Cash-flowing with a house hack?

Question

What are the best ways to house-hack in 2023 where generating positive cash flow is still possible? When I run calculations I'm finding that cash flow and sometimes even breaking even is hard in T1/T2 cities and their suburbs. I've looked at single family homes with several bedrooms and rent by the room. I've looked at duplex and triplex arrangements and even furnishing attics and basement potential value ads, but most of the time the purchase prices still make cash flowing a house hack seem difficult.

Ace Kaspar · Answer

Hi Scott,

You won't cashflow in T1 cities just as @Eliott Elias mentioned and I can agree with the point made by @Didier Bizimungu as well that most don't cashflow especially in single family.In my certain situation I have 4 roommates so I was able to cash flow by turning my work area to a bed room and renting out the other three bed rooms. Even without the extra room it would have cash flowed but the important thing you need to consider is market rent in the area and the bed + bath situation. It would be a hard sell to house hack a 3 bed and 1 bath but if it was more like 4 bed 3 bath or 3 bed 2 bath then that is a lot easier and has a better possibility of cash flowing.If you want to chat more about this, feel free to DM me.

Eric Yu · Answer

The days of cash flowing a house hack are not gone, but they're REALLY hard to find now. We were able to cash flow our house hack when we listed a separate unit on Airbnb. It's *possible,* but will require work and effort on your part. The other option is finding a property that requires extensive rehab instead, so you can build in equity & find cash flow by keeping your total acquisition cost low.

If you're open to doing Airbnb, you might have some possibilities in the Midwest where you could still cashflow after buying a property. Good luck!

Ben Rhodin · Answer

Hey @Scott Bowen! As many have mentioned, it's important to look beyond just the cash flow aspect of your house hack. You are gaining a lot more than just cash flow, you gain tax benefits, your "rent" is going towards paying down your loan, and not someone else's, you get appreciation, and you get monthly savings from hopefully lower rent. You can factor your "rent savings" as your cash flow in year one until you move out.

Personally, I would analyze the properties as if you weren't living there, and make sure they will work when you choose to move out, as that is the most important figure. With today's market conditions, it is a very tall order to have a cash-flowing house hack. It is basically asking the property to cashflow at 1/2 occupancy, which if that was possible then would be a deal everyone was jumping on. There are still chances to cashflow while house hacking but you have to be able to give up your comfort in order to achieve it.

Ryan Thomson · Answer

@Scott Bowen House hacking is tough to cashflow in year one (with current house price run-ups and interest rates) for a couple reasons:

1. You are living in one of the rentable units

2. You are only putting 5% down so your loan amount is much larger and therefore your mortgage payment.

Lower your standards and get into a house hack that will allow you to avoid throwing rent money away every month. You know this, but don't forget all the other ways real estate makes you money. Paying down your mortgage and owning an asset that will appreciate over the long term.

Michael Dumler · Answer

@Scott Bowen, case and point, a break-even or negative cash flow house hack is better than paying for someone else's mortgage. House hacking is an investment strategy that is pitched to newer investors and first-time home buyers allowing them to enter into the real estate space by utilizing an owner-occupied loan. Similar to any other investment, you won't find many on-market house hack deals that cash flow positive. Some viable house hacking strategies include; renting individual rooms, properties with an in-law suite, or finished basement that can be sourced as an STR, 2-4 unit deals, etc. If you want house hack deals that cash flow, you either need to acquire off-market properties or start submitting offers below asking. As Tanner mentioned, it's also necessary to plan an exit strategy. Will the deal cash flow after you move out? This is the question you should be asking and thinking about. Hope this helps!

Tanner Pile · Answer

On my house hacks I plan to have lower rent than I would renting in the area. In Colorado if I can get where I only pay $900 or less I consider it a win because my end goal is to move out and have a cash flowing rental when it is fully rented.

Creative house hacking I've seen people do is to offer RV parking or charge extra for garage parking. Some will even live in the RV and rent out the house fully.

The end goal for house hacking is to have a lower housing expense and get into owning real estate at a low cost to entry.

Hope this helps!

Didier Bizimungu · Answer

To add to Eliott's point, most folks don't cashflow their house hack.

Instead, they look for at least 50% to 75% coverage of the mortgage expense.

Thank you,

Eliott Elias · Answer

They don't cash flow in T1 cities. The play is to hold and hope for equity, which is not investing. I don't invest in single family in these kind of cities.