{"id":90965,"date":"2017-08-07T14:30:33","date_gmt":"2017-08-07T20:30:33","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=90965"},"modified":"2024-02-24T12:43:17","modified_gmt":"2024-02-24T19:43:17","slug":"problem-with-house-hacking","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/problem-with-house-hacking","title":{"rendered":"The Problem with Traditional House Hacking (& Why I Had to Find a Better Way)"},"content":{"rendered":"

My view of what house hacking is and how to use it is quite different from what is commonly discussed on BiggerPockets. In order to better understand what I\u2019m proposing and whether it is appropriate for you, we must address the global perspective on why we do things in general\u2014and then boil that down to the level of house hacking. We began this discussion in the previous article<\/a>. Let\u2019s continue.<\/span><\/p>\n

What Is House Hacking?<\/h2>\n

Think of house hacking<\/a> as a blend between that which is home for you and your family and that which is a real estate investment. The thing we must acknowledge here is the very well-hidden-in-plain-view reality, which is this:<\/span><\/p>\n

It is hard enough to find a home that works for your family without any regard to its investment value. And, as you know, it is also hard to find an investment property worth buying, without any consideration given to it becoming your home. But combining these two perspectives together and finding a piece of real estate that works as both a great home for you and a good investment opportunity is just crazy hard. Think needle in a haystack.<\/span><\/p>\n

\"rental-property-pros\"
\n
\nRelated:<\/strong> The Tax Implications You MUST Understand Before House Hacking<\/a><\/em><\/p>\n

Some Perspective<\/h2>\n

The main objective behind house hacking is to offset the monthly burn. But at what cost?!<\/span><\/p>\n

There are two ways to look at this problem.<\/span><\/p>\n

Scott Trench<\/a>\u2019s way is finance-centric: I will buy a property that fits my financial plan. I am OK sacrificing comfort for the greater good of my wallet.<\/em><\/span><\/p>\n

While principally this is not wrong, it obviously only works for Scott, Craig<\/a>, and their friends under the age of 30 who\u2019ve discovered independence from their parents and some degree of personal finance. This, by the way, is no small thing among the Millennial generation and is to be applauded. (Scott and I argue publicly because it\u2019s good for ratings, but I wonder how much we actually would agree upon in private.) That said, what\u2019s good for Scott is not workable for all of us.<\/span><\/p>\n

Another perspective is life design-centric: The main point of house hacking for me is not saving money\u2014that\u2019s the necessary augmentation. But the main point has to be the comfort of my family. In other words, doing an effective house hack is pointless unless we are getting exactly what we want relative to life design. We are not willing to compress ourselves even one iota in order to save money. We want what we want, and saving money (by way of house hacking in this case) simply has to fit the overall picture.\u00a0<\/span><\/p>\n

The thing is, if we do this right, we can have both. We can have all of the above.\u00a0<\/span><\/p>\n

Abundance of resources, not scarcity! The reason I did this house hack is because it got me to where I was going more quickly and more easily than any other approach\u2014and where I was going was to 10X my lifestyle.<\/span><\/p>\n

The Problem<\/h2>\n

What we want costs some dough. And while I think differently from Scott in a lot of key ways, in at least one way we think alike\u2014we want someone else to pay for our lifestyle. This might sound cynical, but it\u2019s the truth, guys. It\u2019s the essence of real estate and business in general. <\/span><\/p>\n

Since, as we established, we were not willing to compromise on the lifestyle to accomplish this, I could not simply start with the math. I could not say, “The numbers look good on this, so let\u2019s do it.”<\/span>
\n
\nRelated:<\/strong> A New Way to Look at the Concept of \u201cHouse Hacking\u201d<\/a><\/em><\/p>\n

Instead, I had to start with the product. The location, house, footprint, amenities, and all the rest had to conform to the vision of what we wanted and needed for our family. Otherwise, there was no point to this exercise!<\/span><\/p>\n

This meant that once I found exactly the thing we wanted, then I had to find a way to \u201cbend\u201d the math to facilitate the deal!<\/span><\/p>\n

