House Hacking- really as beneficial as many say?

[Will Dennis]

Hey guys!

Got a question about house hacking. So pretty much everyone says that house hacking is the ideal first investment, but being someone who often questions conventional wisdom, I have a few questions about this. I feel my question would best be illustrated as an example.

Let's say in our example that Joe rents his current single family home that only he lives in for $1,000/mo. Let's say he purchases his first investment property- a duplex. Let's say each side also rents out for $1,000 a month, and the mortgage is $1,000.

Is there any benefit to Joe actually moving into the property and choosing to house hack? As I see it, Joe has two options, which I will outline below.

Option A allows Joe to pay $1,000/mo. in rent, stay in his current home, and collect $1,000/mo. from each of his duplex renters, totaling $2,000. In this scenario, Joe would have $2,000/mo. in income from his renters, and $1,000 going out for his own rent, leaving him with $1,000 to put towards the mortgage each month. He breaks even.

In Option B, Joe can "house hack" by moving out of his currently rented home and into his newly purchased duplex, receive $1,000 from one renter compared to the two in Option A, which he uses to pay his mortgage. Again, he breaks even.

If Joe breaks even in both scenarios, if he prefers to pay to rent in his current home for whatever reason, is there really any benefit to house hacking from a financial standpoint? Further, if many new investors live in their duplex for a year or so and move out anyway so they can rent both units out, why not just skip the middle step and go with renting both units out as their initial investment strategy?

I guess what I don't understand is how "house hacking" where you live in the property is really of any great benefit when compared to just renting out both units- especially considering the breakeven outcome of both scenarios listed above.

Thank you all in advance for reading and for any answers you might me able to provide!

Will