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

Julie Kent
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3 Articles Written
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Even if you’re only an occasional reader on the BiggerPockets blog, I’m confident that you’ve at least heard the term “house hacking.” If you’re familiar with the concept, please skip ahead.

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In a nutshell, housing is expensive—it’s usually the most significant portion of a budget. House hacking is a strategy to cut down on your housing expenses by purchasing a multifamily property, often a duplex, and living in one unit while renting out the other(s). By using the rent you receive from the other unit(s) to put towards some, if not all, of your mortgage, you're essentially living "rent-free." And by utilizing a FHA loan, you can put down as little as 3.5% to get started. Sounds perfect, right?

Don’t get me wrong. House hacking is an awesome strategy that works for a lot of people. But I’ve decided that it’s not the best option for me and my lifestyle. Here’s how I reached this conclusion.

Background

I moved to Denver, Colorado for a job here at BiggerPockets in mid-March from Des Moines, Iowa. I had approximately ~4 weeks to find a place to live in Denver, and not knowing much about the city, I decided to rent.

Current Housing Costs

  • Base Rent: $1,380 (includes pet rent and parking spot)
  • Utilities: ~$140 for water, electric, and internet. I do not have cable.
  • Total: $1,520/month

My lease is up in early 2018, and as a real estate investor, I’ve certainly been thinking about purchasing a property in Denver either as a house hack or straight investment. The problem? Property is really, really expensive right now. For example, this 2-bed/1-bath 888 sq. foot duplex recently sold for $410,000 after selling for $210,000 in 2005. Here’s a triplex that sold for $650,000 after selling for $252,200 in 2012. While it’s possible and probable that remodeling could help explain the bump in prices, it’s still really expensive, especially compared to what I’m used to investing in back in Des Moines, Iowa.

great-deal

Related: Luxury House Hacking: How to Have Your Cash Flow, Equity Appreciation—and Live for (Almost) Free, Too

House Hacking Costs

One of the considerations for purchasing a house hack is that you have to be willing to live in half of it (it's a stipulation for a FHA loan.) When I started to look for duplexes or triplexes, I couldn't find anything listed for less than $450,000 that met the "I'd live here" criteria. For the sake of simplicity, let's go with a final purchase price of $425,000. (Note: Yes, I know that I could spend more time networking/scouting for a better deal, lower my living standards or be open to other neighborhoods, etc.)

  • Purchase Price: $425,000
  • Down Payment: $16,000
  • Loan Amount: $409,000
  • Interest Rate: 4.12%
  • Property Tax: 2.0%
  • PMI: 0.50%
  • Insurance: $1,000
  • Mortgage Payment: $2,985

Now, let’s assume that I rent out the other 1-bed/1-bath unit for $1,600. That leaves $1,385 left to cover the remainder of the mortgage, which is essentially what I’m paying before utilities at my apartment.

Option 2

In either scenario, I do not like having to pay $1,300+ for housing. So I thought of another option. I currently have three rental properties in Des Moines, Iowa and wondered if I might be better off just investing in another property there to offset the high cost of living in Denver. Taking a look at the inventory there, I believe I would be able to purchase a single family home (likely a 3-bed/1 or 2-bath) for ~$130,000 that would bring in $1,200/month in rent.

  • Purchase Price: $130,000
  • Down Payment: $32,500 (25% down to keep the rates lower)
  • Loan Amount: $97,500
  • Interest Rate: 4.2%
  • Property Tax: 1.5%
  • No PMI
  • Insurance: $800.00
  • Mortgage Payment: $700.00

Renting out the house for $1,200 month, I will have $500 to put towards my $1,380 rent, essentially bringing it down to $880.

Pros and Cons

I see the major con of renting being that you’re just giving your money away to someone else—I never like that feeling. Having lived in a property that I owned since 2010, going back to renting was really hard at first. But there are benefits! I like having a gym and a pool. I like not having to worry about maintenance headaches. I like not feeling tied down to a specific location. I also love the location that I’m in, and as they say in real estate, location is priceless. We’re two blocks from Coors Field, we have a grocery store across the street, and I can walk to work almost every day to save money on transportation.

