Frequently Asked Questions About House Hacking

House Hacking is a real estate investment strategy where you purchase a property for the purpose to rent out parts of it to make money from it and save money from it. Traditionally it is utilizing a multi-family house where you live in one unit and rent out the other unit(s).  For more details on What is House Hacking feel free to read our article.

• Live  at a discount or for free.
• Lower potential  barrier of entry price to real estate investing.
• Start on the path of being financially independent (passive income exceeds your annual expenses).
• Tax incentives. 

To read up on all of the wonderful reasons to house hack check out this blog post here.

• Can’t scale quickly due to mortgage restrictions of minimum living in the property is a year.
• Sharing space with tenants most of the time even if it is just the backyard or driveway.
• The nuances and extra work of managing a rental property.
• It’s not always just about the numbers since you will be living in the property. 

To read up on more details on why you might not house hack read this blog post here.

Some mortgage loans such as an FHA (Federal Housing Authority) will allow you to buy a property for as small as only 3.5% down if you are living in a property.

750 is the minimum goal that Lenders will highly be in favor of for giving you their best service. 

Traditional Fixed rate loan – used if you feel loans interest will go up and you want to lock in a low interest rate that you will be able to get. 

FHA – low down payment of 3.5 percent are the positives, but the negatives are that they have higher standards when getting appraised that they need to come by such as no mold, nothing falling apart. 

Adjustable rate mortgage (ARM) – used when you do not have a high or above average credit score and you still want to be able to purchase a house. the downside is that the mortgage rates will be going up and it is hard to run your numbers.

For more details on mortgages check out this article.

The number 1 rule is to find houses below market. Second, look for a market that shows signs of appreciating as a whole (ie: new large apartment buildings being built, new restaurants and stores being installed), near public transportation, the school district the house is in is a good one, and convenient to the downtown area. What helps out a lot is having an uneven balance of the unit you are living in vs the rest of the property (ie: a duplex that you would rent out a one unit that is a 3 bed 2 back when you are living in a one bed 1 bath.) since it increases odds of offsetting the expenses. 

Find some comps for what you will be renting out. Then subtract the  PITI (Principle, interest, taxes, and insurance), plus some utilities, and then add some additional small expenses together from it.

For more details of analyzing house hack deals check out our calculator here and download our house hack analysis spreadsheet calculator by signing up for our email list.