The Pros and Cons of House Hacking: Turning Homeownership into an Investment Strategy
“House Hacking” is a commonly used term in real estate investing and the term gained popularity several years back. After learning about the concept, I quickly realized that this was not a new concept, but it now had a cool name to reference it. So, what is “House Hacking?” Well, the most simplistic definition is owning a multifamily asset in which you as the owner lives in one unit and rents out the other unit(s) to help pay down the mortgage.
This is a great strategy for many reasons whether you are an inspiring investor or just buying your first property as a primary residence. Here are some of the pros of House Hacking.
1. Build equity faster as renters help pay your mortgage.
2. Figure out if you like being a landlord and learn about property management.
3. Favorable financing terms. You can purchase multifamily properties 4 units or under with as little as 3.5% down and long-term fixed rates.
4. Enjoy the tax incentives of investment real estate.
There are some things you should consider before purchasing. If you explore this concept, you will find many articles where the owners claim they lived for free because the renters paid the entire mortgage. Now this is possible, but it highly depends on where you are purchasing. The more desirable the neighborhood the higher likelihood this will not be the case. This is OK! The important thing is your costs are minimized and your equity and value grows. Here are other factors to consider.
1. Get to know the neighborhood. Which way is it trending?
2. Find the current market rents to know how the building is currently performing.
3. Is there any improvements needed to get the property to its full potential?
If you want to understand this concept better, please feel free to contact Ryan Blake
It is important to work with a qualified professional when making a purchase of this magnitude.