House Hacking Basics | Steps to Building Wealth and Financial Freedom

At its most basic level house hacking is when you live in one part of a property and rent out other parts of it to cover things like your mortgage, utility bills, or property taxes.

At its most basic level house hacking is when you live in one part of a property and rent out other parts of it to cover things like your mortgage, utility bills, or property taxes. People of all ages house hack everything from single-family homes where they rent out everything from bedrooms and have roommates, to renting their garage or driveway for storage and parking. Others house hack multifamily properties, buying a duplex, triplex, or quadplex and renting out adjoining units to tenants. The main goal of these additional revenue streams is to cover some, and ideally all of the expenses related to the property. In the best situations some properties even cash flow positively such that house hackers are able to throw off income from their properties.

This strategy is employed by savvy investors who are keen to build wealth and aren’t afraid to generate maximum income from their investment properties. Many of these investors who start early enough are able to amass a fortune, leveraging conventional loans every few years to add to their portfolio, using the hacked house as their primary residence. Having the foresight to plan for the future, contemplate all available revenue generators, and live in this manner pays off big a decade down the line in life when the properties are able to cover living expenses, generate positive cash flow, and in nearly all cases the properties themselves grow immensely in value.

All of these factors should encourage aspiring house hackers to contemplate any and all avenues to add income to their property, whether it be renting the home on short term rental platforms like Airbnb or VRBO, to having long term roommates or tenants, to renting your garage, driveway, or basement space on storage and parking platforms like Stache.

House hacking is the ideal way for people who are willing to have roommates or side hustles related to their property to set themselves up later in life with a passive income stream and immense equity via their properties.

Is house hacking right for you?

The largest benefit to house hacking is reducing and eventually eliminating living expenses. Imagine not having to use your hard-earned salary to pay a mortgage, utility bills, or property tax. Most of us know about the 30% rule which stipulates you should only spend that percentage of gross income on a mortgage or rent. Unfortunately for most Americans, this number exceeds 40%, and in many high cost of living markets like San Francisco, New York City, or Washington DC this approaches and even exceeds 50% of gross income. In this scenario, only $1,200 of a $4,000 per month income should be used towards rent or a mortgage.

To compound this issue most young people choose to rent rather than buy and in so doing are building no equity in a home. With property values surging in 2020 and 2021 Millenials and Gen Z are missing out on the wealth being accumulated by the older generations. With interest rates at all-time lows home values have only continued to surge.

Adhering to the 30% rule is immensely important and with house hacking, this number can the percentage of income spent can be reduced dramatically. Doing this ensures you are on the path to a higher quality of life down the road, one where working from home, or working only when you feel like it is entirely possible.

3 More Benefits of House Hacking

  1. Building wealth through the appreciation of your home. Renting a home lines the pockets of your landlord. By house hacking you become the landlord, turning the tables on the renting vs owning game.
  2. Conventional loans afford the buyer a lower interest rate than investor loans. By occupying your home you secure these rates.
  3. Building a real estate empire. House hacking allows you to develop an income stream and every two years you can leverage a new conventional loan to expand your real estate holdings. The income generated by your properties can be used to improve your debt to income ratio allowing you to purchase more properties despite a lower traditional salary.

Sharing Some House Hacking Strategies

While not all properties are well suited to house hacking most landlords could do a dramatically better job of increasing the income generated from their property with some creativity. Our goal below is to share some tips on how you can generate even more income from your property.

House Hacking Single Family Homes

The more bedrooms the better in a single-family home. Each of these rooms represents a potential tenant renting from you. We’re huge fans of long term rental platforms for traveling professionals such as nurses or doctors. Of course, some discretion is important in selecting a roommate with whom you will share common areas, so this strategy is best served for younger owners or those less concerned with privacy. Over time we’ve found traveling nurses to be the ideal tenants as they stay for several months, work long hours, and are generally very respectful of the property.

Alternately short-term rental platforms like Airbnb work well and you can avoid having roommates at certain critical times of year that suit your needs. On a nightly basis, these renters tend to pay more however heavy turnover and the constant burden of hosting new renters has made it a less desirable alternative in our experience.

House Hacking a Duplex, Triplex or Quadplex

House hacking a duplex (or triplex or even a fourplex) is a popular option. It means you don’t have to share your space with a tenant. Instead, you buy a multi-unit property, live in one, and rent out the other(s). Having full units attached to your own means you can command a higher rent than just renting out a room yet you can still reap the rewards of low-interest rate and minimal down-payments as you are living in the property.

House Hacking RV Parking

Renting a driveway, paved, or backyard space for a tenant is a potential option should you be willing to let someone park an RV or trailer on your property. Often times this has zoning implications particularly if you don’t have a hookup. We endorse this approach with some caution if you have ample land and your renter understands they need to maintain a low profile.

List your Driveway, Basement, Shed, or Garage for Rent

In the same way Airbnb opened up homes to short term tenants platforms like Stache Storage are empowering hosts to rent all types of space around their homes for storage and long term parking. Your little backyard shed could be worth $600 per year in passive income while nationwide a typical 2-car garage generates $3,500 per year in passive income. Is a month’s mortgage or an entire year’s utility bills worth parking out front? It just might be for many and a new wave of sharing platforms are empowering aspiring house hackers to do just that! Listing your garage for rent takes as little as two minutes and for that, you have a storage tenant who is much less hassle than hosting a renter in your home.

House Hacking a Duplex, Triplex or Quadplex

House hacking a duplex (or triplex or even a fourplex) is a popular option. It means you don’t have to share your space with a tenant. Instead, you buy a multi-unit property, live in one, and rent out the other(s). Having full units attached to your own means you can command a higher rent than just renting out a room yet you can still reap the rewards of low-interest rate and minimal down-payments as you are living in the property.

House Hacking RV Parking

Renting a driveway, paved, or backyard space for a tenant is a potential option should you be willing to let someone park an RV or trailer on your property. Often times this has zoning implications particularly if you don’t have a hookup. We endorse this approach with some caution if you have ample land and your renter understands they need to maintain a low profile.

List your Driveway, Basement, Shed, or Garage for Rent

In the same way Airbnb opened up homes to short term tenants platforms like Stache Storage are empowering hosts to rent all types of space around their homes for storage and long term parking. Your little backyard shed could be worth $600 per year in passive income while nationwide a typical 2-car garage generates $3,500 per year in passive income. Is a month’s mortgage or an entire year’s utility bills worth parking out front? It just might be for many and a new wave of sharing platforms are empowering aspiring house hackers to do just that! Listing your garage for rent takes as little as two minutes and for that, you have a storage tenant who is much less hassle than hosting a renter in your home.