Related: Meet Tim: How One Newbie Investor House Hacked a Duplex With No Prior Experience

Sure, the Des Moines market isn’t as sexy as Denver, and maybe it won’t appreciate as much. I’m losing the possibility to build equity, but I’m also being much more conservative adding a way smaller amount of debt to my balance sheet. Having a vacancy for a few months and covering a $700 mortgage payment sounds a lot safer to me than possibly having to cover ~$3,000 if both units of the duplex were vacant.

Conclusion

Unless I find a killer deal, I don’t believe I’ll be investing in a multifamily unit in Denver anytime soon. Instead, I plan to invest in a market I’m more familiar with and where I already have established properties. I’ll still use the rental income gained to pay my crazy expensive rent in Denver, so I guess maybe it still could be considered “house hacking.” 🙂

[Editor’s Note: We are republishing this article to help out our newer readers.]

House hackers and others: I’d love to hear your thoughts on this strategy!

If I’m not considering something that you would, please let me know!

By Julie Kent

Julie is a software engineer, real estate investor, and book worm. She accidentally fell into real estate five years ago and currently owns three rental properties in the Des Moines, Iowa metro. She couldn't be happier working at BiggerPockets and looks forward to helping change more lives! In her free time, Julie enjoys live music, watching/playing sports, and spending time with her boyfriend and dog.

