Is House Hacking is creating a bubble?

2 Replies

Is it just me or has the concept of house hacking gotten a little of out control? I find that areas in my desired markets zoned for 2-4 flats are being driven up by first-time home buyers looking to be saavy and "house hack".

I love the idea, definitely a fan of the theory!! In my mind, a house hack should create a very low ($500 or less) monthly housing expense or eliminate your housing costs all together. I see many posts and folks in REIA groups buying small 2-4 unit properties at a higher per unit cost than a SFH. Or their share of the mortgage/expenses (w/ 100% occupancy) is higher or equal to market rents.

Evictions can happen with a house hack and i think a see a bubble. also, a true "hack" is living at the same level you wish but paying much less. Always felt the "nomad" method/live-in to rental was better for starting off and scaling. 

Meh. With interest rates artificially low demand for real estate rises and with more people getting priced out of single families more of them opt for small multi-families. 

When interest rates increase demand eventually declines, but we're still in the fear of missing out stage. Fundamentally though the price increases are driven largely by inventory shortage, not risky mortgage lending practices so there's no reason to expect that the next credit crisis will stem from the housing market though it will no doubt be affected. 

Originally posted by @Ibn Abney :

Is it just me or has the concept of house hacking gotten a little of out control? I find that areas in my desired markets zoned for 2-4 flats are being driven up by first-time home buyers looking to be saavy and "house hack".

I love the idea, definitely a fan of the theory!! In my mind, a house hack should create a very low ($500 or less) monthly housing expense or eliminate your housing costs all together. I see many posts and folks in REIA groups buying small 2-4 unit properties at a higher per unit cost than a SFH. Or their share of the mortgage/expenses (w/ 100% occupancy) is higher or equal to market rents.

Evictions can happen with a house hack and i think a see a bubble. also, a true "hack" is living at the same level you wish but paying much less. Always felt the "nomad" method/live-in to rental was better for starting off and scaling. 

From what crosses my desk, I'd say that buyers sometimes get a better deal on a large SFR that's easily converted to multiple units. Better interest rate and stuff, too.

This is zoned, was priced, sold, financed, advertised on MLS (meaning you wouldn't see it if you limited your search to multifam), etc, as a single family home (old pic from google street view, I blacked out the single street address)... we had to do some property specific stuff prior to the appraisal.

Note the front doors, and what the window down below implies too.

People dropping $200k on ADUs aren't subsequently selling those homes for $200k more. Those are also financed as SFRs. People don't generally build ADUs unless they intend to be there for a while, so the ones listed are often divorce cases.

Back to OP question, I don't think there's a bubble. 2-4 unit properties in my area are appreciating slower than SFRs (you think the 1% rule is tough to find in a Bay Area triplex, try to find it on a SFR!). The market is still overwhelmingly dominated by husband/wife/kids families buying homes to live in, and they don't want to share walls. The husband maybe read Rich Dad Poor Dad and wants a multifam, but wife wants to nest and have space... wife usually wins. So they buy an SFR, and this demand is what drives values.

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