Is house hacking a smart choice for me?

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mrbluewho
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Is house hacking a smart choice for me?

Post by mrbluewho »

Hello Everyone!

I posted recently asking if any fellow Bogleheads had any advice on what to do in my financial situation, and I was given some great advice on how to allocate my income, which is primarily to my student loans. However, almost immediately after posting, I started to learn more about "house hacking" and using it as a way to generate supplemental income to pay a mortgage and build equity. I've been living with roommates for over the last few years in an effort to save some money, and meet new people, and it's gone well, so I have no issue with that. My lease ends at the end of May 2022, and I was honestly deciding whether to renew, find another room, place on my own, or now house hack. My roommate, who is also my landlord, introduced me to the idea, and it sounds like he might Airbnb where I currently live after our leases end, so renewing might not be an option. Trying to get the ball rolling early, and see what others think.

In a nutshell:

Single (well not married.. GF lives in another state), 31 yrs old M, live in mod cost of living SE US city; Housing market is booming though :moneybag :(

Credit score like 772 according to my credit card company.. not sure how accurate this is. Work history of over 4.5 years, in different capacities.

Budget:
Would ideally like < $275k

Income:
$89,500.. ~$2300 biweekly

Debt:
- Student loans of $82,224 (Down from ~$94,000 in late July) through Fedloan.. Currently at 0% interest until end of Jan 2022. This will go back to around 7% at that time. What I've been doing is putting nearly all of my paycheck to these loans. I have shifted to $1500 to loans biweekly, and $500 to roth IRA
- Pay Credit Cards every month

Assets:
- Roth IRA through Vanguard: $101,000
- Webull Account: $5850
- Savings/checking Account: $2,300.. this is mostly EM fund
- Transamerica 403b: ~$600 or so since I've just started.. maxed company match

Expenses:
Currently renting a room in an apt for $500 + utilities to allow for more flexibility with income (either put towards debt, investing, leisure).. total expenses per month like ~$950 maybe?

Questions:
- Does anyone have any insight into house hacking for my specific situation? Is this a reasonable idea?
- Any tips you'd recommend? Or things to be cautious about? I'm hopeful that I can get a good loan, maybe the FHA loan since I'll be living there/first home
- It sounds like I should look to have 5-10% to put down.. Would you agree?
- I was also looking at refinancing my student loans also early 2022.. Would this be a lot to ask of a mortgage lender like 5 months later?

Thanks a bunch!
pizzy
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Re: Is house hacking a smart choice for me?

Post by pizzy »

What is house hacking?
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student
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Re: Is house hacking a smart choice for me?

Post by student »

pizzy wrote: Sat Oct 16, 2021 9:28 am What is house hacking?
I think buy a house and rent out spare rooms.
pizzy
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Re: Is house hacking a smart choice for me?

Post by pizzy »

student wrote: Sat Oct 16, 2021 9:30 am
pizzy wrote: Sat Oct 16, 2021 9:28 am What is house hacking?
I think buy a house and rent out spare rooms.
Is that what the kids are calling it these days? :oops:
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Mr. Rumples
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Re: Is house hacking a smart choice for me?

Post by Mr. Rumples »

Might work...gotta be careful on how screening is done...Judge Judy does a lot of cases on this...in some areas, depending on zoning, it's illegal. Where we once lived, the authorities were alerted, they came with a warrant and when they found dead bolt locks on the interior doors, they fined the owner for operating an illegal boarding house. In 2013, VA passed SB 894, making it easier for localities to prosecute both the property owner and the tenants.
"History is the memory of time, the life of the dead and the happiness of the living." Captain John Smith 1580-1631
Topic Author
mrbluewho
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Re: Is house hacking a smart choice for me?

Post by mrbluewho »

pizzy wrote: Sat Oct 16, 2021 9:32 am
student wrote: Sat Oct 16, 2021 9:30 am
pizzy wrote: Sat Oct 16, 2021 9:28 am What is house hacking?
I think buy a house and rent out spare rooms.
Is that what the kids are calling it these days? :oops:
haha I didn't come up with the name. That's just what I was told, but that's right. I'd live in one of the rooms, and hopefully rent the other 2-3 to help pay down the mortgage.
Topic Author
mrbluewho
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Re: Is house hacking a smart choice for me?

