House Hacking a Wave of the Next Generations??
Hey gang!
I wanted to share an interesting article.
In short, the article states, Gen Z & Millennials are using house hacking (HH) with rising prices and current interest rates to begin home ownership. More than half of the surveyed Gen-Zers and Millennials agreed HH as positive.
The article, mentions a household would need at least $114k to afford a median priced home ($420,000 as of writing). I think HH provides these new home buyers the opportunity to purchase a home with some financial flexibility being able to rent out portions for extra income.
I think Gen Z & Millennials are more keen on a nomadic lifestyle too. A lifestyle that they can travel frequently and for longer. A solid HH gives them that flexibility to maintain that lifestyle. I've met several Millennials, like myself, that rent out portions of their home and their entire home while they go away on multiple week travel excursions to offset most or all of their mortgage.
How do you all feel? Do you think this is a wave of the future or just a trendy strategy for now?
I think it is here to stay for my generation and future generations. As a house hacker myself, I am doing it at my wife and I's current duplex and will continue to do it for at least our first few properties.
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I'm from the generation no one talks about and we've had the same househack since our Gen Z kids were 2 and 4.
We are paid to live here after all expenses- T, I, maintenance, utilities, internet, etc.
Either way, I'm glad it's being more recognized as a good housing option.
When rent vs buy influencers like Remit lay out their case for renting, I always raise my hand and say how about the hybrid of househacking.
With housing prices and all prices so high, multi-gen households will be more common here in the US like it is in other cultures and HH is an excellent option for older and younger family gens to stay closer and save $.
@Steve Vaughan That is awesome you're getting paid to live in your housing situation!
Yes, a lot of personal finance people preach the rent option, but house hacking is almost always superior.
I think you're right about the multi-house holds. Personally, I think even at our forever home we would like to have an in-laws suite, separated basement, or an ADU of some sort to house our parents.
I appreciate your input Steve!
I totally agree and I think it’s going to start becoming a necessity. House hacking isn’t just for the rookie investor anymore trying to start a portfolio. With prices as high as they are and income not keeping up I think more and more families will buy property together.
I think that the first part of your question is the bigger reason. Its an affordability thing moreso than a nomadic lifestyle or a love of travel. I know people who love to travel and move often... they mostly rent.
I think you are seeing a rise in HH among Millennials/ Gen Z due to everything becoming more and more unaffordable.
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I'm Gen-X and I "house-hacked" before it was "cool" and much before it was called "house-hack". I think back then I called it "let-me-get-some-roomates-so-that-I-can-offset-the-mortgage-and-other-expenses". This single trick allowed me to exponentially save into my next real estate deal and so on and so forth.
I also agree with @Steve Vaughan's sentiment above.... agree with about 99% of Remit's advice EXCEPT him saying that renting is cheaper than buying. Anytime Remit states that renting would be cheaper I always feel like saying....well, when you're renting you're paying 1000% in interest! You get NONE of that money back when you leave the property. If you have to live somewhere, might as well buy so that some day you'll get an ROI.
I agree. Income not keeping pace with housing prices will be a huge factor for multi-generational house holds & house hacking.
Unfortunately, I think affordability is probably the bigger reason too. You're right.
Quote from @Manny Vasquez:
I'm Gen-X and I "house-hacked" before it was "cool" and much before it was called "house-hack". I think back then I called it "let-me-get-some-roomates-so-that-I-can-offset-the-mortgage-and-other-expenses". This single trick allowed me to exponentially save into my next real estate deal and so on and so forth.
I also agree with @Steve Vaughan's sentiment above.... agree with about 99% of Remit's advice EXCEPT him saying that renting is cheaper than buying. Anytime Remit states that renting would be cheaper I always feel like saying....well, when you're renting you're paying 1000% in interest! You get NONE of that money back when you leave the property. If you have to live somewhere, might as well buy so that some day you'll get an ROI.
"Renting you're paying 100% of someone else's interest" Now that hits! So true! Haha
I don't see a different way for current entry level folks to afford a house.
The other alternative that I am seeing is smaller townhomes being built well outside the urban core. Where younger generations are settling for a 1 hour+ commute to be able to afford a house.
The young folks who are affording the larger, more expensive homes closer to the urban areas are receiving large down payments from parents to help out. 30-40% down payments.
