house hacking, but I’m familiar with the strategy you mentioned. I also haven’t been able to try it since I had a family to take care of from a very young age. However, I see nothing wrong with it, especially for people who can take advantage of VA or USDA financing. In those cases, there is no giant down payment, and it seems like a good stepping stone, especially for those who want to work the BRRR strategy. Not everyone has to invest just as you did to be successful. There are plenty of successful people whose “I started off with $X in my pocket and look at me now…” stories that don’t follow the same path you did. Why dissuade people who are just trying to make their own way?
    Jonah Freedman Rental Property Investor from Ithaca, NY
    Replied almost 2 years ago
    Thanks for sharing. I like how you like to post controversial topics. Honestly I think your advice is really dangerous for new investors. There is no better way to get started than to buy a house that you can live in and rent part of it out and cover your cost. You don;t have to put down as large a downpayment. This is the easiest way to save more money to invest and it is far from lazy and you are not attached to the property. If you buy right you can always move it out and keep it as a rental. Cheers Jonah
    Engelo Rumora Specialist from Toledo, OH
    Replied over 1 year ago
    Hi Jonah, Thanks for your comment and kind words. I want to get people to stop and think and not just follow the herd. If my blogs and content are dangerous for investors, then I pity those that can succumbed so easily to an opinion that they have read or heard online. I’ve got nothing for sale and my content is just an opinion based on my experiences. Content provided by many others has a hidden agenda and is sales orientated. Investors need to be smart enough to work through the maze of information and make final decisions on what they want to do and how they want to do it. They should never be swayed by someone’s opinion. I’m always happy to offer mine tho 🙂 Thanks again and much success ps. I still think house hacking is just an excuse for saying that “you’re a real estate investor” Folks should work harder than that if they want to succeed
    Renée Volny Darko New to Real Estate
    Replied about 1 year ago
    Thanks for the article. I’m truly new at this, so I’m really asking for a point of clarification. If I understand the article correctly, you describe that you are living in someone else’s rental (which is probably paying their mortgage) instead of hacking one house of your own (where others would essentially be paying your mortgage and other expenses). I guess I don’t understand how living for free in a house hack with a small one-time downpayment (FHA is about 3.5%) is not better than spending the same or more money in annual rent to pay off someone else’s mortgage. For example… Let’s say on one hand you house hack a $100K 4-unit multiplex in Toledo (which apparently is possible according to the house hunting sites) with a 3.5% FHA one time down payment of $3500, then let’s assume other costs might total up to $10K to complete the sale and you live for free with the other 3 units rented at $600/mo ($1800/mo). On the other hand, you pay someone else $600/mo rent which is $7200 on a yearly basis, which after 18mo of renting would exceed the one time $10K that you invested to house hack. I don’t understand how spending money yearly on rent frees up more cash for you to flip houses than living in your own house for free. I agree with you that “money makes money,” so… Wouldn’t having $7200 yearly in your pocket be more desirable so that you could use that money to make money in flips instead of paying someone else rent which makes them money? Wouldn’t that get you to your goal faster? Again, I’m new at this, so please school me! Thanks!
    Account Closed
    Replied about 1 year ago
    Not sure why everyone's giving such bad reviews. Had gotten pre-approvals many times. I did my due diligence and built up my credit to get into the range of their "minimum requirement". with the assistance of a credit expert which I contact (captainspyhacker2 @gmailCOM or +1502-378-7817) to helped me fixed my credit. He helped me pay off my CC debt and improved my scores to 780 in a couple of days Applied, got approved, Took less than a week for the whole process, with funds directly sent to my checking. I had benefited a lot from Captain spy service as I'm presently writing this message in my new house at Texas Thanks Captain!
    Joshua Springman
    Replied 10 months ago
    I don't think this was an article that needed to be written. From the sounds of it, you don't have a lot of experience house hacking, and therefore should've written an article focused specifically on your strategy, without the unnecessary bashing. If you look around this community, house hacking is obviously an effective strategy for a lot of people; for myself personally, it's the best way to get into real estate while still holding a full-time job. The passive income, plus experience as a landlord is great. Maybe just stop telling people that they're "following the herd" by using a strategy that works.
