Why I still love the house hacking strategy

Question

I was recently asked why I've continued house hacking instead of moving exclusively into traditional investment properties (which I do both at this point).

The answer is simple for me: leverage!

With a conventional investment property, you're typically putting down 15-25%.

With an owner occupied 2-4 unit property, you may be able to get in with as little as 3.5%–5% down, depending on the loan program.

That means: building equity while living in the home, having rental income offset my housing costs, more cash for future investments, use rental income from the property to help qualify for the next purchase.

It's also been a great way to gain hands on experience with tenant management, maintenance, and operating a small multifamily property before taking on larger investments.

House hacking isn't for everyone. Sharing walls with tenants isn't always glamorous. But if your goal is to build a real estate portfolio with limited capital, it's one of the most effective strategies I've found.

I'm curious... If you've house hacked, what was the biggest lesson you learned? If you haven't, what's holding you back?

Ryan Rominger · Answer

I think it's one of the best ways to get started if you're comfortable with the lifestyle. Beyond the financing benefits, you learn a lot about managing tenants, maintenance, and cash flow while keeping your housing costs lower. That hands-on experience can make the transition to traditional investment properties much smoother.

Evan Polaski · Answer

@Amber Stout, agreed that it can be a great strategy, but in some ways it is also risky.  More debt = higher monthly costs = harder to cash flow.  For me, I have only house hacked in a duplex, which worked great.  But, that was pre-children.

The biggest piece with househacking, specifically a single family, is making sure you can comfortably afford the property if/when your roommates move out.

Janice Carter · Answer

@Amber Stout I have done house hacking and the biggest lesson I learned is that it is not for everyone. While it has some great benefits, especially for building wealth with limited capital, sharing your living space with a stranger can be challenging. For some people it is a great fit but it is important to be honest about your personality and comfort level before choosing that strategy.

Tom Arrington · Answer

I retired at 40 from the restaurant industry in Maryland. Bought a home with a basement in-law to give mother-in-law privacy as we had been her care giver for 15 years. She became ill and had to stay with us so the unit in basement was empty. I started to rent it to supplement mortgage. I went into Real Estate sales and mortgages for 18 years and moved to Georgia. I wouldn't look at any homes that weren't ranchers on a full basement with a walk out. I'm now retired due to disability, and my basement tenant pays for my 450k home mortgage leaving me with 245.00 a month plus utilities to pay. My son had to move because roommate of 10 years was getting married. he had been paying 800 a month including utilities. He had shell shock looking at true living expenses. He asked me to help him do the same set up so we bought a 3/2 brick ranch with an in-law in the basement that was a walk out. We rehabbed it and now he rents the larger unit upstairs to a family while he resides in the full 1700 sqft 2 bed/1 bath with laundry basement unit.

We just cash out refi that home. Appraised for 400k and the family tenants pay all the mortgage except 325 plus utilities a month. We now took the cash out money and bought a triplex that we will STR 2 units while keeping a 1 bedroom 1 bath carriage apartment for family visiting, us on weekends or live in property caretaker. We LOVE house hacking.

Bianca Barcelos · Answer

I actually finished my basement right after buying my home to force appreciation and generate extra income right out of the gate. I ended up renting it out to friends and acquaintances as a temporary setup.  I always made sure that their rent was extra, not necessary for covering my expenses.  I saved as a next step to my next property(s).

It wasn't until recently, though, I reached a point where I didn't need/value that extra rental income relative the want for my space and privacy back.

That’s really the beauty of house hacking - it’s a tool to boost the potential in other real estate investments forward (particularly in a duplex situation), but it's also totally understandable if it’s not for everyone. Some people are wired and interested to sacrifice lifestyle comfort in the short term for long-term financial freedom and early retirement (and whatever future goals look like for the individual). Others just want a beautiful home for their partner and dogs without ever dealing with tenant management, asset management, or other real estate headaches (and we know those come in all shapes and sizes).

Neither is wrong; it just comes down to your personal goals and what season of life you're in!  I am an investor friendly agent in NH and I work with my clients to understand what their values are in life - I have more investor clients where a property is heavily a business decision but I do have some that are looking with a very emotional eye for their first home.