I don't think the article factors in the overall cost of living increase. All things being equal, you need EVEN more of an income to afford the same house now because true inflation has been about 20%
I feel like a general best practice of any kind of investing is starting when you don't need to, that was certainly the case when I started house hacking. I think of if I had to buy my first house two years ago when I was just about to get married, having a variable income with no cash flow supplement, it would be a dramatically tougher situation. Unfortunately, as a lender I find most people only look to buy when they absolutely have to, often it's when they have a growing family and don't want to rent out other rooms, or live in a one unit of a mult-family unit. So that's a long way of saying that while I think it SHOULD be a more frequently used strategy for first time homeowners, I don't see it become dramatically more executed strategy than it is right now. I think a more likely trend is multiple family members, or even friends, going in together to buy a home because they can't qualify alone.
Yeah it is increasingly difficult, but I do have an appreciation for the resiliency and ability for our generations to get creative.
I do see the 45-1 hour commutes being more common with more townhome new developments in those ranges. I think that is another viable option, especially if more accessible public transit becomes available.
You're right on that. You NEED much more income for the same house now. I am interested to see if lowered interest rates even helps affordability or just raises prices.
What do you think?
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People over 40 consider having roommates when starting out in life to be normal. People under 40 call it house hacking and consider it "new".
Quote from @Mike Dymski:
People over 40 consider having roommates when starting out in life to be normal. People under 40 call it house hacking and consider it "new".
This.
It's always been apart of the process. Right now, affordability is why it's a hotter topic and why the nomadic/travel lifestyle is pushed as much. It's not because it's a choice, it's because there are no choices but to do that.
Guarantee you everyone would be anti-roomates if the RTP was inverse.
It's not up to milennials and Gen Zers, it's up to the market. They are just doing the most practical thing given the circumstances.
Quote from @Anthony Swain:That's the right question.
Yeah it is increasingly difficult, but I do have an appreciation for the resiliency and ability for our generations to get creative.
I do see the 45-1 hour commutes being more common with more townhome new developments in those ranges. I think that is another viable option, especially if more accessible public transit becomes available.
You're right on that. You NEED much more income for the same house now. I am interested to see if lowered interest rates even helps affordability or just raises prices.
What do you think?
Most think lower rates= immediately high asset prices. I agree with that, but I believe it's literally immediately for housing as in the first 1-12 weeks, and then falls it offs to the affordability angle and starts to close the gap on that. Basically, rental prices will push up faster than mortgage prices tightening it and making it more "affordable".
@Anthony Swain of course that is the way to start if you are buying the median house. Previous generations also had the starter or fixer home strategy. Less common now because there are more flippers and fewer starter homes. Also move in ready seems to be what people even if they need roommates to do it.
@Anthony Swain a 45 min to 1 hour commute was normal in NJ in the 80s and I think there were other metro areas that was also true. I think maybe it is just getting to your part of the country. My BIL won an affordable housing lottery in about 1986 45 min min from his job 2 bedroom townhome.
But given all the growth in WFH that should Make housing affordable and no commute for some
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Quote from @Anthony Swain:
@Steve Vaughan That is awesome you're getting paid to live in your housing situation!
Yes, a lot of personal finance people preach the rent option, but house hacking is almost always superior.
I think you're right about the multi-house holds. Personally, I think even at our forever home we would like to have an in-laws suite, separated basement, or an ADU of some sort to house our parents.
I appreciate your input Steve!
I know it isn't possible in all areas, and depends on how long a person is in the area, but long term, renting is not a good idea. The price of rent is usually more than a mortgage and come retirement, rents are going to be higher and chances are your income will go down.
Sharing a house (ensuring contracts are drawn up) is a great way to get into the market.
Personally in denver it’s super saturated and hard to rent room due to the amount of supply. While I think it’s a strategy here to stay, I also think there is variability in the amount of people willing to rent rooms.
@Anthony Swain
I think that the proliferation of the Internet, quick exposure to information, AND the fact that people have adopted the name "house hack" is the only reason we talk about it today. It's now a focal point of articles since it's a sexier subject than just plain old getting some roommates.
It's been around as long as real estate has been around. I gotta believe it's been around hundreds, if not thousands, of years. I was the "roommate" when I first moved to the US. Then I became the guy collecting the check long before the term house hack was coined.
@Steve Vaughan when I look back at the time I did it, I was at the age of modern day Gen Zers ... Many of my age at that time did it. We just did not have the Internet to go around shouting about it.
Heck, my favorite TV shows thought me. The Facts of Life and Threes Company. They just called it roommates.