These are the different approaches\u2014one starts with the math, while the other starts with the quality of life.\u00a0<\/span>An elegant solution was required, but more on that later.<\/span><\/p>\n

OK, let\u2019s just agree\u2014we are not renting futons or bedrooms in our SFR. <\/span><\/p>\n

I know what you are thinking: If we are not renting spare rooms, then we must be searching for a small multifamily<\/a>. The reason you are thinking this is because it\u2019s everyone\u2019s go-to solution.<\/span><\/p>\n

I considered it, but decided against it.<\/span><\/p>\n

\"credit-report-loan\"<\/p>\n

Small Multifamily Has Drawbacks in House Hacking<\/h2>\n

There are some very real drawbacks to using multifamilies to house hack. It\u2019s true\u2014some people will be able to work through these drawbacks. Nonetheless, let\u2019s touch on some of the issues of house hacking in multifamily.<\/span><\/p>\n

They’re not upscale enough.<\/h3>\n

Fact: You are highly unlikely to find a multifamily where you can combine the words “house hacking” and “luxury” in one sentence. Indeed, most multifamilies are not well enough located and constructed to facilitate any type of lifestyle upgrade for most people.<\/span><\/p>\n

Well, that kind of kills it for me. How about you?<\/span><\/p>\n

Management is more challenging.<\/h3>\n

Follow my logic. It needs to be mentioned that:<\/span><\/p>\n

    \n
  • If you buy a higher grade asset, you\u2019ll be able to charge more.<\/span><\/li>\n
  • If you can charge more, your audience will be more affluent.<\/span><\/li>\n
  • A more affluent audience is generally easier to manage (not always, but as a general rule of thumb).<\/span><\/li>\n<\/ul>\n

    Most of the money in income property is lost by way of economic losses, and so you have to ask yourself, what do I want to own and which will attract the audience that is less likely to cause economic losses?<\/em><\/span><\/p>\n

    Most of the time, the answer is not multifamily.\u00a0<\/span><\/p>\n

    They’re not private enough.<\/h3>\n

    I\u2019ve got two kids. Privacy and safety, for me, were absolutely paramount. And this concern is not eliminated by not sharing bedrooms. <\/span>The proximity in multifamily is a bit much for me. How about you?<\/span><\/p>\n

    Today, multifamilies are over-priced.<\/h3>\n

    …at least any place you\u2019d remotely want to live in.<\/span><\/p>\n

    The exit strategy is cloudy.<\/h3>\n

    Exit is all about who your market is and your ability to align yourself with them. The fact is that out of 100 potential buyers of that 4-plex, 99 are investors. Limiting yourself in such a way on the exit is not smart.<\/span><\/p>\n

    Conclusion<\/h2>\n

    Someone accused me the other day of asking questions instead of giving answers. <\/span><\/p>\n

    Yeah\u2014so what?!<\/span><\/p>\n

    There are a lot of dynamics and mechanics I could be talking to you about\u2014and I have, and I will. But what I really want you to take away is the concept of abundance.\u00a0<\/em><\/span>Life is to be lived fully and without compromise. House hacking is to be done without compromise as well. The more you think \u201csmall,\u201d the more \u201csmall\u201d you\u2019ll attract into your life.\u00a0<\/span><\/p>\n

    None of that nonsense, guys! Abundance is yours; you just have to materialize it. <\/span><\/p>\n

    Next week, I\u2019ll give you my formula! (P.S.\u00a0The answers to the questions are between the lines!)<\/p>\n

    Are you house hacking as a real estate investment strategy? Do you agree with the drawbacks above\u2014or have you found a way around them?<\/em><\/p>\n

    Weigh in with a comment!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

    We want what we want, and saving money (by house hacking) simply has to fit the overall picture.\u00a0The thing is, if we do this right, we can have both.<\/p>\n","protected":false},"author":810,"featured_media":84756,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7356],"tags":[],"class_list":["post-90965","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-house-hacking"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/90965","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/810"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=90965"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/90965\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/84756"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=90965"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=90965"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=90965"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}