House Hacking: is it worth the higher house price?

Question

I’m based in Utah. I’ve been thinking about househacking and would appreciate some advice, since I still don’t quite understand the advantage of house hacking. Two scenarios:

Scenario 1: House A

- Purchase price: $380k

- Monthly expenses (mortgage, insurance, tax): $1500

- No house hacking, so my family would pay the full $1500 monthly.

Scenario 2: House B (bigger, with an ADU)

- Purchase price: $460k

- Monthly expenses (mortgage, insurance, tax): $1900

- Rent out the ADU for $1200/month.

- My family would live in the main house and pays the remaining mortgage of $700/month

Considered that I’ll put down the same $ amount of down payment for both houses. Both houses are single family homes.

Here's the math:

- House A: Monthly expense is $800 lower ($1500 - $700).

- House B: The property is $80k more expensive.

- Time to recoup the difference: $80k / $800 = 100 months or 8.3 years.

In terms of finance, is house hacking worth it? It does decrease my monthly mortgage expense, but the houses that can be house hacked are often more expensive.

I'd appreciate your insights and experiences with house hacking. what number did it make sense for you to consider paying more for a house to house hack. Did I miss something as to why people want to househack so much? Please enlighten me! Thank you so much !

Josh Bowser · Answer

Hey Annie - you're asking the right question here.

With the assumption you can comfortably afford both houses without the rental income AND they are in equivalent neighborhoods, the house hack will be better from a pure financial perspective for the following reasons:

1. Appreciation of a higher priced house will lead to a $$ of appreciation due to leverage. Let's say both houses appreciate 10% over the next 10 years, then you have gotten an extra $12k in networth from the same down payment.

2. You can save/invest the $800 dollar difference over 10 years and have an extra $96k liquid over that period of time OR use that extra $800 to help pay down the mortgage faster.

3. Higher home value means you can depreciate more $$ every year

4. If you choose to move in the future, you have the ability to rent out both units and will likely cashflow based off your numbers.

5. It is possible that market rent for that ADU will also increase over time.

In other words, your time to recoup the difference will likely be less than 8.3 years on paper depending what you do with the extra $800

Julien J. · Answer

I like the long term thinking. Year on year rent increases and appreciation is where the wealth is built.

Alan Asriants · Answer

Usually multi family properties are always valued more than single family.

The goal of house hacking is to offset your monthly housing expenses while reaping benefits of RE:

1. appreciation

2. rent

3. tax benefits

Yes, buying a multi family is usually more expensive, but what you have to consider is that you should also see higher appreciation.

So owning the more expensive asset now should make you wealthier in the long run.

if owning the multi family is cheaper per month after renting it out, it is worth it. Honestly even if it is a bit more expensive it is worth it when it comes time to do your taxes.

If you're not renting out house A, you can only write of limited amount of items

As a house hack you reap same benefits as a rental property (depending how much of the space you occupy)

NOT a CPA. But considering tax benefits is also important

I'd say start with the house hack, then get your primary

Brandon Allenczy · Answer

Hey Annie:

Like everyone else mentioned, you're thinking about this in a great way, but I absolutely believe househacking would be the way to go for a few reasons.

1. You're buying a much nicer (most likely) property, and paying less than half the monthly expense.

2. Over that 8.3 years, you'll most likely have realized much more than just the $80K. You will have saved that from your monthly payment, but also appreciation, loan paydown, and tax benefits over time will likely add up.

3. You can get creative to cover the full mortgage payment. Look into other types of rentals like medium term rentals. Often the rental rates for these are 1.5x-2x long term rentals, and ADUs make great units for this strategy.

Good luck!

Chris Seveney · Answer

How much $ you putting down on the mortgage? payments seem really low? To me house hacking is more about the lifestyle than anything. Do you want to have to share a house with someone. Even if its a ADU, you have someone else living on your property that may come home at 2 am and the car wake you up etc. The house hack is probably the better option if you are ok with that lifestyle.

Carl Davis · Answer

I really like the way you’re thinking about this.

As someone that’s house hacked here in Utah 3 times now, house hacking is a no brainier.

Not only are you able to subsidize your monthly payment but you’re also gaining appreciation and you’re able to create a small rental portfolio within a few years.

When I look to purchase a house hack my overall goal is to buy property that will gain in appreciation and that I will cash flow from when I move (even if the numbers don’t pan out when I first buy).

If you buy the property you are looking at with 3.5% down, and then you only had to pay 800/mo for your home, PLUS it cash flowed after you move in a year or two is it really YOU paying the extra 80k? Isn’t that the whole point of leveraging real estate? That someone else is paying down your loan?

Plus with a more expensive asset a lot of times these may gain more appreciation then the one at a cheaper price. Hence why it’s more expensive in the first place.

With all of these things factored into the equation I think it is a much better solution than purchasing a property with 20-25% down and paying another 2000+/mo for your personal residence.

If you have more questions about how I’ve house hacked in the area, feel free to reach out. I’m an open book.

Taylor Dasch · Answer

I'd say it's definitely worth it if you can comfortably afford the payment on the higher-priced home. The long-term play here is huge—you're getting appreciation on a $460k asset instead of a $380k one. Plus, when you eventually move out, you have a solid rental property with multiple doors to cash flow. That $800 difference could easily be reinvested or thrown at the principal. Sounds like a win-win situation to me!

Ryan Thomson · Answer

I'd consider using a spreadsheet/calculator that can capture the total net worth ROI of buying a home (Loan paydown, appreciation, tax benefits, etc). Here is how I do that calculation.

Ryan Thomson · Answer

Maybe I'm crazy but I also think you are saying that wrong. House B is actually $800 lower in monthly payments.

If you are looking to scale and save money then House B seems like the better option.

Ryan Thomson · Answer

@Annie Tran the advantages of house hacking are being able to purchase a property for 0-5% down. You are then leveraged 20x on an asset that historically has always gone up over the long run. So if you have a plan to be able to pay the monthly payments it is an incredible investment especially compared to renting.

House Hacking: is it worth the higher house price?

House Hacking: is it worth the higher house price?

Most Popular Reply

14 Replies