Proven Ultimate Guide To House Hacking With Kids

House hacking is one of the best ways for someone to live affordably, save money, and build equity. Most people will house hack by investing in a one- to four-unit property in which they live in one unit and rent out the others, using the rental income to offset the cost of their mortgage. Living in a smaller unit is typically no big deal for first-time homebuyers in search of affordability, but house hacking with a family comes with a whole host of other considerations.

In today’s article, we look at ways to house hack with a family – especially if that family includes young kids! We look at the pros and cons of house hacking with a family, and some special considerations for house hacking with kids as you pursue this alternative.

Property Types Best for House Hacking with Kids

Believe it or not, there are many property types that work well for house hacking with kids. Here are a few examples:

Duplexes: Duplexes come in all different shapes and sizes. In these homes, units can be positioned side-by-side or on top of one another. In either case, you’re sharing a wall with your tenants so you’ll want to be sure you let them know you have children (especially if you have small children who create noise). This prevents you from having disgruntled tenants who were not expecting children to be living in such close proximity. The best duplex option when house hacking with kids is the side-by-side model. If you’re in an up-down duplex, consider taking the lower floor unit so you don’t have children running around and banging directly above the tenants below.

3- to 4-Unit Homes: The benefit to house hacking in a 3- or 4-unit home is the optionality. Let’s say you have one kid today. You and your spouse might decide to take one of the smaller units and rent the others. Then, if your family grows, you might renovate the property to “absorb” one of the other rental units. You could double your square footage while still maintaining one or two additional rental units, which ensures the cash flow keeps coming.
Single Family Home with Carriage House: Although these properties are sometimes harder to find, an ideal situation for house hacking with kids is when you can find a single family home that contains a carriage house, more formally known as an “accessory dwelling unit,” that can be rented out. This gives you the benefit of single-family living while still providing rental income to offset your mortgage. The carriage house model also provides some physical separation, unlike an in-law apartment which is within the main home, so it doesn’t feel like you are living on top of your tenants (literally or figuratively).
Recently Renovated Homes: While this isn’t a property type, per se, it is a certain property characteristic to consider. When house hacking individually, many people will live in their unit and make repairs or other substantial renovations while living there. This is generally not something that you’ll want to do if house hacking with kids. Renovating, especially with small children, can be a nightmare. If you’re planning to house hack with kids, consider buying a recently renovated property (or complete renovations to the owner’s unit prior to moving in).

Pros and Cons as House Hacking as a Family

There are many benefits to house hacking, but there are some particular considerations when house hacking with a family. House hacking with kids is certainly not for everyone. Here are some of the pros and cons to evaluate before house hacking with a family:

CON: Potentially less space. Depending on the type of home you buy, the owner’s unit might have less space than you’d get in a traditional single-family home. You can mitigate this con by looking for larger properties, or by combining smaller rental units into a larger owner’s unit while still having units left over to lease.
CON: Less privacy. Anyone with kids will know that on occasion, things get loud. It might be a child having a meltdown. It might be a parent who yells at said child for having that meltdown. In any event, house hacking with kids can mean the family has a little less privacy than they’d get if living in a single family home with more distance from neighbors. If you don’t want other’s hearing these shouting matches, carefully consider what property type to invest in.
CON: Responsibility. House hacking requires some degree of responsibility. You’ll have to manage both the physical property and tenants. Depending on the type of property you buy, this can take a lot of time and effort. People with families don’t always have extra time. They’re already busy tending to their children. The responsibility might be too much to bear for some considering house hacking with a family.

CON: Not the “Norm”. Sometimes, you just want to live like everyone else. Some families may feel pressured by others in their neighborhood, family, or social circle to move out of a multifamily house and instead, move to a single-family home. Anyone who grew up in a single-family home will be used to this environment, and may find that house hacking with kids is simply not the “norm” (indeed, it’s not).

Despite these negatives, there are so many other benefits to house hacking with kids. Here are some of the reasons to consider house hacking with your family.

PRO: Saves money. There’s no doubt: house hacking with kids saves families money. The rental income collected from tenants will be used to offset the mortgage. These cost savings will allow you to live more affordably and save money. That savings can then be used for other expenses—say, college tuition—and expenses can certainly add up when you have kids!
PRO: Teaches kids value. Parents are always trying to impart wisdom on their children, and house hacking with kids is a great way to do just that. When you house hack as a family, you’re teaching your kids that sometimes, you need to make sacrifices to get ahead in life. Children will start to understand “needs” versus “wants” and will have a better appreciation for value.
PRO: Diverse environments. Areas with more renters than homeowners tend to be more diverse places, so the children of house hacking parents often grow up with the good fortune of being exposed to more diversity and a broader range of cultures than their own.
PRO: Builds equity. Any time someone house hacks, they benefit from renters helping pay down the mortgage which in turn, helps the owner build equity in their home. Depending on rents versus expenses, the house hacker might actually earn money on the home which can be used to pay down the mortgage even faster. This equity is a natural savings plan for retirement. House hackers can also leverage the equity in their homes to pay for things like childcare, private school, tutors, college courses and more – a different type of investment that leads to brighter futures for their children.