    Austin Montgomery Rental Property Investor from Enterprise, AL
    Replied 10 months ago
    Hey, I believe house hacking may not have been right in your situation, but for many people, it is. I believe house hacking is a great way to start out. I bought a 3/2 with a VA loan next to a military base and rent out the other two rooms. With 0% down, I have $0 living expenses. My PITI is $520/month, and the rent from the other two roomates including utilities is around $1060/month. It would have cost me $500/month to rent a place + utilities. I understand it takes money to make money, but for people starting out that don't have much capital to put down on a "buy, fix, flip" or have a full time job and don't have as much time to flip quickly, house hacking is a great way to quickly build up capital. My house hack has allowed me to save at least an additional $1000/month. I am also flipping and buying other places, but the house hack was the biggest factor that has contributed to me being able to get started. When I move out next month, I will rent the additional bedroom and up the rent to $1400/month. That cashflow allows me build capital for other projects - like the 10 other units I have been able to purchase this year because of it. I wouldn't recommend putting 50k down on a house either, but if you can house hack with little out of your pocket with a VA or FHA loan, I see no downside.
    Nicole Vascianna
    Replied 10 months ago
    It's called working smarter. Nothing lazy about that.
    Larry Alar
    Replied 10 months ago
    Agreed. There are other ways to house hack rather than putting $50,000 down on a duplex, as well. I'm glad I read the comments to get further insight, because this article did not do much for me.
    Dominick Marschall
    Replied 10 months ago
    Whats wrong with taking the easy way out? Especially if you are starting out. Its a way to start out with minimal risk.
    Engelo Rumora Specialist from Toledo, OH
    Replied 10 months ago
    There is no such thing as "easy". Nothing beats hard work and if you're going to invest in real estate in the first place. You might as well work hard and get to the end result of financial freedom as quickly as possible. House hacking is for amateur investors that read a blog and think they know it all. Just my opinion. Much success
    John Elliott Investor from Oakland, CA
    Replied 10 months ago
    If you make so much money that you think you you are saving by renting in....Ohio of all places, then that leads me to believe you aren't really balling like you say you are. I'm in the top tax bracket and a high net worth individual and I own my home and invest in real estate and I live in a very high cost of living area and throwing money down the drain on rent is the last thing I would do. In fact, one of the main reasons I am in the financial position I am in is due to the fact that I got on the 'property ladder' with my first primary residence which led to many other positive financial things for me. Renting is foolish when the tax benefits to owning ( particularly after 3 years when the gain is completely tax free ) and equity buildup are essentially like living for free if you sell. I understand that you write click bait articles to get the comments and attention but you also give generally bad advice and I think most people see that hopefully
    Jiri Vetyska Investor from Normandy Park, Washington
    Replied 10 months ago
    This is really foolish advice for most folks! If you are starting out, it is much much better to house hack, get the feel for the business and grow from there. Those that live anywhere but midwest would also greatly benefit from owning and having the ability to get tax free loan against their equity while enjoying the tax write off on interest. Those in midwest would benefit from owning, because properties are so cheap and rents so high. So starting out renting is shooting yourself in your foot. There are certainly cases where renting is the way to go - if you have bad credit, you really just want to flip and don't want the responsibility of owning, or don't trust your own work that you would never live in the property you have just rehabbed. There are lots of folks that are in this flipping biz just for a quick buck. There are many approaches, there is no only one way to do things.
    Tom Fisher Rental Property Investor from Charlottesville, VA
    Replied 10 months ago
    House hacking was a great way to get my first couple of properties up and running, build some equity, build confidence in the game, get some practice at land-lording and have some creative fun. Different strokes I think. But power on Engelo. I'd be toast if I jumped into the game at your level too soon.