    Edward C. Investor from Palisades Park, NJ
    Replied over 2 years ago
    Great post. Agree it may be a better option to find additional streams of income given how much properties in certain regions have appreciated. Am in the same boat and would rather wait to swing at a fat pitch than go chasing sliders. Thanks for sharing.
    Nathan Richmond Rental Property Investor from Visalia, CA
    Replied over 2 years ago
    Nice baseball reference.
    Aria Drexler from Greeley, Colorado
    Replied about 1 year ago
    What kind of loan would the second scenario be? I thought you had to be primary occupant to get that kind of interest rate, even with the down payment (conventional/FHA).
    Adam Britt from Bessemer, Alabama
    Replied over 2 years ago
    We are in a somewhat similar boat. The House Hack options I’ve seen in Birmingham (or nearby) are nothing close to a place my wife and I would live, doubled by the fact that we are currently caring for an older family member in our house. Our rent is astronomically high and we NEED another alternative, but I just can’t find a house hack that would be safe and effective. Thanks for your thoughts! I’m actually hoping to jump into getting my first rental property soon, and may well just go rent a spot to live so that I can afford the down payment rather than using all my savings on a house, but losing money I could invest.
    Rebecca Jackson Rental Property Investor from Dallas, TX
    Replied almost 2 years ago
    Same here! There are simply no multifamily units in our area for under 7 figures… and they aren’t in good areas either :/ Why live in the ghetto and put ourselves at risk for money? Life is my most valuable asset.
    Luis Roa Homeowner
    Replied over 2 years ago
    Hmm… let’s think about some scenarios (on paper): Scenario 1. Assume that house prices continue to go up in Denver and that the hypothetical property in option 1 goes up by 10% every year for the next 3 years (a total of 135K give or take). Assume that the property in Des Moines goes up by 5% (this is reasonable ratio of increases between the 2 properties, right?.. then, it will have gone up by around 20K in the same 3 years). In your examples, you have put an additional 16K down payment for the Des Moines property, which is almost equivalent to 3 years of $500 applied to your monthly rent. In this scenario: at the end of 3 years you would have paid the same amount of rent (due to the 16k offsetting the 500 rent savings from the Des Moines property) and you will be ahead by $115K. Please keep in mind that the risk of being an absentee home owner (far from your rental) and the risk of not having both sides rented in the Denver property where there is a higher monthly payment, almost offset each other. Also, please note that the $16K not spent in the purchase, can also be used as funds for any catastrophic event (no side rented for several months). In this scenario, it seems to me that purchasing in Denver wins. Scenario 2. Assume that the Denver house price go down by 10% each year for the next 3 years and that the house in Des Moines goes down by 5% (a nationwide recession hits us). Your property in Denver has a paper loss of $125K give or take. And your property in Des Moines a loss of 17K give or take (rough figures, didn’t calculate exact numbers and it doesn’t matter, a rough figure is OK as this is just a hypothetical example). In this case, you may face vacancy pressure in both rental markets, which one will recover faster? what is the largest draw-down funds you need have on hand to ensure you are not forced to sell at a loss? Obviously, here Des Moines wins.. hypothetically you could lose up to $110K more in Denver as compared to Des Moines. How can you hedge against the potential loss in scenario 2 so that you participate in the (more likely) healthy upside of scenario 1? It is a matter of having funds available to avoid having to sell during the bad times. You are 16K ahead already in the case of Denver. I would carefully get historical data and analyze the patterns during the worse times (how did the rental market behave? longest vacancy expected? how much lower rents had to be to attract best tenants? etc. and equate this to the additional funds to manage this potential problem (could be a line of credit against other properties, that you only use when required, could be considering using a 401K loan, etc… you just need to secure access to those funds when they are needed) I think the upside is high enough that it would make sense to carefully analyze the risks if scenario 2 happens, and bring them to zero with careful planning. Please note that I believe scenario 1 (increase in house prices in Denver) is more likely than a 30% correction from current prices. But, of course, any one of them (or anything in between or beyond) could happen. It is just that the market there doesn’t seem to be as out of whack as the market in San Francisco is, and house values and rents will probably 3 years from now will not be lower than they are today. But, at the end it is a matter of how comfortable people are w/ more or less risk.
    Jeremy D. Investor from Farmington, Maine
    Replied over 2 years ago