Post by mrbluewho »

Mr. Rumples wrote: Sat Oct 16, 2021 9:41 am Might work...gotta be careful on how screening is done...Judge Judy does a lot of cases on this...in some areas, depending on zoning, it's illegal. Where we once lived, the authorities were alerted, they came with a warrant and when they found dead bolt locks on the interior doors, they fined the owner for operating an illegal boarding house. In 2013, VA passed SB 894, making it easier for localities to prosecute both the property owner and the tenants.
Very interesting. I'll be sure to do my due diligence. Like I said my roommate/landlord is doing it, and we have just normal locks on our doors. I figure he did the research into this being legal, but I'll be sure to look into it further. Thanks!
SpaceX
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Re: Is house hacking a smart choice for me?

Post by SpaceX »

I would ask this question on Biggerpockets.com. Many readers on this website focus on RE investing primary thru REITs. Good Luck!
runninginvestor
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Re: Is house hacking a smart choice for me?

Post by runninginvestor »

mrbluewho wrote: Sat Oct 16, 2021 9:44 am
Mr. Rumples wrote: Sat Oct 16, 2021 9:41 am Might work...gotta be careful on how screening is done...Judge Judy does a lot of cases on this...in some areas, depending on zoning, it's illegal. Where we once lived, the authorities were alerted, they came with a warrant and when they found dead bolt locks on the interior doors, they fined the owner for operating an illegal boarding house. In 2013, VA passed SB 894, making it easier for localities to prosecute both the property owner and the tenants.
Very interesting. I'll be sure to do my due diligence. Like I said my roommate/landlord is doing it, and we have just normal locks on our doors. I figure he did the research into this being legal, but I'll be sure to look into it further. Thanks!
Most definitely look into it on your own. A legal defense of "I knew someone else who was doing it" would not bode well for you :D

As long as you conform to the home insurance, lender, local zoning terms & rules it should be fine. But you should have a good understanding anyways and especially so on the legality when someone under your roof doesn't leave or does something illegal.
Last edited by runninginvestor on Sat Oct 16, 2021 9:59 am, edited 1 time in total.
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Sandtrap
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Re: Is house hacking a smart choice for me?

Post by Sandtrap »

IMHO:
You are not in a financial position to "house hack".
Why?
Income stream.
Cash reserves (operating capital).
Liabilities

Yes. Everything can go great and you can get rich over time.
But. . .
Homeowner's insurance with umbrella rider to cover lawsuits, etc.
Vacancy rate: mortgage still must be paid, etc.
Evictions and disputes (business is business and in House Hacking, there's tendency to make friends and a social element).
Large lumpy expenses: roof, hvac, reno after damage, etc.
Time: There's a tendency for this to feel like a second full time job, often limiting real job advancement and focus.
Personal . Interpersonal Dynamics. . . .

Suggest: for now, put the same effort into maximizing your career opportunities, grow your work income stream hugely, etc.

The point of view here is "yours". . not what others have done or will do. The buck stops with you.

Do your "research" by affiliating yourself, befriending, property owners and landlords with 50 rental units that started from scratch. Successful businessman who's business is real estate (not an employee).
**These sole ownership, employer vs employee, points of view is what you need to get.


To be an entrepreneur, Work 3 jobs, live frugally, build a large nest age to invest with first. Leave the normal comfort zone and safe boundaries of a 40 hour work week, days off, vacations.
j :D
Last edited by Sandtrap on Sat Oct 16, 2021 10:31 am, edited 1 time in total.
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cjcerny
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Re: Is house hacking a smart choice for me?

Post by cjcerny »

I would get the GF situation nailed down first. Is it serious? Is she moving to you? Are you moving to her? I don’t know or care about the answers to those questions, but those answers could have a direct bearing on your ability to implement any of your current plans—which don’t seem to involve her. You did mention her existence, though, so that seems like a wildcard that you haven’t accounted for in your life.
Topic Author
mrbluewho
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Re: Is house hacking a smart choice for me?