    Brent Crosby Rental Property Investor from Farmington, UT
    Replied 10 months ago
    Why does house hacking mean being anchored? Living in a place for one year so you can get in the game sounds just as good to me, if not better, than renting and saving (saving much more money because you won’t be occupying). I doubt you’ll be doing much moving in one years time if you are ultra focused on saving up to invest.
    Steven May Rental Property Investor from Kansas City, MO
    Replied 10 months ago
    Haha what a terrible article. I currently house hack. Have lived for free for a year now with only 3% down. I work full time as a nurse and am under contract for another home and work as a bird dog for investors. Renters are losers every time. Statistics show that. No matter “how many extra jobs or hours” I would work would I be able to do what I do now which is I put 3,500$ down on a 115k home and have lived for free while updating the place through small improvements. If you’re thinking about getting started by house hacking or any other method — don’t take the advice as this article. Sincerely, A 23 year told currently house hacking with no living expenses
    Andrew T. Rental Property Investor from Montreal, QC
    Replied 10 months ago
    New to BP and welcome solid advice, but I had hoped that this blog post was more substance, fact, and numbers based rather than a silly opinion piece with no obvious merit.
    Randall Marshall
    Replied 10 months ago
    That's basically $6000 down the drain instead of building equity - even in Toledo. You know the saying, "You can't live in your 401k..." I rented for a decade, and it ranks among my top 5 worst life decisions.
    Engelo Rumora Specialist from Toledo, OH
    Replied 10 months ago
    Thanks Randall, I still rent and it's the best decision I have ever made. Travelled the world and experienced so much. Retired before the age of 30 and it was all due to being very active in the real estate market. Who wants to work hard and get to financial freedom as quickly as possible should rent and buy, fix and flip. Who doesn't want to work hard and is happy taking their time, then they can house hack. I chose the faster path. Just my opinion. Much success
    Forrest L. Rental Property Investor from Lowell, MA
    Replied 10 months ago
    Troll
    Nicholas Wood Real Estate Agent from West Virginia
    Replied 10 months ago
    Yup lol
    Brandon Allenczy
    Replied 10 months ago
    I understand the argument, and I see how this can be the case for those who house hack as a means to an end. If you just buy one duplex with a 3.5% down payment, and house hack the same place forever, I’d call that lazy. But I don’t think that’s the case if you plan to scale it. I also seriously disagree with the implication that being frugal and working two jobs are on a different coin than house hacking. My wife and I want to start investing and have around $200 to our name. Our plan is to build up a safety net by living frugally, busting my butt at work, and then purchasing a house hack. We’ll get in with a low down payment, stay for a year, then move out into another house hack while keeping the previous one as a rental and renting all the units. We plan to do this 5 times. Thus staying mortgage free for 5 years and accumulating multifamily rentals with putting low money down. It will require us move 5 times in 5 years, but we both work from home and have a desire to move around. I think if used as a springboard house hacking is extremely powerful and the most efficient way to get started.
    Mark Beeson Rental Property Investor from Wichita, KS
    Replied 10 months ago
    Engel- I get it. You HATE house hacking. Ok. So give me specifics. You bought your first property for $$$$$ ? Invested $$$$ to fix it up. Refied it for $$$$$. Made X $$$$$. Cash flowing X $$$$. With your profit you purchased a ? for X $$$$. Come on man! Show me house hacking is a sissy's game and BRRRR is for real real estate investors.
    Nicholas Wood Real Estate Agent from West Virginia
    Replied 10 months ago
    Who gave this guy permission to write blog posts? Not so good for selling BP books! Craig, Brandon, David Greene, WYA? What a poorly written article that spews nonsense and discouragement to the aspiring investor. So, so, so many benefits in simply taking action by purchasing multifamily real estate as early as possible. Yes, you need capital. But once you have just enough capital, you can make the ends meet and begin snowballing to long term success. Every investor I talk to has at least one regret— “I wish I had started sooner”.