    Counting on additional appreciation in a market already at a historic all-time high is called speculation, not investment. Investment is based on sound financials (protection of capital WITH a promise of return), not wishful thinking that government backed FHA loans will continue to push prices skyward. I can’t find any sound reason to justify paying a premium to be in a “hot market” just because others are willing to do so. What do the numbers look like without the appreciation factor??
    Luis
    Replied over 2 years ago
    That’s why I recommended using multiple scenarios, to better understand the situation (scenario where appreciation happens, scenarios where there is a downturn) and deciding what the best path to generate wealth is. But, let’s calculate it “without the appreciation factor” as you say: 1) using a mortgage calculator (such as the one at https://www.zillow.com/mortgage-calculator/) one can see that with the values in the article for the house in Denver, one would have paid it down to $386,285 and would have an equity of $38,715 if the house would not have appreciated at all. 2) Similarly, for the house in Des Moines, the house would have been paid down to $92,156 and the equity would be worth $37,844 (numbers are similar in terms of equity due to the higher down payment) 3) in the case of the Denver house, one has paid out of pocket as follows: 16K down payment, monthly payments of $1385*36=$49,866 for a total of $65,860… subtracting the equity, the net worth is then -$27,145.00 4) in the case of the Des Moines house, one has paid out of pocket as follows: 32,500 down payment, monthly payments of $880*36=$31,680 for a total of $64,180 … subtracting the equity, the net worth is then -26,336.00 So, the difference “without the appreciation” is around $800.00 However: if there is some appreciation, the scenario is different and heavily better in Denver. If there is depreciation, the scenario is different and heavily better in Des Moines Since the name of the game in investing is to end up with more money over a period of time, by minimizing risk, under all possible scenarios, and since one knows that over time, Real Estate tends to go up and recover, even from heavy depreciation, then the real way to accumulate wealth is to go with scenario 1, if and only if, one can survive the potential depreciation scenario, but ensuring that one has enough funds to weather that storm. I welcome other analysis, so that I can learn more, but this is what the numbers say to me.
    Sean Krause from Colorado Springs, CO
    Replied over 2 years ago
    Correct me if I’m wrong, but in the scenarios you just explained, you are betting on appreciation either going up or down? Whereas she is talking about being able to have the cashflow to cover the mortgage?
    Luis Roa Homeowner
    Replied over 2 years ago
    Sean, one of the scenarios has appreciation going up (I think that’s more likely for the next 3 years in Denver) and the other one going down. The article discusses two options: put a higher down payment and purchase a lower cost house in Des Moines, or purchase a more expensive house in Denver with a lower downpayment. The way it was setup in the article the higher down payment and lower cost, resulted in a reduction of $500 per month in rent (but it used additional $16K at closing for down payment) Clearly you can use the same $16K and use $500 per month to lower your rent during 32 months, correct? (16K/500 = 32) So, for close to 3 years from the point of view of rent reduction, they are pretty much the same. The question is: would you fare better 3 years from now, with option 1 (Des Moines house) or with option 2 (Denver house)? Since no one has a crystal ball and can’t exactly predict the future, one has to think about different scenarios to see how one make sure to come ahead. If you are completely risk averse, the option 1 is the way to go, as it minimizes the potential down risk. But, if you can tolerate more risk, and have some additional means of eliminating the worse case scenario, by ensuring access to funds to allow you to survive any bad recession, then option 2 is much better, as it has a very possible > 100K better outcome in 3 years. One doesn’t create wealth without taking some (calculated) risks…
    David Pizzi from New York, NY
    Replied almost 2 years ago
    All fair scenarios, but the issues are two fold. You’re assuming shell have enough equity to pull from those other properties in a recession. Banks tend to pullback on lines of credit during recessions, not keep them running. Data analysis and trebds research is all well and good, but we’ve seen a massive shift the past 10 years since the great recession, so for markets like Denver and Austin, it’s hard to know how and when the next recession will hit. Markets that have more blue collar based that havent had tremendous growth (like Indianapolis) probably wouldnt suffer as poorly as other markets in rents. Point being, assuming outsized appreciation in equity at this point in the recovery cycle with low wage growth may not be the best method to a long term cash flow investment right now. I think the Des Moines property, while more conservative, is the more prudent and successful investment given her existing situation
    Ruth Lyons Realtor from Highland, MD
    Replied over 2 years ago
    Great article. Thanks for sharing. Exploring all options, understanding the numbers and considering personal short term and long term goals is so important to real estate investing success. Congrats on your job at BiggerPockets too!
    Brandon Hall CPA from Raleigh, NC