@Mike Dymski @V.G Jason @Sam Yin
Thanks for dropping by! I always appreciate some good dialogue.
I totally understand just having room mates or splitting housing costs were a thing for a long time. I don't know if I am as old as you three, but even in my time, I split housing expenses since I was 18. The house hacking term definitely gained some mainstream attention, but I think its a cool name, so why not refer to it? *shrugs shoulders with hands up
A man much wiser than I coined the term anyway. Which one of us would argue with him right?! haha
I would like to believe people are getting much more creative and tapping into the potential of "house hacking" now. I don't believe it was utilized at this level a hundred years ago or even decades ago. Now, people are using short-term rentals, mid term rentals, rent-by-room, etc. I think it's more attractive than ever, because of all the resources now too! Airbnb, Furnished Finder, BP (to learn), all the various PM software, etc.
Anyway, I think the strategy is here to stay and I think multiple generations will take advantage of this.
Hey Stacey! Good to hear from you. Its been awhile! :)
Wow. Interesting! Denver is very saturated? Are there are a lot of people attempting to do this in your opinion?
I am sure there are cycles up and down for people renting rooms, but I think it can be a great option for someone that isn't looking to take on a year lease for an apartment themselves. It could still save them money, but obviously everyone may have a different preference.
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Quote from @Sam Yin:
@Steve Vaughan when I look back at the time I did it, I was at the age of modern day Gen Zers ... Many of my age at that time did it. We just did not have the Internet to go around shouting about it
Exactly. We've had a sustainable 'luxury' househack we raised our family in for the last 17 years and counting.
HH isn't just for 20-something singles if the house has a MIL apt, ADU, casita, carriage house, etc.
I also recently FSBO'd a side by side duplex in a resi neighborhood (not in plex-ville) where the garage separates to what I'm sure will be a l/t HH.
I told all the investor buyers to pound sand. Drove them crazy. "OO only!" That's how much I believe in it for long-term wealth and FI.
Quote from @Steve Vaughan:
Quote from @Sam Yin:
@Steve Vaughan when I look back at the time I did it, I was at the age of modern day Gen Zers ... Many of my age at that time did it. We just did not have the Internet to go around shouting about it
Exactly. We've had a sustainable 'luxury' househack we raised our family in for the last 17 years and counting.
HH isn't just for 20-something singles if the house has a MIL apt, ADU, casita, carriage house, etc.
I also recently FSBO'd a side by side duplex in a resi neighborhood (not in plex-ville) where the garage separates to what I'm sure will be a l/t HH.
I told all the investor buyers to pound sand. Drove them crazy. "OO only!" That's how much I believe in it.
Its always a good feeling to be in control and have draw the line for potential buyers in case you need to take it back. I think they just do not realize that you are looking out for YOUR property as long as you are carrying.
Congrats on the 17 years. That's a good run for a Lux life with HH. When I got married, I did keep my roommate. I wish I did because she got use to not having any roommates and refused the idea later. There were 3 rooms and 2 bathrooms I forgot I had for 3 years.
I agree that house hacking is the single best strategy to get into real estate especially in today's interest rate environment! I also would like to remind you all of a strategy that is growing in popularity in today's market... Assumable loans!
These have not been in the limelight since the late 80's when was the last time we had a high interest rate loan market that immediately followed a lower rate market. ALL FHA, VA and USDA loans are assumable!! Imagine getting a 2% - 5% interest rate today and how much cash you would be saving every month on your mortgage payment and the increased debt paydown! Combine this strategy with house hacking and you have a recipe for cashflow that is unmatched by any other strategy! (IMO)
I personally assumed a loan for my most recent purchase (must be your primary residence) in November 2023 and was able to lock down a 3.08% interest rate in a 7.5% - 8% interest rate market! On my $400,000 home I am saving approx $1,100 per month in mortgage payments, and am also paying down and extra $450 per month in principle paydown! This is saving me over $18,000 per year in increased debt paydown and lowered mortgage payments! I am not currently house hacking, but this allows me to rent the home for a profit when we move out in 6 months, which would be impossible if I took out a new loan to purchase.
I have blog post on this topic if anyone wants a little more of a deep dive into the powerful strategy of combining these two methods!
https://www.biggerpockets.com/forums/922/topics/1175338-maxi...
I wish you all the best in your House Hacking and investment journey! Reach out if you need any advice from someone who has been through the assumable loan process :)
@Anthony Swain we have been encouraging and helping younger investors house hack for years. I think it is a brilliant first step.