A House Hack with Kids Case Study

When Mary was 8 months pregnant, the last thing she expected to be doing was moving. But sometimes, life throws an opportunity your way that’s too good to pass up. See, Mary and her husband had been house hacking in a duplex for a few years. They were living in the two-bedroom ground floor unit and had been leasing the 4-bedroom unit upstairs to a local family. Mary always intended to move to the upstairs unit once she had a family (it was nearly twice the size), but then an unexpected opportunity came along.

Mary was perusing the real estate listings one day (like she often did) and came across another two-family home in a neighboring town. This property was much different, though. The owner’s unit was a 5-bedroom, 2-bathroom unit on the first floor with a finished basement. The upstairs had a completely separate two-bedroom apartment that could be rented. Interestingly, the owner’s unit also had an attached one-bedroom in-law apartment. So while the property was technically a two-family, it functioned as a three-family.

What’s more, this home would give Mary and her husband more room to grow. Her husband has an 8-year old son from a prior marriage, so this home would allow both children to have their own bedrooms. They’d also have a spare bedroom for when grandparents inevitably wanted to visit to meet the new baby. That still left one more bedroom for future children. In total, this owner’s unit had about 2,000 square feet which is the equivalent of many single-family homes in that area.

The home was big and in a great area, so house hacking wouldn’t be cheap. The home was listed for $765,000 which meant they’d need to come up with $153,000. (They had house hacked their way to about $200,000 in savings so this was doable, but it was still going to be tight!). But they had a feeling the home would go for over asking, so they were aggressive and offered $815,000. That was just enough to get the deal done.

Now, after putting down 20%, this meant they were taking on a $652,000 mortgage—something Mary and her husband NEVER would have considered without house hacking. The mortgage payment (including taxes and insurance) were going to run about $4,150 per month. With the cost of daycare staring them in the face, they knew the rental income would be critical.

Fortunately, this home had two units that could be rented- the upstairs unit and the in-law apartment. They quickly leased the two-bedroom apartment for $2,300 and the in-law for $1,400. That totals $3,700 in rental income which meant their resulting out-of-pocket housing expenses would be just $450 per month – just over 10% of the total mortgage costs. TEN PERCENT!

Today, Mary and her husband continue to live in their 5-bedroom owner’s unit. They now have three kids. The older boys share a bedroom, their daughter is in the nursey, and they still have two bedrooms in the finished lower level to spare. They use one as a home office/guest bedroom and the other as a playroom. Their whole family has plenty of room to spread out, and they’re able to live affordably at a fraction of the price of a single family home in a fabulous community with excellent schools. They’re a perfect example of how house hacking with kids can be done.

Tips for House Hacking with a Family

If you’re considering house hacking with kids, here are a few final tips to keep in mind:

Be sure your spouse wants to house hack with you. If you’re interested in house hacking but your spouse isn’t, this could create conflict down the road. Be sure both are on board because house hacking is not for the faint of heart and should be done in unison.
Consider how the common areas will be utilized. Determine if the tenants will have access to certain common areas or whether certain areas should be retained for exclusive use by the owner who is house hacking with kids. In Mary’s example, there was a large backyard with an above-ground pool. She and her husband made the decision early on that this space would be for their exclusive use, particularly because they did not want to increase their liability with having tenants using the pool.
Evaluate your space needs. Determine just how much space your family needs. This way, when you start your search, you can quickly weed out properties. For some families house hacking with kids, two bedrooms might be sufficient. Others may need three or four bedrooms (or more) depending on the size of their family or their living preferences.
Finding the “right” house hack for families can take time. Some of the townier, nicer areas that are ideal for families with children (e.g., good schools, low crime, great parks and playgrounds) are also incredibly cost prohibitive. This means it could take time to find the “right” house hack. You might be pushed to more affordable, fringe neighborhoods so before you commit, be sure you feel comfortable living in those areas with your children.

In Conclusion

Whatever your reasons for house hacking, don’t be dissuaded by doing it with children. House hacking with kids can be challenging, but it can also be highly rewarding on so many levels. In fact, it can even be fun if approached with a positive attitude!

And remember, house hacking does not need to be forever (but it could be!). Families may choose to house hack with kids now, for five or so years, while they build equity and save money. Once they’ve achieved certain goals, they can then decide whether house hacking is the best long-term solution for their family or whether investing in a more “normal” living situation is better.