For anyone thinking of house hacking, read this!

[Daniel Haberkost]

Hi everyone, I wrote a blog about this on my BP blog but wanted to share it in the forums as well because I personally have run into countless people who want to house hack but are afraid to get started. This has had such a positive impact on my financial situation (and ultimately my life) I feel the need to share my experience house hacking in hopes that it will motivate others who have not yet taken action to do so!

I moved to Colorado Springs in July 2018 and was planning to house hack a fourplex. After identifying and making an offer on a 4 unit in the area my lender informed me that she had made a mistake and changes in Fannie/Freddie guidelines would require a full 20% down on a multi unit (which I did not have) even though it was owner occupied. So I decided to go with a single family and purchased a 4 bed 3 bathroom home for $275,000. My house is on a dead end street, it backs up to a park, and is 3 minutes from Palmer Park which is one of the largest parks in the city. Additionally, I selected the home due to its layout as it has 4 levels and a large deck which gives everyone quite a bit of privacy!

I currently rent the basement out as its own suite (it has a living room, separate entrance, bedroom, fireplace) for $900/month, one upstairs bedroom for $700/month, and the other for $650/month for a total of $2,250/month while I live in the master bedroom (if you read my blog it will say I'm generating $2,300/month as I was at the time but one of my tenants moved out unexpectedly so I listed the room $50 lower to quickly fill it). My mortgage is $1761/month so not only am I covering that in its entirety but I'm also paying my utilities and my food bill each month while comfortably living for free in a beautiful house in one of the hottest markets around. Not to mention the home is appreciating, the mortgage is paid down each month, and nearly all of my expenses are now (partially) deductible (I pay very little in taxes on this income). This has completely changed my life as all of my basic living expenses are covered from my primary residence. It has given me substantial freedom to focus on my business and work when I want to. 

When I tell people I do this I often get the response "you let strangers in your house?!" or "Isn't it terrible sharing the kitchen?" and to these people I simply say it's a matter of proper screening. BP has numerous articles explaining how to screen tenants and if you follow all the steps and don't cut corners it is not difficult to find reliable and trustworthy people to rent from you. My experience so far has been phenomenal and I've made friends with several of my tenants who have moved on and my current group of renters are all easy to live with as we are hardly ever home. One of the most important items when house hacking (in my opinion) is to set very clear expectation with your roommates as to how the arrangement will need to work. I tell everyone when they first come to see the house what my expectations are; 1.) Do not wake me up at night. 2.) Pay your rent on time. 3.) Do not leave the kitchen dirty, and because I've been upfront with these items I've had no issues thus far. 

Additionally, I believe it has worked well because I treat my tenants well and make a point to be sensitive to their needs. If they need me to buy something to make the living situation more pleasant I do (within reason). I have a new tenant who likes to meal prep which takes up quite a bit of space so I bought her a separate mini fridge. One of my other tenants likes to play Xbox in his room so I offered to upgrade the WiFi speed if he needs. These people are paying my mortgage, they deserve to be treated well. Which hits on my entire philosophy surrounding any business transactions being that it should always be a win-win for both parties! If you take a transactional, win-lose approach to your business relationships it will be a challenge to succeed. My tenants are living for much cheaper than if they were renting a traditional apartment and my mortgage is covered, win-win. 

The moral of this post is simple, if you're considering house hacking I would highly recommend it! The benefits greatly outweigh the negatives and it can completely change your current situation and VASTLY change your financial trajectory for 10-20 years down the road. The only disclaimer I have to everything I've written is you must do all of the standard due diligence that comes with purchasing/operating real estate (i.e. are you buying in a growing market? do you know how to screen tenants? etc.). 

If anyone reading this has any questions, feel free to ask away!

-Dan