Post by mrbluewho »

cjcerny wrote: Sat Oct 16, 2021 10:06 am I would get the GF situation nailed down first. Is it serious? Is she moving to you? Are you moving to her? I don’t know or care about the answers to those questions, but those answers could have a direct bearing on your ability to implement any of your current plans—which don’t seem to involve her. You did mention her existence, though, so that seems like a wildcard that you haven’t accounted for in your life.
Thanks for your response. I was anticipating this inquiry, but should have been more clear. It has been accounted for. I've discussed it with her, and she's supportive. At the very least I'll be here in my state for 2 years, and she's aware of that. I'd live in this home for at least a year, and decide what to do afterwards based on where we are at.
Topic Author
mrbluewho
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Re: Is house hacking a smart choice for me?

Post by mrbluewho »

SpaceX wrote: Sat Oct 16, 2021 9:52 am I would ask this question on Biggerpockets.com. Many readers on this website focus on RE investing primary thru REITs. Good Luck!
Thank you! I will. I wasn't aware of this other site before.
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ResearchMed
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Re: Is house hacking a smart choice for me?

Post by ResearchMed »

runninginvestor wrote: Sat Oct 16, 2021 9:57 am
mrbluewho wrote: Sat Oct 16, 2021 9:44 am
Mr. Rumples wrote: Sat Oct 16, 2021 9:41 am Might work...gotta be careful on how screening is done...Judge Judy does a lot of cases on this...in some areas, depending on zoning, it's illegal. Where we once lived, the authorities were alerted, they came with a warrant and when they found dead bolt locks on the interior doors, they fined the owner for operating an illegal boarding house. In 2013, VA passed SB 894, making it easier for localities to prosecute both the property owner and the tenants.
Very interesting. I'll be sure to do my due diligence. Like I said my roommate/landlord is doing it, and we have just normal locks on our doors. I figure he did the research into this being legal, but I'll be sure to look into it further. Thanks!
Most definitely look into it on your own. A legal defense of "I knew someone else who was doing it" would not bode well for you :D

As long as you conform to the home insurance, lender, local zoning terms & rules it should be fine. But you should have a good understanding anyways and especially so on the legality when someone under your roof doesn't leave or does something illegal.
Right.

Some jurisdictions can make it a very difficult, very lengthy, very expensive, and very unpleasant endeavor to evict someone who "prefers" not to leave...

And in some jurisdictions, violating zoning laws, even "innocently" (?), can lead to a violation of home insurance policy terms... meaning that if there were to be a claim and a zoning violation were to be found... you might find that any insurance claim is denied.

Without understanding ALL of the legalities, and strictly following them, this could become a devastating economic - and emotional - adventure.

RM
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Topic Author
mrbluewho
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Re: Is house hacking a smart choice for me?

Post by mrbluewho »

Sandtrap wrote: Sat Oct 16, 2021 9:58 am IMHO:
You are not in a financial position to "house hack".
Why?
Income stream.
Cash reserves (operating capital).
Liabilities

Yes. Everything can go great and you can get rich over time.
But. . .
Homeowner's insurance with umbrella rider to cover lawsuits, etc.
Vacancy rate: mortgage still must be paid, etc.
Evictions and disputes (business is business and in House Hacking, there's tendency to make friends and a social element).
Large lumpy expenses: roof, hvac, reno after damage, etc.
Time: There's a tendency for this to feel like a second full time job, often limiting real job advancement and focus.
Personal . Interpersonal Dynamics. . . .

Suggest: for now, put the same effort into maximizing your career opportunities, grow your work income stream hugely, etc.

The point of view here is "yours". . not what others have done or will do. The buck stops with you.

Do your "research" by affiliating yourself, befriending, property owners and landlords with 50 rental units that started from scratch. Successful businessman who's business is real estate (not an employee).
**These sole ownership, employer vs employee, points of view is what you need to get.

j :D
Thank you for this honest take on it all! You raise good points, and I'll consider them when assessing this possibility.
WhatsIRR
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Re: Is house hacking a smart choice for me?

