You may have just started hearing about house hacking over the last few years, but homeowners have been using this little trick to help cover housing expenses for hundreds of years!
House hacking simply means finding a way to generate income from your home. And house hacking provides several benefits to homeowners, including
Cash to help pay off your mortgage or help with living expenses
Increased home equity through a combination of debt pay-off and long-term appreciation
Tax deductions for the cost of repairs, improvements, and depreciation on the rented portion
But there’s more than one way to hack a house. In this article, we’re going to show you four house hacking strategies.
1. Renting Out a Room, In-Law Suite, or Guest House
Many options are available if you have some living space to spare on your property. For example, you could rent a room to a local college student for the school year. Or, if you have a private in-law suite, casita, guest house, or pool house, you could rent this out to long-term tenants for consistent income or as a short-term vacation rental.
Some property owners are even building new structures, called Accessory Dwelling Units (ADUs), specifically for this purpose. Since Governor Newsom signed the ADU and Housing Reform Bills in 2019, lots that are zoned as single-family can legally accommodate two families through these ADU structures. You could even convert garage or attic space into an ADU if you don’t have the land space available to build a unit on.
Just be aware of local laws if you plan to offer a short-term vacation rental like an Airbnb. San Francisco short-term rental law, for example, says that vacation rental owners must register with the Office of Short-Term Rentals. And there are time limits on how long your guests can stay.
2. Buying a Multi-Family Property Instead of a Single-Family
This is considered the original house hacking method. Homebuyers would choose to purchase a small multi-family building rather than a single-family home. The owners would live in one of the units and rent out the other units, using the rental income to cover their mortgage payments. This way, the owners had housing without paying housing costs out of pocket.
And this still works today. Buying a building with up to four units is more accessible than you might think. The financing generally works the same way as with single-family home loans, and you can include the projected rental income to help you qualify for the loan. If you happen to be a qualified military service member, veteran, or surviving spouse, you could even buy a multi-family property with a 0% down VA loan!
3. Renting Out Storage Spaces
If the idea of living in close quarters with renters doesn’t appeal to you, you can still house hack by renting out storage spaces on your property.
Attics, basements, garages, sheds, barns, and even parking spaces can all be rented out for cash. The income won’t be as high as renting out living spaces, but the turnover is typically low, and this income is about as passive as you can get!
4. A Live-in fix-and-flip
Unlike the other house hacking strategies on this list, a live-in fix-and-flip doesn’t require renting out any space. It simply means buying a bit of a fixer-upper, renovating while you live on-site, and selling for a profit. Fixing and flipping has proven to be a lucrative real estate investment model. And you gain a few advantages living on the property during the flip:
You’ll only have one housing payment. This is different from most flips, where the investor pays the mortgage on the flip plus their own separate housing costs each month.
Since you’re not paying two housing costs, you can afford to take your time with the renovation.
You’ll be able to keep an eye on the property round-the-clock.
Since you will be living on the property, you can use government-backed loans that apply only to primary residences.
The downside is that you live on a construction site for those few months. Some flippers don’t mind this. And some choose to bring a camper onto the property for a comfortable living quarter away from the construction area. This inconvenience may be well worth it when you cash in on your sweat equity!
Sequoia is Here for all the House Hackers, Investors, and Homeowners
Are you looking for a house you can hack? Or maybe just a space to call home? Either way, the experts at Sequoia Real Estate are here to help you. Contact us today to speak to a well-qualified real estate agent who can help you buy, sell, or invest with success!