How to house hack a primary residence?

Question

What are the laws against house hacking a primary residence? And is it possible to House hack a SFH as a primary residence?

Would i have any legal problems house hacking a single family home?

Please do advise me??

Mindy Jensen · Answer

House hacking a single family residence is just a fancy way of saying "Having a roommate."

Joe Splitrock · Answer

I am so glad someone finally said it...

Zach Whicker · Answer

I recently bought a SFH “house hack” with a FHA loan - my advice is to run the numbers for both the FHA and Conventional. Why put down more than you need? Granted you’ll pay mortgage insurance on FHA “forever” but if the numbers work out, especially when/if you move out, then it may be worth considering.

Financing aside, my property is a 3/2 with a 1/1 in law efficiency attached. So my plan (which I’ll be complete this weekend with signing the lease) is rent the 1/1 for ($1150, all utilities, WiFi included) and split the rest of the mortgage with my girlfriend. The total monthly mortgage is $1700/month, this leaves us at very little monthly cost to live in central Orlando, in a house we own. (For reference, she was paying $1200/ month (no utilities) for a 1/1 apartment and I currently pay about $800 w utilities for a townhouse with a roommate.)

The FHA financing and sellers paying closing costs allowed me to have extra money to renovate the 1/1 a little, and thus increase monthly rent.

Now, I am using a normal lease that would be used on a regular property, but as others said, you can be picky with who you choose. A friend rents his place near the local college and has certain requirements since he’s living there too.

Also... make sure to have good savings on the side. I bought the house last month, and had to replace the AC this week. Terrible decision on my part to not make the previous owner replace it (they were firm) BUT, it was a $2000 learning lesson!

You sound like you have a good plan, just make sure the numbers work and take action!

Good luck! Message me if you have any questions!

Charlie John · Answer

I am currently house hacking. I bought a distressed home in a great area in fall of 2018. I paid 250,000 for it and have put in 150,000 into renovating the property. It was a 1988 built home, very solid but dated. Simple to renovate as most of it was upgrading new kitchen bathrooms, paint , floor and fixtures.

The value after renovations is around 575k. We will be putting it on the market end of summer. As long as I sell the property 24 months (or later) after I purchased it, I will not pay any tax on that gain.  My wife is a licensed realtor so we will save on commissions too.

That should net out around 150k, tax free. And we got to enjoy the property for the last two years. My plan is to roll that equity into the next house and repeat the process. After a lot of hard work and a few more houses, we could potentially buy a home outright. There’s no way I could see myself saving to paying off a 30 year mortgage in the same time period.

This is a different kind of house hack but it allows us to live somewhere nice, raise our 3 kids and still create opportunity. No way would my wife live in a multi unit situation. :-)

Twana Rasoul · Answer

If you live in the property and make it your primary residence then you can qualify for an owner occupied loan which opens you up to options such as fha financing with as little as 3.5% down payment, but you have to live in the property for a year.

If you decide not to live in the property then it is a non-owner occupied investment loan and you typically have to put 20-25% as down payment

hope that helps

Twana Rasoul · Answer

you can house hack a single family by renting out the other rooms or you can house hack a 2-4 unit property and live in one unit and rent ou the other(s).  The advantage you have here is that by living in the property, lenders allow you to put very little down to purchase the property and with 2-4 units they can count rent of other units towards your income to qualify for a high loan amount than you would otherwise.

Best of luck!

Matthew Porcaro · Answer

@Donovan Maskell

I househacked by purchasing a legal 2 family. That way there was no issue, but I don’t think there’s any real law against subletting rooms in your own house. It’s your home. Unless you begin to overcrowd the house.

But I guess every jurisdiction is different...

Zach Whicker · Answer

I do not - my first tenant will be an old coworker friend until October.

Personally I would browse the forums and check recommendations from others and go with the highest ranked of those

Michael Freed · Answer

I am a Noob to Bigger Pockets, and I am new to the Real Estate Investment Game as well..I've had an interest for quite some time in a real estate investment path and in March I finally decided to do something about it. I'm starting with a house hack for my primary residence, I've carved off a 600 sq ft section of my house and I'm turning the space into a full studio apartment. It will not be accessible from my portion of the residence, there is a separate door for entry into that space. I'm acting as the GC and I am doing some work myself (I am an Electrician). The project is on pace to complete by the August 1st deadline I set for myself and I have a tenant lined up to move in that day. I'll have a 30% Cash on Cash return my first year for the money I'm putting into the project and I'll have less wasted space in my home. Looking forward to completing this project and moving forward with other buy and hold, wholesaling, and flip opportunities. I like the idea of this kind of house hack as a good starting point, and should I decide to move in the future, the house will serve as a duplex with a 4 bedroom 2 bath as one unit and the studio apartment as the other unit. Good luck with your house hacking endeavor!

Zach Whicker · Answer

@Donovan Maskell

$600/ room is definitely reasonable, that’s near what I would price my spare room if I decide to rent it out.

As far as AC, if the seller won’t lower price because of age and cost of replacement, go with home warranty at minimum and make the seller pay for it.

On that note, home warranty only covers certain things, and in my case wouldn’t have helped. My hone warranty would have fixed the AC if it broke, but mine was so inefficient it couldn’t cool the house down on a hot day last weekend. Works great when it’s cooler, but it’s a super old system and needed replacing.

I got the Home warranty for peace of mind, but I did just come out of pocket for the AC, so as I said, learning lesson.

Research the benefits of the home warranty and visually inspect your units if you’re concerned. My inspector said AC would need to be replaced in 5 years, which was a joke. I inspected it myself this week and the fins within the old unit were deteriorating and were crumbling away.

Just talk with your agent and express concerns and see what they can do for you!

I’m a newbie so this is just my 2 cents - only speaking from the experience I have, so I hope it helps!

How to house hack a primary residence?

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