Post by WhatsIRR »

mrbluewho wrote: Sat Oct 16, 2021 10:24 am
cjcerny wrote: Sat Oct 16, 2021 10:06 am I would get the GF situation nailed down first. Is it serious? Is she moving to you? Are you moving to her? I don’t know or care about the answers to those questions, but those answers could have a direct bearing on your ability to implement any of your current plans—which don’t seem to involve her. You did mention her existence, though, so that seems like a wildcard that you haven’t accounted for in your life.
Thanks for your response. I was anticipating this inquiry, but should have been more clear. It has been accounted for. I've discussed it with her, and she's supportive. At the very least I'll be here in my state for 2 years, and she's aware of that. I'd live in this home for at least a year, and decide what to do afterwards based on where we are at.
I would not buy a house if you could realistically only have 2 years in it. You have a very good chance of losing money between closing cost and fees. A good rule of thumb is 10% of home cost to sell, so your $275k house is going to cost $27,500 to sell. Your first few years of payments will be almost all interest so no equity gains. The housing market has been crazy the past year but I wouldn’t count on that going forward. So if you are looking at buying at $275k and selling in 2 years you’ll need to sell for ~$310k to just break even.
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mrbluewho
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Re: Is house hacking a smart choice for me?

Post by mrbluewho »

WhatsIRR wrote: Sat Oct 16, 2021 10:35 am
mrbluewho wrote: Sat Oct 16, 2021 10:24 am
cjcerny wrote: Sat Oct 16, 2021 10:06 am I would get the GF situation nailed down first. Is it serious? Is she moving to you? Are you moving to her? I don’t know or care about the answers to those questions, but those answers could have a direct bearing on your ability to implement any of your current plans—which don’t seem to involve her. You did mention her existence, though, so that seems like a wildcard that you haven’t accounted for in your life.
Thanks for your response. I was anticipating this inquiry, but should have been more clear. It has been accounted for. I've discussed it with her, and she's supportive. At the very least I'll be here in my state for 2 years, and she's aware of that. I'd live in this home for at least a year, and decide what to do afterwards based on where we are at.
I would not buy a house if you could realistically only have 2 years in it. You have a very good chance of losing money between closing cost and fees. A good rule of thumb is 10% of home cost to sell, so your $275k house is going to cost $27,500 to sell. Your first few years of payments will be almost all interest so no equity gains. The housing market has been crazy the past year but I wouldn’t count on that going forward. So if you are looking at buying at $275k and selling in 2 years you’ll need to sell for ~$310k to just break even.
That is a great point, and I wasn't aware of the exact details. That's a good tip on the 10% cost to sell. Would managing it from afar, if I were to move, be unwise? I understand that I'd most likely need to hire someone to help manage the property too. Sounds like a few other hoops to jump through.
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retired@50
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Re: Is house hacking a smart choice for me?

Post by retired@50 »

If it were me, I'd focus on paying down the student loans as Job #1.

You're already in a relatively low cost living situation, I'd try to keep that in place as long as possible while paying down the debt. When the 7% interest starts to show up again on your student loan statements your progress on getting them paid off is going to slow down quite a bit.

Regards,
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WhatsIRR
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Re: Is house hacking a smart choice for me?

Post by WhatsIRR »

mrbluewho wrote: Sat Oct 16, 2021 10:40 am
WhatsIRR wrote: Sat Oct 16, 2021 10:35 am
mrbluewho wrote: Sat Oct 16, 2021 10:24 am
cjcerny wrote: Sat Oct 16, 2021 10:06 am I would get the GF situation nailed down first. Is it serious? Is she moving to you? Are you moving to her? I don’t know or care about the answers to those questions, but those answers could have a direct bearing on your ability to implement any of your current plans—which don’t seem to involve her. You did mention her existence, though, so that seems like a wildcard that you haven’t accounted for in your life.
Thanks for your response. I was anticipating this inquiry, but should have been more clear. It has been accounted for. I've discussed it with her, and she's supportive. At the very least I'll be here in my state for 2 years, and she's aware of that. I'd live in this home for at least a year, and decide what to do afterwards based on where we are at.
I would not buy a house if you could realistically only have 2 years in it. You have a very good chance of losing money between closing cost and fees. A good rule of thumb is 10% of home cost to sell, so your $275k house is going to cost $27,500 to sell. Your first few years of payments will be almost all interest so no equity gains. The housing market has been crazy the past year but I wouldn’t count on that going forward. So if you are looking at buying at $275k and selling in 2 years you’ll need to sell for ~$310k to just break even.
That is a great point, and I wasn't aware of the exact details. That's a good tip on the 10% cost to sell. Would managing it from afar, if I were to move, be unwise? I understand that I'd most likely need to hire someone to help manage the property too. Sounds like a few other hoops to jump through.
Depends on if you want to be a landlord and a remote on at that. You’d have to find a property manager you can trust and hope their contractors are trustworthy since you won’t be around to verify what work is needed or the quality of work after it’s done.