    Replied over 2 years ago
    Good article Julie! I’m not sure if you have thought about this, but on the house hack option, it didn’t seem like you factored in principal payments. In your example, they amount to roughly $580/mo. Sure, it’s not tangible, but it’s equity that you CAN utilize. So really, your net “out of pocket” is roughly $800 on the house hack option. On your rental property scenario, it seems you are using gross rents without factoring in any expenses to justify the strategy of picking up properties. I’d just caution you that what you make in gross rents never actually makes it back to your pocket 🙂 I’ve tried both of your methods. When I lived in DC, I picked up a 3-unit out of state in a cheaper location. It was a great buy, but the rents never actually offset my DC rent because I didn’t pull the cash out. I didn’t want my investment properties to allow me to justify a higher standard of living. I think it’s a dangerous trap to fall into.
    Account Closed Professional from Dallas, TX
    Replied over 2 years ago
    Thanks for sharing, and it is a viable strategy. The only key difference i see is the “out of pocket” cost between the two scenarios, whereas one gets you in for $16K and the other requires almost 2x as much. Is there a possible scenario where you could FHA in Denver, at or near similar costs, then use that remaining money (available cash being the net difference between the two scenarios) and invest in a cheaper area for cash flow? That way you get the benefit of owning in denver and reducing your housing overhead. Either way I guess i was just trying to make both scenarios where cash out of pocket was equal. Thanks again!
    Danny Stiller from Allen, Texas
    Replied over 2 years ago
    In the Scenario 2 above you are collecting $1200 rent with a 700 mortgage payment. Are you saying the $700 includes the monthly mortgage payment, insurance and property taxes? Also, even if the $700 is all the above pieces (Mortg, ins, tax), do you have money saved back to take care of any repairs/maintenance? Is that a common practice for landlords to have money saved back like self insuring? OR do you use money from your JOB income at BP to pay for maintenance/vacancies, etc?
    Kurt
    Replied over 2 years ago
    The thing you ignore is equity. Say both properties go up 50% in 5 years, that’s a difference of about $150K that you have made in Colorado versus Iowa. Also you are neglecting the amount of principal you are paying which is over twice as much in Colorado.
    Scott Hibbert from Denver, CO
    Replied over 2 years ago
    Julie I have recently been considering a similar question except I will be moving from Boulder, CO to the Bay Area. Expensive to more expensive housing. I own my house in Boulder and will be renting it out for about $750 above my $2250 mortgage, insurance, taxes. I haven’t run the full rental calculator on it to include capex, etc but that’s not the point. There have been plenty of good responses above with details about the various options and I think one more thing to consider is how much your rent in Denver could increase per year vs your Iowa rental income increase per year. I would expect the rent you pay in Denver to increase much quick that your rental income in Iowa which will increase your costs of living every year. For me I am wondering if I should put some of my extra cash to work in an area like Ohio, or Iowa to create rental cash flow instead of using it as a down payment in the Bay Area and just rent for a few years. But at the same time I personally like knowing how much my monthly housing costs will be with my 30 year mortgage and not leaving it up to a landlord to decide. In a month when I move to the Bay Area I will rent to get a lay of the land and an idea of the neighborhoods I want to live in and then hope to buy a 4plex to have better control over my monthly housing expenses year after year and hopefully reduce them by raising rent on the other 3 units while my mortgage remains the same. Just something to consider and how much value do you put on the maintenance free benefits of renting. I think the answer depends on personal priorities and goals.
    Michael Lyons Rental Property Investor from Atlanta, GA
    Replied over 2 years ago
    I have friends in California who have the same logic and want to invest with me in Georgia – it’s just not possible out there for most, so investing in another state can sometimes be the only options. Nice post!
    Kurt
    Replied over 2 years ago
    The problem is, how many Georgia investors become millionaires? Nearly every landlord in the Bay Area and LA is a millionaire and most many times over. Yes, the price of admission is high, but you get what you pay for.
    Fay Chen Investor from Los Angeles, California
    Replied over 1 year ago
    Yea…but the “millionaires” in Bay Area and LA are struggling to find a 3-bedroom house with a nice yard in a decent school district, while the Georgian “sub-millionaires” are chilling in the swimming pool of their mansion with a room for each of their 3 kids.
    Frankie Woods Investor from Albuquerque, NM
    Replied over 1 year ago
    But they have way more options and could easily choose to be FI if they were willing to move.
    Chris Mylan
    Replied over 2 years ago