    Kevin Sabatino Rental Property Investor from Fort Lauderdale, FL
    Replied 10 months ago
    Hold on a sec, Have you heard of FHA Loans at 3.5%? Live in the house hack for ONE year then continue renting it out to others while you house hack another property ALLLL WHILE you can be BRRRRing with the money you make at your normal job and with all the savings you have because you’re living for FREE in your present househack... I did hear your video that you kinda get househack but kinda don’t. I don’t think you truly understand it. Just my opinion.
    James McLain
    Replied 10 months ago
    I agree. I don't think he gets it. I've been "house hacking" for several years with multiple properties. My tenant pays the majority of my mortgage while I rehab the property. I'm paying a net of $600/month to live in a place that would normally cost me $2700/month. As a result, I've been able to fully rehab my property out of pocket without pulling out any equity. To each his own I guess.
    Mike Staheli Real Estate Broker from Saint George, UT
    Replied 10 months ago
    Don't you have to put a down payment on a rental property that you own? And in most cases it is a BIGGER down payment. Other than not being tied down to your primary residence, this makes 0 sense to me. Also, where I live rent is more than an average mortgage payment.
    Angel Dejesus Property Manager from Boston, Massachusetts
    Replied 10 months ago
    Great read great job Mr Dingo Following your advice I too want a penthouse in the sky. Thanks for your straightforward words. Refreshing
    Engelo Rumora Specialist from Toledo, OH
    Replied 10 months ago
    Thanks Angel, Much success
    Ben Tubergen Investor from Grand Rapids, MI
    Replied 10 months ago
    I couldn't disagree more. Maybe this varies by market...but I'm currently "house hacking" and being paid about $800/month to live in my own house/first rental property that I only had to put 5% down on. The returns are phenomenal and its reducing my overhead costs because I no longer have housing/rental costs to worry about making it easier to raise capital for my next investment. Appreciate your article...but I don't think you're seeing the whole picture here.
    Chad Setterbo from Brookfield, Wisconsin
    Replied 10 months ago
    after a flip which I labored on for a year and a half I used the 80k I made to put 3.5 down on a 3 unit townhouse building. I’ve been living in it while renovating and moving into each unit - now have finished and gone from an appraised 315k to 600k. “House hacking”, for lack of a better term, allowed me to live for free while saving all my day job income. I understand the type you are calling out but in the right instances it can be a great stepping stone.
    Karl B. Rental Property Investor from Columbia, MO
    Replied 10 months ago
    Just bought a duplex on a FHA-loan at 3.5% interest. After a year I can move out and cashflow $700 a month (zero utility bills as everything is submetered). But from the author's comments above, I'm a wannabe investor. lol. Despite the fact this is my first house hack and all my investment properties prior were done on either bank loans or by using private money. The author may hate house hacking but I just bought a 250K property for under 10K all-in. My renters will not only pay for it but as mentioned, I'll be cash-flowing. Well, he can hate it all he wants, I'm all for it.
    Wilson Churchill from Madison Heights, Michigan
    Replied 10 months ago
    If you never buy a "personal" residence, then you never get to take advantage of the Section 121 Exclusion: 250k per individual, 500k total for a married couple. You could apply your philosophy of being mobile by flipping your personal residence every two years, trading up into your dream home.
    Akua Sarhene
    Replied 10 months ago
    The article comes across super judgmental. I understand that this is not your preferred method, but to try to insinuate that people who house hack are lazy is a bit absurd. Managing units and more importantly people is no joke. At the end of the day, if the numbers make sense, then shouldn't that’s be all that matters!?!?!?!
    Keaton Nichols
    Replied 10 months ago
    I thought I read a previous article of yours a while back and it too was slamming the house hacking method. Just because you prefer other strategies doesn’t mean house hacking is without merit. So how do you explain the numerous people who have used the house hacking method successfully? It doesn’t take 50k out of pocket to house hack due to FHA loans. It’s a good way for beginners to get their feet wet in real estate considering flips are more of an advanced technique. I understand the desire to stay mobile but that’s not something that appeals to everyone. For people who are okay with being anchored it doesn’t make sense to burn money on rent. Stay humble big guy.