I like real estate but personally would not want a single SFH rental without plans to add more. That puts a lot of risk in a single property, any missed rent payment still has a mortgage payment due out of your pocket. With multiple rentals one vacancy has the other properties’ cash flow to help float the payments with a single property you do not have any emergency back stop. I would want 12 months of mortgage payments in a bank account as working capital before starting a single rental property
Impatience
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Re: Is house hacking a smart choice for me?

Post by Impatience »

No personal experience, but did a lot of research on it at one point. General sense I got was it’s better to buy a duplex or triplex. Not just “roommates” but separate attached living units in one structure. It can be great if you’re handy and can do most small or medium repairs yourself and are good with people. Seems like having a 2nd job though.
randomguy
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Re: Is house hacking a smart choice for me?

Post by randomguy »

WhatsIRR wrote: Sat Oct 16, 2021 10:35 am I would not buy a house if you could realistically only have 2 years in it. You have a very good chance of losing money between closing cost and fees. A good rule of thumb is 10% of home cost to sell, so your $275k house is going to cost $27,500 to sell. Your first few years of payments will be almost all interest so no equity gains. The housing market has been crazy the past year but I wouldn’t count on that going forward. So if you are looking at buying at $275k and selling in 2 years you’ll need to sell for ~$310k to just break even.
It isn't the 80s anymore with 8%+ mortgages. If you take out 100k mortgage at 3%, your payment is 421 of which 171 is principle. That is a long way from almost all interest. I do agree that short term house ownership tends to be expensive. If you aren't going to be there 5+ years, you are going to need well above average appreciation to get things to work out.

I have had numerous friends do the buy the house and have roommates for a half dozen years and it has worked out fine. We definitely didn't have a name for it though. But I wouldn't buy a house if I wasn't planning on being in it for a decade or so. And as people have pointed out roommates tends to be legal in most areas. You do need to be aware of the rental laws in your area as you are now a landlord running a bussiness. Running a boarding house or a hotel involves a whole other set of legal and zoning issues.
Topic Author
mrbluewho
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Re: Is house hacking a smart choice for me?

Post by mrbluewho »

WhatsIRR wrote: Sat Oct 16, 2021 10:53 am
mrbluewho wrote: Sat Oct 16, 2021 10:40 am
WhatsIRR wrote: Sat Oct 16, 2021 10:35 am
mrbluewho wrote: Sat Oct 16, 2021 10:24 am
cjcerny wrote: Sat Oct 16, 2021 10:06 am I would get the GF situation nailed down first. Is it serious? Is she moving to you? Are you moving to her? I don’t know or care about the answers to those questions, but those answers could have a direct bearing on your ability to implement any of your current plans—which don’t seem to involve her. You did mention her existence, though, so that seems like a wildcard that you haven’t accounted for in your life.
Thanks for your response. I was anticipating this inquiry, but should have been more clear. It has been accounted for. I've discussed it with her, and she's supportive. At the very least I'll be here in my state for 2 years, and she's aware of that. I'd live in this home for at least a year, and decide what to do afterwards based on where we are at.
I would not buy a house if you could realistically only have 2 years in it. You have a very good chance of losing money between closing cost and fees. A good rule of thumb is 10% of home cost to sell, so your $275k house is going to cost $27,500 to sell. Your first few years of payments will be almost all interest so no equity gains. The housing market has been crazy the past year but I wouldn’t count on that going forward. So if you are looking at buying at $275k and selling in 2 years you’ll need to sell for ~$310k to just break even.
That is a great point, and I wasn't aware of the exact details. That's a good tip on the 10% cost to sell. Would managing it from afar, if I were to move, be unwise? I understand that I'd most likely need to hire someone to help manage the property too. Sounds like a few other hoops to jump through.
Depends on if you want to be a landlord and a remote on at that. You’d have to find a property manager you can trust and hope their contractors are trustworthy since you won’t be around to verify what work is needed or the quality of work after it’s done.

