House hacking?

10 Replies

I've been seeing the term "house hacking" pretty often lately, and I'm curious about what it means. Could somebody please tell me what it is and how you do it? Thanks!

No problem. The basic concept is to buy a property, perhaps a quad, live in one unit and rent the other three out ideally on a low DP loan such as a VA or FHA, so less than 5% down vs the 20-30% required for the same property with traditional financing. After a while, loan seasoning, re-fi the property to a traditional loan, and repeat the process.

If you don't want to mess with a small multi, then you can do it on a SFR, find a property that would be a good rental, live in it for a bit, move and rent it out.

Hope that explains it.

@Zack Broaddus

Another version of House-hacking, often discussed here on BP, is to simply use a SFR (single family residence) as a functional duplex or triplex. This is very common in college towns or expensive markets where you can rent out a basement or individual rooms in your home. You do have to be careful in certain areas that have local ordinances that make this more difficult. Some laws might state that only 3 or 5 unrelated people may live in a home.

You also may not be able to use the rental income from a functional (but not permitted) multi-family property to qualify for the mortgage.

I house-hacked 4 different SFRs on Maui several years back by renting out "ohana" units (mother-in law apartments) that were simply sectioned-off parts of a SFR. My ludicrous mortgage payments were mostly covered by my renters and the appreciation really paid off after 1-2 years in each place!

Have fun and make your own luck!

I am moving to IN and will be doing "house hacking". I am buying a duplex and will live in one side. The rent from the other side will cover all PITA but about $150 (once I get homestead exemption on taxes). That is WITH a 3.5% down FHA loan, so if I did 15% down conventional, rent would completely cover PITA. Once I buy or build a long term house, I will rent the other side and it will cash flow about $200-300/unit. There aren't many 3-4plexes in my area, so hard to find, but there are a good amount of duplexes.

simply put it means to buy a multifamily building like a duple or triplex and live in one unit while renting out the other units. its a good way to start out because of the low down payment. it helps new investors get started.

Great way to start investing!  I am house hacking a 5 unit currently and have learned a lot.  Great learning experience on how to handle different situations, because you're living in the same building as your tenants.  I make sure I have set forth guidelines and the tenants understand them.  Tenants have a way to submit maintenance requests and pay rent online.  This way tenants are not coming to my door at all hours of the day and night.  So far it has been going great.  Screen, screen, screen your tenants!!!  Probably just a little bit more than usual for a rental because they become your neighbors!  Best of luck!

@Zack Broaddus

People typically do it to start out with an FHA mortgage (low down payment - 3.5%) and you can go up to 4 units as long as all criteria is met. 3-4 units must meet the self sufficiency roll a stork rents must equal or be greater than the mortgage payment. I am glad to give you more info on FHA financing.

Jerry Padilla, Lender in NY (#NMLS 1084877)

@Zack Broaddus Here are some links that I have put together for you, hope it will help you on your path of REI. I hope this will answer some of your questions.

Much success to you!

https://www.biggerpockets.com/renewsblog/2013/11/0... (Get Paid House hacking)

https://www.biggerpockets.com/renewsblog/2014/03/13/investing-multifamily-ben-leybovich/ (Podcast 061 - How to succeed in multifamily investing-Ben Leybovich)

https://www.biggerpockets.com/renewsblog/2013/04/09/how-to-buy-a-small-multifamily-property/ (How to buy a small multifamily property)

https://www.biggerpockets.com/renewsblog/2015/11/16/how-to-choose-areas-multifamily-deals/ (How to choose multi-family deals)

http://www.biggerpockets.com/renewsblog/2014/07/19/how-to-buy-a-duplex/(How to buy a duplex)

https://www.biggerpockets.com/renewsblog/2013/12/12/bp-podcast-048-duplex-managing-tenants-darren-sager/ (Podcast 048 Duplex investing and managing tenants-Darren Sager)

Much success to you!

I am currently looking to do the same. I am a beginner and this would be my first purchase. My question is why is it better to put less down vs paying more up front and make your monthly mortgage less? I read it somewhere but it wasn't fully explained. Thanks

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Excellent discussion. I was familiar with the strategy but not the term. 

I imagine this would apply to using a house for some sort of short term rental. If anyone is in Austin, TX (everyone has a place to rent for SXSW). 

Does this term apply to transitioning a SFR into a resort rental use? I am asking so that I can adjust my keywords with accuracy. Great topic!

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