    Jacob Waddell
    Replied 10 months ago
    Look, I completely understand your reasoning. But I don't think you fully understand just how great of a deal house hacking can be for some people. I had 5k a couple years ago, but I was more focused on my emergency fund (which, in hindsight, was smarter, but I digress) and wish I had househacked earlier. It'd put me so much farther ahead. In my area, the median house price is 210k. I'd have to save 42k in order to get a 20% down on an investment property. At a 35k net salary (this year, was even less before due to being at a lower paying job) and renting a room for 500, this would put me at 29k. I need ~40/week on gas, 27k. Food ~200/mo, 24k. Assuming I spend *no* money on ANYTHING else, at all, this would take me 2 years to save up for an investment property. I'll be getting a raise next year for 20k net more, but I'd *still* need the 2 years since I'm not making the money this year. Instead, I'm buying a house I can rehab for 10-15k. Even if I only rent out 2 of the rooms (4 bed with a den that I could live in) I'll be living for free. This is utilities included. So, I'll be saving an additional 6k. 26k net compared to my previous statement. Hey look, now I have 6k for "fun" and I'll be in the same position as before! But wait, there's more. If I rent out the other 2 rooms, I can net ~1200/mo, if not more. Oh look, there's 20k. I just got the 40k necessary for an investment property, in half the time. I'll continue house hacking for the next 1-2 houses, since I can continuously be building wealth faster. Only after that will I look into renting/owning my own house. Being in the game one year earlier is a huge game changer. I'm 24, and this will allow me to retire in half the time. With this, plus the raise I'm getting next year (will net ~40k, up to 80k if I work overtime and get nights, which I prefer nights anyway), I'll be able to afford 2 investment properties, rather than 1. This is exponential. I'll be "ahead" 2 years in investments. I will be able to afford two ~400 cash flowing properties, if not more, next year. I dunno about you but retiring in 30 sounds significantly better than retiring at 40 and being miserable for an additional 3 years while I'm young. House hacking allows me more freedom, I can still be frugal, BUT I can also enjoy life for fun.
    Sulaiman Shah Real Estate Investor from Staten Island, New York
    Replied 10 months ago
    Smart strategy by telling other people NOT to house hack so they continue renting out and putting money in your pocket.
    Engelo Rumora Specialist from Toledo, OH
    Replied 10 months ago
    I'd rather folks buy. fix and flip. They would get to financial freedom much quicker than house hacking. It's just a very slow and in my opinion "lazy" way to invest. Much success
    Thomas Evanchik
    Replied 9 months ago
    Well there's even a better way them what you have implied or copyed Mr. G Cardone's ideology. Find a class B or C apartment complex in a growing metropolitan are such as nashville. 100 doors or more, And in need of updates. Buy the property with other peoples money. Upgrade all the apartment complexes and boost the rent $200-$400 a month. The tenants are happy, Im very happy. And the investor are happy. that's how easy this is
    Andrew Cooper from Washington, District of Columbia
    Replied 8 months ago
    Well done! Your click bait worked, you got a lot of views, and now you can sell your other "advice" to other people as a branded professional. Impressive PR tactic. You make some good points about "if you want to do this as a business, then do so". House hacking is great for the working professional who is looking for a side hussle. It's a long term-strategy to build wealth and income just like some people invest in the stock market, while also holding down a career. But it's a great way for people to learn the business, and then, when and if they want to leave their career and pursue real-estate full-time, they can do so with a wealth of experiential knowledge. I speak from experience and one day may make the transition. But for now? I enjoy my career and my house hack, the income, equity, cash flow, appreciation, lessons, home, friends, network, knowledge, financial safety net, diversification, and experience it has given me. Best of luck to you.