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Updated over 6 years ago, 08/14/2018
House Hacking vs Rent Hacking
Hello,
I'm starting out in real estate and have been considering doing a house hack in a multi-family unit. However, the more I learn about real estate the worse this idea seems. My understanding is that the golden standard for a real estate deal is to "brrrr" a property, but at least where I live this is very hard to do with a house hack.
An alternative that appears to be way more attractive is to "Rent Hack" - rent a house bigger than you need and sublet the rooms out. This way, you can still reap the benefits of living for free, and use the money you have saved to "brrrr" a non-owner occupied property.
The pros and cons of each strategy as I see it.
House-hacking:
Pros: Get experience as a landlord, 5% downpayment with owner-occupied financing, Live for free (or very cheap), Rent paid to you builds equity in the property, ability to sell after two years for tax-free gains, can live in a different unit from roommates with a multi-family building.
Cons: Difficult to "brrrr" a property this way (at least where I live), limited in terms of where you can invest due to needing to be close to work, etc...
Rent-hacking:
Pros: Live for free (or very cheap), Frees up capital to invest in a non-owner occupied property, Ability to invest in a market with better returns than the one you live in, possibly more flexibility in where you can live depending on the availability of rental units in your area.
Cons: May be difficult to find a landlord who allows this (I've found at least one so far), Need to put at least 25% down on a non-owner occupied rental property, have to live in the same unit as roommates (some may see this as a pro - I don't...).
What do you think? Have you chosen to pursue a particular strategy and why?