    Julie, I understand you’re trying to make an argument of scenario A vs B and enjoy the discussion, but why are you limiting yourself to small multis when a single family can work just as well in a major city? At least in DC ( where I am), you can rent out per room at almost the same amount as a 1 bed/1 bath in a more traditional duplex/tri/quad scenario. Also, a 4 bed SFH is usually going to be much cheaper than a quad, so your numbers make more sense. Just something to consider living in a major city where a perceived disadvantage could really be your “unique advantage!”
    Chris Mylan
    Replied over 2 years ago
    Julie, I understand you’re trying to make an argument of scenario A vs B and enjoy the discussion, but why are you limiting yourself to small multis when a single family can work just as well in a major city? At least in DC ( where I am), you can rent out per room at almost the same amount as a 1 bed/1 bath in a more traditional duplex/tri/quad scenario. Also, a 4 bed SFH is usually going to be much cheaper than a quad, so your numbers make more sense. Just something to consider living in a major city where a perceived disadvantage could really be your “unique advantage!”
    Jay
    Replied over 2 years ago
    House hacking / Multi family is the way to go. Do not loose out on additional future income and also your precious time .
    Bill Regan Investor from Clearwater, Florida
    Replied over 2 years ago
    Thanks for the article Julie. Have you considered the strategy recently outlined by Ben Leybovich in his new book and series of blog posts? If you turn the other unit of your duplex, or find a SF with a garden apartment, into a short term rental you can easily double your monthly rental amount thereby offsetting the high cost of Denver real estate. Then you have exposure to the upside potential of appreciation there.
    Scott R. from Torrance, CA
    Replied over 2 years ago
    I get the appreciation upside but the duplex in option 1 would never cash flow without doing short-term rentals. So how would one move on from there into the next property if one wanted to repeat with another MF? Try cash-out in 1-2 years?
    Takeo Kingi from Bakersfield, California
    Replied over 2 years ago
    Interesting article especially on the housing market in those two locations. One thing I did notice was when you referred to “house hacking” you strictly referred to multi family properties and maybe I’ve always misunderstood the term but doesn’t house hacking also apply to single family residents. I consider myself to be a house hacker. I own a 3 bedroom 2 back 1,220 sq ft home. I rent out both extra bedrooms and those tenants/ roommates share a bathroom and each pay rent. After all I don’t know a whole 3 bedroom house to myself. If you were married with kids the scenario would be different but it sounded like you’re single. My house hacking (when both rooms are rented) pays almost my full mortgage payment and works great. My rent is fair and the living conditions are great for us all. I do believe you can have better house hacking success in single family homes if it doesn’t make sense to purchase a multifamily home. Just my two cents!
    Takeo Kingi from Bakersfield, California
    Replied over 2 years ago
    Sorry for the autocorrect spelling and grammar errors.
    Frankie Woods Investor from Albuquerque, NM
    Replied over 2 years ago
    Great article! I like the idea of including the principal payments in your calculation. You also have to consider the tax savings from owning a primary vs rental. Like you, I would never get on appreciation, but if you can house hack to li e at the same level as your renting, I would go for the better market.
    Jerry Chamnichanh from Buffalo, New York
    Replied almost 2 years ago
    This blog certainly adds some perspective to the trendy house hacking idea. As someone who is looking into real estate upon graduating from college, I have realized that I must know the market that I am in. House hacking may not always be the best way to invest. Thank you for sharing!
    Nathan S. Rental Property Investor from Minneapolis, Minnesota
    Replied almost 2 years ago
    Julie, what about PM fees or were you planning on self-managing from afar?
    Julie Kent Investor from Lincoln, NE
    Replied almost 2 years ago
    Hi Nathan! Thanks for your comment! ? I do not use property management for my out-of-state properties. I still manage them remotely. I have a handy-man that I pay hourly if needed, but I do not have to pay the 10% (and other fees.)
    Tiffany Rosa
    Replied over 1 year ago
    Inspiring article Julie. But your example for option #2 does not include any savings towards repairs, capex, wouldn’t this new property need reserves?
    Ken Virzi from Long Beach, California
    Replied almost 2 years ago
    If you used the $32,500 as down on the duplex in the first example, that wold lower your mortgage by a couple of hundred dollars and get you PMI free quicker. Or if you used the $16,500 in cash savings you could either invest a cheaper property as well, or use it discount your rent by $500 a month for three years. In other words, the second example uses a lot more capital so that is what makes it hard. I am with you though as I moved to Miami and the prices are very inflated. The main reason I am considering house hacking is to take advantage of FHA, and that is probably the only reason. However, I am renting a bed in a crowded place and it is so cheap ($285 a month all included) that I keep buying properties but have yet to buy anything that was owner occupied, and feeling that it might be time to change that.
