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How I’m Living Rent-Free in the Most Expensive City in America (Using House Hacking!)

David Greene
6 min read
How I’m Living Rent-Free in the Most Expensive City in America (Using House Hacking!)

As co-host of the BiggerPockets podcast, I have the privilege of speaking with successful investors on a weekly basis. Brandon Turner and I dive deep into their stories and noticeable patterns tend to emerge.

Among many of those who have seen success, there’s a common denominator: they got their start house hacking.

What is House Hacking?

House hacking can be done in many ways, but at its core, it’s the concept of buying a property to live in while using part of it to generate income. Depending on where you live, there are different opportunities, strategies, or techniques to execute this concept.

What won’t change, however, is the impact it can have on your financial life and the doors it can open. Namely, it’s a way to ease yourself into the world of real estate investing.

A House Hacking Success Story

In addition to hosting the podcast and investing, I’m a real estate agent. I’d like to share one of my client’s success stories.

One day Ryan Meinzer heard Brandon and me talking about house hacking on the podcast. He decided to do what many others do not: take action.

After calling to let me know about his plan, Ryan and I went to dinner. We broke down his goals, his strategy, and his understanding of what he was trying to accomplish, which was to buy a property in uber expensive San Francisco without having to pay through the teeth for it.

That conversation became the first step on a journey that would ultimately lead to Ryan finding a massive deal, adding big value to it, and living for somewhere between cheap to free in the most expensive city in the country.

Think this is all hype? Not for Ryan, it wasn’t!

His determination, intelligence, and can-do attitude led to him hitting a home run on his first try. To make it even better, Ryan has agreed to open up his playbook and share a lot of what he did to make this possible.

The following is Ryan’s account of his story, his thought process, and his ultimate success finding a property that paid for him to live in the city he loves. It was a move that simultaneously opened the door for more deals, more wealth, and more real estate!

So, if you’ve ever been thinking about house hacking yourself, learn from and be encouraged by Ryan’s journey!

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Living Rent-Free in the Most Expensive City in America

An Investor Tell-All by Ryan Meinzer

My story isn’t unique. All that’s unique is that I finally put my mind and money where my mouth was. It’s what enabled me to live rent-free where I left my heart: San Francisco.

I’ll first share the house hacking process by which I accomplished financial freedom through real estate. Then, I’ll provide an overview of how I found the rare deal I knew my agent David Greene and I could win in one of the most competitive real estate markets in the world.

After dumping money into thin air (rent) for 15 years, I decided that enough was enough. I set the goal of living rent-free through real estate.

How? By house hacking, which to me meant making the sacrifice to live with others at age 35, in order to have them pay my mortgage.

I had heard David on the BiggerPockets podcast talk about this concept time after time. There’s no complicated financial algorithms involved in the process. The idea is to find a place you can afford to buy where the rent you can charge your roommate(s) will exceed your mortgage.

In San Francisco, this is not too difficult. Rents are the highest in the nation, and demand is through the roof.

House hacking inherently requires sacrifice. It could be sharing a bathroom, wall, and/or kitchen with a roommate. In my case, it was all three.

I began by utilizing some of the principles of BRRRR, retrofitting an open living room into a private bedroom. These are definitely first world problems, but sacrificing a bit of privacy required a big mind shift for me, as I had been so used to living in studios (and living with OCD) for the past 10 years.

I got over it within a few months by letting go of full control, which turned out to be quite liberating. Who would have thought sharing a toilet with someone would be a blessing in disguise?

Many investors have rigid perspectives about real estate. They believe a property is either an investment property (rental) or a luxury expense (primary residence). House hacking allowed me to take a luxury and make it a sound investment, combining both worlds and growing my net worth considerably in the process.

If you look at the return on investment (ROI) on my down payment and consider how much money I’m saving a month on my previous living expenses—not to mention factor in principle reduction and tax savings—it becomes crystal clear this move not only allowed me to live where I want, it was also an amazing investment of capital.