I like real estate but personally would not want a single SFH rental without plans to add more. That puts a lot of risk in a single property, any missed rent payment still has a mortgage payment due out of your pocket. With multiple rentals one vacancy has the other properties’ cash flow to help float the payments with a single property you do not have any emergency back stop. I would want 12 months of mortgage payments in a bank account as working capital before starting a single rental property
That makes sense. I think the idea is that by the end of May 2022 when my lease is up, or a couple months before, I'd have enough for a down payment, and some more working capital. It would be at the expense of some of my loan payments which is something I'd have to consider. I'm not sure how realistic these "projected mortgage payments" are that are listed on Zillow, but if I live in the home, I'd still be able to pay the mortgage without renter support based on what I've seen. Doing this "house hack" would be to ideally not have to pay rent for myself, but I'd be able to if I had to. I would make sure I could before proceeding.
WhatsIRR
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Re: Is house hacking a smart choice for me?

Post by WhatsIRR »

randomguy wrote: Sat Oct 16, 2021 11:09 am
WhatsIRR wrote: Sat Oct 16, 2021 10:35 am I would not buy a house if you could realistically only have 2 years in it. You have a very good chance of losing money between closing cost and fees. A good rule of thumb is 10% of home cost to sell, so your $275k house is going to cost $27,500 to sell. Your first few years of payments will be almost all interest so no equity gains. The housing market has been crazy the past year but I wouldn’t count on that going forward. So if you are looking at buying at $275k and selling in 2 years you’ll need to sell for ~$310k to just break even.
It isn't the 80s anymore with 8%+ mortgages. If you take out 100k mortgage at 3%, your payment is 421 of which 171 is principle. That is a long way from almost all interest. I do agree that short term house ownership tends to be expensive. If you aren't going to be there 5+ years, you are going to need well above average appreciation to get things to work out.

I have had numerous friends do the buy the house and have roommates for a half dozen years and it has worked out fine. We definitely didn't have a name for it though. But I wouldn't buy a house if I wasn't planning on being in it for a decade or so. And as people have pointed out roommates tends to be legal in most areas. You do need to be aware of the rental laws in your area as you are now a landlord running a bussiness. Running a boarding house or a hotel involves a whole other set of legal and zoning issues.
Fair.

Ran the amortization and it looks like 24 months on a 30 yr 3% at $225k would be -$13,000 in interest and $9,500 in principle.
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Sandtrap
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Re: Is house hacking a smart choice for me?

Post by Sandtrap »

Impatience wrote: Sat Oct 16, 2021 11:06 am No personal experience, but did a lot of research on it at one point. General sense I got was it’s better to buy a duplex or triplex. Not just “roommates” but separate attached living units in one structure. It can be great if you’re handy and can do most small or medium repairs yourself and are good with people. Seems like having a 2nd job though.
+1
4plex or 6Plex.
separate entries, separate electrical meters.
j :D
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Re: Is house hacking a smart choice for me?

Post by 123 »

Mr. Rumples wrote: Sat Oct 16, 2021 9:41 am ...they found dead bolt locks on the interior doors, they fined the owner for operating an illegal boarding house...
The need for boarding houses, as we see them in old movies and TV series, still exists. It has just been camouflaged as roommate situations. I guess I never thought of the need for interior dead bold locks in a roommate situation, though when you consider the potential number of friends and guests who may be passing through the house perhaps its reasonable. It could feel like being a prisoner in your own home if you own the house and you have to dead bolt your own bedroom. Of course I could see student housing situations where the owner doesn't live there.
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Investnewbie01
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Re: Is house hacking a smart choice for me?

Post by Investnewbie01 »

I ask, why would you want to house hack at 31? You say you have a girlfriend in another State, suggest you decide where that is going? Given the job market,shouldn’t be too difficult for one of you to move if desired, then buy a house together, rates hopefully will still be low? Wouldn’t suggest you house hack with her, wouldn’t go down well!Suggest your student loan should be a priority? I bought my first property at 21, modest but so worth it not to deal with housemates. Obviously I’m from a different generation,but throw it out there for consideration?
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Watty
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Re: Is house hacking a smart choice for me?

Post by Watty »

mrbluewho wrote: Sat Oct 16, 2021 8:55 am Or things to be cautious about?
Make sure that it is legally allowed and there are no HOA rules against it.

