Feasibility of this “house hacking” alternative??

5 Replies

Hi all, 

I was hoping folks with some experience might be able to give me a bit of advice. I’m roughly familiar with the idea of housing hacking from this site and the BP podcast. I generally see or hear it described in terms of purchasing a duplex or apartment building and then occupying one of the units for a certain period. Although that seems like a great idea, I’m at a stage in life where moving my family back into a duplex or apartment for a temporary period as an investment strategy is likely a non-starter.

That said, we recently moved and will be in the market for a home relatively soon, which got me thinking about whether the following alternative might be feasible: We’d purchase a lot and then divide the lot in two. We’d construct two separate homes, one on each of the two divided lots. We’d then rent out one of the homes and live in the other as a permanent residence, attempting to recreate the house hacking strategy but with my family ending up in its own house that we would plan to stay in indefinitely.

At minimum, this would seem to clearly increase the complexity of the strategy because now I’m effectively developing the land in addition to everything else. That seems a bit imposing for someone who lacks experience as a real estate investor generally (my experience is limited to one rental unit that I more or less backed into when I decided to rent my former residence). On the other hand, I imagine that I could learn a lot quickly by going through this process and that could be useful in future endeavors.

Any thoughts on whether this would be a workable idea or whether it would be too much to take on? Also, any thoughts on how a bank might view financing this type of project would be appreciated.

Thank you!

At that point, you wouldn't be house hacking as much as you would be developing. Because you will be paying to construct 2 homes, I don't see a way to benefit from the efficiencies of house hacking. You might be better off finding a home with a detached ADU and renting that out. Usually, you can get a better deal if you purchase one that is already finished instead of building a new one.

@Gunnar Haugen I love the creativity, but I agree with the other posts. I would look for a home that already has 2 houses on the lot. You could also look for in-law units, garage apartments, homes with 2 entrances, a basement apartment, etc. There are many ways to house hack without having to live in multifamily properties. 

Thank you all. 

And yes, I was thinking it would potentially be cheaper as I'd try to cut out the retail profit. I live in a relatively small town but prices for finished homes have increased significantly in the past several years, so I was attempting to avoid paying for that too much. 

But it seems that the alternative route suggested above may be a better one that I can look into. It certainly seems easier from an execution standpoint, so I like that. 

Thanks again! 

@Gunnar Haugen I would suggest looking for homes that have an in-law suite with a separate entrance or where you could add something like that on relatively easily. This strategy would be particularly effective if you are in a good short term rental area.