Time was my most valuable asset in finding the deal. I gave myself a full year to research the market and prepare my finances accordingly. From living in the city for five years and renting out five apartments on Airbnb, I knew every pocket of San Francisco fairly well, along with its respective rent yields.

What I didn’t know was how competitive the market to buy was and how exactly to win deals. Unsurprisingly, I vastly overestimated the number of “house-hackable properties” there were available.

I also quickly realized that only millionaires or DINKs (double income, no kids) were winning deals on such properties. They did so by offering upward of 20 percent higher than the property’s asking price.

As a single guy who wasn’t a millionaire, how could I be competitive in that market? I needed more than money.

Finding a deal for me meant finding a very rare type of property in San Francisco, one categorized as tenancy in common (TIC). In short, a TIC property is owned through a legal partnership by individuals. Those individuals then have a separate agreement to designate which areas/units of an entire building are owned and occupied by whom.

As TICs are unconventional, they require non-conventional financing (as opposed to conventional mortgage loans) offered by merely a few banks with extremely strict underwriting requirements, including exceptionally high down payments and credit scores. This makes TICs drastically harder to finance/buy and thus reduces the seller’s price by as much as 20 percent below the market compared to a standard condominium.

Voilà! If I could finance a TIC at asking price, I could afford it. Plus, the majority of the competition would be weeded out, unable to bid.

Classic view of historic traditional Cable Cars riding on famous California Street in beautiful early morning light at sunrise during summer in San Francisco

Now all I had to do was save, build my credit, and find a TIC. So, over the course of a year, I saved by reducing my spending as much as possible and built my credit by all the standard means.

Although it took David and I nearly six months to find my TIC, it proved to be the easiest part. We were laser-focused on finding a niche property with non-conventional financing that was outside of nearly everyone’s scope.

It’s easy to question this complex process and worry about what could go wrong. It’s no coincidence that I waited a year and did a ton of research before feeling comfortable.

As he mentioned previously, prior to moving forward, I met with David to go over my strategy, look at potential hiccups, iron out some smaller details, and make sure I understood the contracts and due diligence involved in the sale. I think this is an important step in covering all your bases.

But now that I’ve done it, I encourage everyone to house hack if they can. I also recommend they find someone familiar with the process who can look over their plan and address any issues they might have missed.

In real estate, it’s what you don’t know that can hurt you. So, having a professional set of eyes look over your deal is a great way to reduce your risk. It’s also free if you’re the buyer!

Currently, I live happily ever after in my favorite city in the world by having roommates pay my mortgage. I won the rare property deal I found through research, time, and fiscal responsibility.

I’m currently in the process of converting my TIC into a condo, a move that will cause it to appreciate by up to 20 percent overnight. It’s a value add that will take this deal from great to super great—but that’s a blog post for another day.

What I Love About Ryan’s Journey

It’s me again, David, with my final thoughts on Ryan’s journey.

Ryan didn’t just hear about a cool strategy and sit on it. He immediately reached out and started taking steps to act on it.

When problems came up during escrow (which they always will), Ryan didn’t let it deter him or make excuses to quit. Instead he systematically broke down each hurdle into smaller obstacles, and we put our heads together to determine the best way to overcome them.

Ryan looked for ways to make the deal he found happen, as opposed to looking elsewhere for one so easy he wouldn’t have to think.

If you’ve ever wanted to own a home but didn’t want to acquire the mortgage that comes along with it, I encourage you to consider this strategy! Real estate investing is all about building wealth through investment properties, and there are many creative ways to do just that.

Thirty years from now, Ryan will own a multi-million dollar asset that has been paid off by his tenants and generates strong, healthy cash flow every month. By taking advantage of his resources today, he’s securing himself a better tomorrow.

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Could you be doing the same? If you don’t think a house hack is for you, which other method of investing would you be willing to try?

Let me know in a comment below. 

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.