Will House Hacking work with single family homes?

6 Replies

I'm asking strictly about the numbers. I know it will be harder looking for tenants/roommates and the management will be different. I live in a college town so I'm hoping to find friends and friends of friends to room with me.

There are not a lot of duplexes in my town that are for sale. The ones that are up for sale are out of my price range.

I'm assuming 'house hacking' could work because there are plenty of single family homes that are successful rentals.

I'm currently looking at some 3 bedroom / 1.5+bathroom houses and some of the numbers are working out for me.. 

@Minh Lai

You can rent out rooms with your primary residence. The income from renting out rooms won't count towards your DTI's with a SFR for financing purposes. It is a great way to live for free though!

My college age sons are sure hoping so.  It's a great idea.  

Can you qualify to buy 2 SFHs?

The first step is to buy a SFH and rent out two rooms. Then after a year you have met the owner-occupied requirement. If you qualify for a 2nd loan you can then repeat the process. Make sure the numbers work long-term also - including repairs and cap ex.

After 2 properties you will end up with 6 tenants so this isn't the simplest strategy.  Although you probably can use at least some rental income from the first property when you are trying to get a 3rd.

One slower low-cash method would be to spend 2 years in each property. Acquire with a FHA loan for a property that needs some sweat equity. Then refinance after a year using the increased appraise value. Then once you have fulfilled the owner occupied requirement you will be able to acquire your 2nd property.

Hacking a single family home can be extremely lucrative if you are in a high rent area. My Seattle home was originally a 2 bedroom home with a full daylight basement. A prior owner had finished the basement adding two  small rooms and a laundry area. Ultimately, by renting out rooms, hacking spaces and lots of trial and error I managed to create 3 separate units in the basement which give each tenant their own maximum space (minimal sharing). I continued to live upstairs renting out the second bedroom for $800 as well bringing my rental income to $3200 downstairs. After a while I knew I could get more from renting out the 2 bedroom house upstairs and eventually moved in with my girlfriend and was able to get $2000 for the upstairs space alone bringing the total to $5200/mo. 

This transition happened over about 7 years where I learned lots about tenants, maintenance and strategy. In order for me to be able to move out I had to have eyes on the property so I found an unemployed carpenter who I trusted enough with my room and who was willing to trade. He then became the full time manager.  Ultimately I had him build me a two story mini house in the backyard which I can rent for at least $1000. He has been living there ever since he completed it though my plan is to move him back into an $800 room as soon as I get a vacancy (which is rare). I stopped having a job about 2 years ago and have not looked back.  On to the next challenge!

Thanks @Lisa V for the comment. I haven't seen lots of multifamily units in areas I want to invest in. I hope to purchase a sfh and convert the basement to a fully functional unit. I've lived alone for most of my adult life and it would be tough renting out the upstairs bedrooms to long term tenants. I'm thinking of maybe trying airbnb and see how it goes.

We are currently using this option. When my daughter went to college, we bought a three bedroom condo. We rent the other two BR and she lives in the third. With Mortgage, HOA, Utilities, etc we break even on the rent from the two BR and she lives with no housing costs out of pocket. You also mention using your network to find renters. - great thought. With families we know and friends our daughter has made, we have a steady stream of potential renters. Our youngest is 3 years away from college. Even if she does not attend the same school, we have enough families already asking about our property, we should have a steady stream of rental income for the next 4-7 years.

Good Luck!

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