    Robert Thomson from Randolph, New Jersey
    Replied almost 2 years ago
    I think this is an interesting approach to make the numbers work. However, I think one of the key expenses left out was a property management fee in scenario 2. I believe out of state investing is very difficult without a competent property manager in the out of state location.
    Julie Kent Investor from Lincoln, NE
    Replied almost 2 years ago
    Hi Robert, Thanks for your comment! 🙂 I do not use property management for my out-of-state properties. I still manage them remotely. I have a handy-man that I pay hourly if needed, but I do not have to pay the 10% (and other fees.)
    Andy Bondhus from Austin, Texas
    Replied almost 2 years ago
    Hi Julie, my wife and I moved to Austin, TX from Des Moines 2 years ago. We have 2 properties in Des Moines that we also manage remotely and use a handyman if needed. We’ve been lucky also that our current tenants, before moving out, would show the property for us to new perspective tenants and then give us their impression of them. We, of course, still run all our application checks, but it’s nice to know what they thought of each applicant. We too, have considered buying other property in Des Moines just because the prices are so much higher in Austin and since we have family in Des Moines we know we’ll get back occasionally and be able to check in on our rentals. 🙂
    Mark S. Rental Property Investor from Richmond, KY
    Replied almost 2 years ago
    4.2% fixed on investment property with 25% down? When was this originally written?
    Tim Coulter Real Estate Agent from San Diego, CA
    Replied almost 2 years ago
    Great article and great comments to follow showing different perspectives, particularly the comments on considering the value of equity. I live in San Diego, CA and am in a similar situation: invest now in my first rental OOS back in my home state of Ohio or some other midwest/southern market or take another year to save up enough money for a down payment in San Diego, try to find a multifamily where we feel safe enough and the numbers work to decrease our cost of living.
    Deanna Opgenort Rental Property Investor from San Diego, CA
    Replied almost 2 years ago
    Hi Tim, Before investing in San Diego I’d look WAY far back into the history of prices (rent, purchase, & incomes). BP tends to be full of articles treating 5 years as “history”. I’d suggest looking back 40-50 years, and pay attention to what RE prices, rents, & salaries were all doing BEFORE the big downturns. I’d especially look at ’76-82, ’94-’03, & of course ’04-present. For an added bit of fun, see if you can find what different classes of property were doing — in the ’80s high-end properties were the focus of a lot of speculation, vs 2000s, when it was the lower/middle class desperately trying to claw their way into RE at any price & the bottom end properties doubled in a year or two.
    Tim Coulter Real Estate Agent from San Diego, CA
    Replied almost 2 years ago
    Will do. @Deanna Opgenort, can you suggest a favorite resource to research long-term real estate trends and city data?
    Rebecca Baird from Azusa, California
    Replied over 1 year ago
    Awesome post Julie! You have given me much to think about as I enter the real estate world. Thank you!
    Nancy E. Rental Property Investor from Charlotte, NC
    Replied over 1 year ago
    Hello @Julie Kent, Good article, but keep in mind that there are positive and negative differences in SF verse Multifamily. For instance, when you have a vacancy in a single family you do cover all expenses and loss revenue. However, when you have a vacancy in a multi-family you cover half. The likelihood of having a duplex with both units vacant at the same time is 50/50. If you house hack one unit you will still be responsible for the one unit that does not change the equation. Multi family allows for economy of scale on both expenses and revenue. In addition, multifamily repair cost is normally similar to the single family because your expenses are split between two tenants. If your multi family needs a roof it is one roof that covers both properties or if you have a triplex + you can negotiate a better price since the roofing company will be working on the same property. Unfortunately, both types of properties have pros and cons financially. Keep an open mind and consider the benefits of each. Good Luck and best wishes. From Nancy
    Nathan G. Real Estate Broker from Cody, WY
    Replied over 1 year ago
    This is a great example of how we need to consider out current situation and the local market. Successful investors need to think outside the box instead of following the crowd. I think the house hack is still better than renting because you’re at least building equity. But for someone like me with a family of five, house-hacking is almost impossible and not an option I would consider. If I were in your situation, I would probably consider investing in an outside market to increase cash flow and balance out the rent.
    Matt Hourigan from Milwaukee, WI
    Replied over 1 year ago
    Midwest is where it’s at.
    Konrad Utterback from Claremont, California
    Replied over 1 year ago
    Only $1500 and you have a pool? Denver sounds nice… Santa Monica is killing me lol.