People often do this and get by with it but often they do not. Someone tried doing that in my subdivision and it was quickly shut down because the county rules for "single family home" zoning did not allow more than one(?) non-related person to live in a single family home.

Even if this is allowed by the housing rules, you also need to look at parking and the parking rules and laws. For example there may be limits on how many cars can be at a house especially if they are not in a garage. Potential renters will not want to have to jockey cars every time someone want to come and go. It may be hard to find a house that will work with more than two cars.

Don't forget that the rental income will be taxable income to you. It is best to get professional tax advice about how that will work.

A problem I have heard about is if there is damage to a common area then it can be impossible to hold someone responsible since any of the renters could have done it.

Another thing to look at is all the liability you will be taking on. I remember reading about a case where someone was renting out rooms to people with different genders in a college town. Alcohol was involved but one renter sexually assaulted another renter. The landlord got sued. I never heard how that worked out.

It is much better to do get something like a duplex where you can do a traditional rental of the other unit. As I recall you can get a conventional mortgage on a multi-plex with up to four units as long as you initially live on one of the units.
neko06
Posts: 97
Joined: Thu Aug 12, 2021 11:15 am

Re: Is house hacking a smart choice for me?

Post by neko06 »

I am currently 'house hacking'.

I bought my house at age 34 for $330k at 2.65%, with an $80k salary.
I get $1,800 per month in rent collectively from two roommates
My mortgage is $1,400 per month

It has been fantastic for me so far. I am single so it is nice to have other people around the house to talk to. It does take some effort to screen out weird roommates, but I have not had a bad one yet. I've found that pricing the rent higher keeps a higher quality of roommate.

I also plan to live in this house for the next 5+ years. If I decide to move to a better location, I will keep this house as a full rental property.

earning more than my mortgage every month is pretty nice!
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AerialWombat
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Re: Is house hacking a smart choice for me?

Post by AerialWombat »

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This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
Oddball
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Re: Is house hacking a smart choice for me?

Post by Oddball »

I recommend getting a smaller 3-4 unit building, with the units being 1 bed 1 bath up to 2 bed 2 bath units. Live in one unit and rent out the other units. The rental income should cover most or all of the mortgage payment, and you gain the equity from the mortgage paydown. 4 units and smaller the mortgage process is pretty much the same as with a single family home.
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mrbluewho
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Joined: Thu Jan 18, 2018 3:37 pm

Re: Is house hacking a smart choice for me?

Post by mrbluewho »

Investnewbie01 wrote: Sun Oct 17, 2021 4:37 pm I ask, why would you want to house hack at 31? You say you have a girlfriend in another State, suggest you decide where that is going? Given the job market,shouldn’t be too difficult for one of you to move if desired, then buy a house together, rates hopefully will still be low? Wouldn’t suggest you house hack with her, wouldn’t go down well!Suggest your student loan should be a priority? I bought my first property at 21, modest but so worth it not to deal with housemates. Obviously I’m from a different generation,but throw it out there for consideration?
Thanks! You raise fair questions. I just wanted to get ahead of my student loan by maximizing an opportunity to have renters help pay off a mortgage, while I can live rent free. I had a very loose, almost unrealistic, idea of what it would take to purchase a piece of property, especially with upfront costs. I've lived with roommates for almost the last 7 years, in an effort to save money. Now with increased student loans, I am living with roommates again to help pay down the loans aggressively. I feel torn between purchasing a piece of property, continuing to live with roommates, or get a studio/1bd apt of my own. At this point I'm leaning more towards the latter two, and continuing to pay down my loans and save.

My GF and I could very well purchase a piece of property together. Maybe a duplex/triplex as suggested by others in the future. We are both just starting our careers and taking everything one day at a time.
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mrbluewho
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Joined: Thu Jan 18, 2018 3:37 pm

Re: Is house hacking a smart choice for me?

Post by mrbluewho »

Watty wrote: Sun Oct 17, 2021 5:01 pm
mrbluewho wrote: Sat Oct 16, 2021 8:55 am Or things to be cautious about?
Make sure that it is legally allowed and there are no HOA rules against it.

People often do this and get by with it but often they do not. Someone tried doing that in my subdivision and it was quickly shut down because the county rules for "single family home" zoning did not allow more than one(?) non-related person to live in a single family home.

