House Hacking Property with Garage Apartment

[Drew Diaz]

I’m looking to house hack for my first purchase, but am not really looking to share living space with strangers. Multi-family is definitely an option (and I’m feverishly looking for multi-family) but multi-family properties around Houston seem to be either too pricey or in pretty sketchy areas. Like the description says, if I purchase a place with a garage apartment, I would plan to live in the garage apartment and rent out the house. After all, an entire home would probably rent for more, and I don’t need all that much space anyways. Has anyone done this before?

[Daniel A.]

Hello Drew,

You are making a wise choice in deciding to house hack. The joy of house hacking is that there are so many different variations, and most all of them will work. 

As to the idea of you living in the garage apartment and renting out the house, you do set yourself up to merit a higher rent payment for renting out the house. A house offers considerably more than a garage apartment and people are willing to pay a premium for that -- assuming the house is in decent condition. If you are content with the garage apartment, then there really isn't much of a reason why not to reside there while making an extra hundred or two (or more) by renting out the house.

I don't know whether you plan to have a washer and dryer in the house or in the garage (or both or neither), but that is something you want to consider.  If they're in the house and you're in the garage, it might be somewhat uncomfortable for you to have to venture into the house to do laundry. The tenants are sitting in the living room, entertaining guests, and then here you come along with a bag of dirty clothes.

Other than that, I can't really think of too much of a downside to you living in the garage apartment while tenants have the house.

If there are amenities or accommodations that are in the house or that are "communal" (i.e., the backyard, the parking, etc.), then I would recommend that you try and work out the logistics before you bring in a tenant. Last thing you want is to come home and find three cars taking up all the driveway parking spots. 

I would also take into consideration how you plan to structure utility payments. Are you going to be paying for electric? Water? Because the house will likely take up more than the garage. Same with water. I would hate to see you lose a large portion of your profits because you pay for utilities and your tenants keep the A/C on when they're gone for the day. While getting them separately metered is financially unadvisable, you could always structure a payment method where you determine the square footage of the garage and that of the house, then figure out what percent of the total square footage garage is, then tell the tenants that they are responsible for the percentage of the house. For the sake of simplicity, if the total square footage is 2,000 square feet for the garage and the house, and the garage unit is 500 square feet, then the garage takes up twenty five percent of the total property. Therefore, if you get a $100 electric bill, you would pay $25 and your tenants in the house would pay $75.

Or if you have a good idea of what the monthly utility bills are without tenants, you could tell them that you will cover the bills up to a certain point. If electricity goes above X in a billing cycle, then they must pay the overage. 

Keep your head up and enjoy house hacking.