    Nancy Wang Real Estate Investor from Boston, Massachusetts
    Replied over 1 year ago
    I just pulled out a similar house hacking situation in Metro Boston. It is a two family each has 4 bedroom 1 bath priced at $445k. One side is rented at $1800 and one side is vacant. Market rent in the area for 4 bed room can be as high as $2300. My FHA loan would be $3200 (P&I 2189, interest 4.375%, mortgage insurance 301). My down payment should be 23k including closing cost. I am an agent I should get 3.5% commission. Basically I may get it for $5k. But I chickened out – mainly because I don’t like the basement – the house is over 100 years old and the dirt floor smells moldy. Also if it rains the sump pump kicks in – the basement is wet. It is a plain Jane kind of house but tenants pay all utilities (gas and eletric). It has rubber roof that will last (by seller) for another 20 years. The house is still on the market as of today – if anybody is interested let me know – maybe I can help you buy it. I have other properties nearby I don’t mind managing it for you or get it rented for you. Thanks – Nancy Wang
    Dean I. from Jacksonville, North Carolina
    Replied over 1 year ago
    Where are the other major expenses like CapEx, repairs and maintenance, vacancy and property management? I understand that you are doing your own property management, but maybe one day you wont want to or be able to. The rest of the major expenses can eat up your cashflow very quickly.
    Frank Jiang Investor from San Diego, California
    Replied over 1 year ago
    You need to back out the principal portion of your mortgage payment from calculations, as well as estimate the tax shield impact of the mortgage on both sides. It’s easily recouped cash inside the year (you don’t have to wait for your tax return) because you can just take more deductions in your W2 income. I understand your mentality that you are being more conservative from a cash flow perspective, but I think it’s important to understand that it’s much easier to build real equity (and thus net worth) in a place like Denver. You address this in your article but I don’t think that’s a message most people are going to take away from the article.
    Martin Minkus from San Francisco, CA
    Replied over 1 year ago
    I love how you guys think Denver is so expensive. I wish I had housing as cheap as Denver available to me. Living and working in San Francisco has me struggling to figure out what to do. $800k to $900k only gets you a small 1 bedroom. Sure, you could airbnb the bedroom out if you are willing to live in the lounge room. Its impossible to invest in property here where renting is cheaper than buying all over the bay area…
    Mike White
    Replied about 1 year ago
    yeah man, here in Canada, almost all major cities are $450+ for a detached. Vancouver is $1.5M The only places to get houses for $50-$100K have little to no industry and a shit rental market.
    Kayla Doan from Boston, Massachusetts
    Replied about 1 year ago
    Your article is a stream of consciousness of how I’ve been approaching living in Boston! I absolutely love my little South Boston neighborhood, and finally had to get over the idea of buying here myself – I also didn’t want to significantly reduce my living conditions, or lock in to living with roommates. I’ve been looking in Worcester and Providence for investments, to offset costs similar to your approach. Good luck, please write with how it goes! PS—Denver is amazing. Stay in your neighborhood and love every minute of it. You only live once!
    Margie Kohlhaas Rental Property Investor from Algona, IA
    Replied about 1 year ago
    I understand your situation coming from expensive living in Santa Barbara and moving to rural Iowa; however, renting is basically throwing your money away. You would be better off investing either in a multi-family complex in Denver or investing in Iowa. I’d take the rental income from your properties to pay part of your mortgage in Denver. Do some research in your area, you might find that Denver real estate is high for a reason and it may continue to go higher instead of lower. It’s a popular place to live and has alot of offer. Investing in your local market might be a good thing.
    Corey Adams from Joplin, Missouri
    Replied about 1 year ago
    House hacking has been great for me, I have a roommate that covers most of my mortgage (P.I.T.I) and I just have to pay the difference of $132 a month. I think it’s easy to forget that the only real benefit of house hacking if you’re going to live in a full unit by yourself is there’s no vacancy, and you should have lower maintenance and repairs because of course a homeowner takes better care of their own home. You still have taxes, insurance, CapEx all that good stuff. If you simply rent out the side you would normally live in, say for $1500 and go rent a single family for $2,000 you’re only out $500 a month, plus the occasional vacancy and a little higher maintenance costs. But you get to live by yourself and for an experienced investor with multiple properties I don’t think that’s much of a trade off. House hacking is best when you’re just getting started, or if you want to go full blown F.I. and rent out rooms in your unit as well like Scott Trench and Craig used to. That’s how you live for free in an expensive market.

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