Even if this is allowed by the housing rules, you also need to look at parking and the parking rules and laws. For example there may be limits on how many cars can be at a house especially if they are not in a garage. Potential renters will not want to have to jockey cars every time someone want to come and go. It may be hard to find a house that will work with more than two cars.

Don't forget that the rental income will be taxable income to you. It is best to get professional tax advice about how that will work.

A problem I have heard about is if there is damage to a common area then it can be impossible to hold someone responsible since any of the renters could have done it.

Another thing to look at is all the liability you will be taking on. I remember reading about a case where someone was renting out rooms to people with different genders in a college town. Alcohol was involved but one renter sexually assaulted another renter. The landlord got sued. I never heard how that worked out.

It is much better to do get something like a duplex where you can do a traditional rental of the other unit. As I recall you can get a conventional mortgage on a multi-plex with up to four units as long as you initially live on one of the units.
These are great points. It seems like there is a lot of opportunity for this to become a massive headache than a worthwhile investment, but i'm sure it's situational. At this point I'm leaning towards continuing to rent for now to pay down my loans as aggressively as possible, and put myself in a position to purchase a multi-plex down the line.
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mrbluewho
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Joined: Thu Jan 18, 2018 3:37 pm

Re: Is house hacking a smart choice for me?

Post by mrbluewho »

neko06 wrote: Sun Oct 17, 2021 9:24 pm I am currently 'house hacking'.

I bought my house at age 34 for $330k at 2.65%, with an $80k salary.
I get $1,800 per month in rent collectively from two roommates
My mortgage is $1,400 per month

It has been fantastic for me so far. I am single so it is nice to have other people around the house to talk to. It does take some effort to screen out weird roommates, but I have not had a bad one yet. I've found that pricing the rent higher keeps a higher quality of roommate.

I also plan to live in this house for the next 5+ years. If I decide to move to a better location, I will keep this house as a full rental property.

earning more than my mortgage every month is pretty nice!
Thanks! It's nice to see it working out for you. This is certainly what I ideally envisioned. Roughly how much capital did you need up front to make this work? Did you hire a realtor to help with everything? Also, that is my concern with the roommates, but that makes sense regarding a higher rent. Good roommates make all the difference. I moved to this area not knowing anyone, so meeting new people is certainly a plus. I'm just wondering if I should pivot and see it from a landlord's point of view.
Topic Author
mrbluewho
Posts: 43
Joined: Thu Jan 18, 2018 3:37 pm

Re: Is house hacking a smart choice for me?

Post by mrbluewho »

Oddball wrote: Mon Oct 18, 2021 1:17 pm I recommend getting a smaller 3-4 unit building, with the units being 1 bed 1 bath up to 2 bed 2 bath units. Live in one unit and rent out the other units. The rental income should cover most or all of the mortgage payment, and you gain the equity from the mortgage paydown. 4 units and smaller the mortgage process is pretty much the same as with a single family home.
Thanks! This is certainly what I'm leaning to. I'll most likely focus on paying down my debt currently, and try to save as much as possible for a more grand endeavor like a multi-unit housing purchase.
neko06
Posts: 97
Joined: Thu Aug 12, 2021 11:15 am

Re: Is house hacking a smart choice for me?

Post by neko06 »

[/quote]

Thanks! It's nice to see it working out for you. This is certainly what I ideally envisioned. Roughly how much capital did you need up front to make this work? Did you hire a realtor to help with everything? Also, that is my concern with the roommates, but that makes sense regarding a higher rent. Good roommates make all the difference. I moved to this area not knowing anyone, so meeting new people is certainly a plus. I'm just wondering if I should pivot and see it from a landlord's point of view.
[/quote]

I put $40,000 down when I purchased the house and I used a realtor.

When looking at houses, I specifically looks for layouts that would be idea for roommates. My basement has a bedroom, full bath, and large living room that I rent out. I can make a lot more money on this full basement setup than if I was just renting out a bedroom.
Spooky
Posts: 142
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Re: Is house hacking a smart choice for me?

Post by Spooky »

It sounds like it is worth looking into the legal aspects, but at least where I live, there is a lot more leeway given to a landlord who rents out part of the house where they live, as opposed to just renting out rooms in a house where he/she doesn't live. Sometimes community colleges may have a class on the basics of being a landlord that would be specific to your area and generally not too expensive.
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