House hacking is a great way to get started on your real estate investing journey - short-term rentals (STRs) are the best way to maximize your return.

Most investors have heard of the house hacking and STR strategies as separate ideas. House hacking - renting out a portion of your primary residence to cover part of, all, or more than your mortgage payment - is an excellent strategy for investors of all experience levels to reduce or even eliminate their housing expenses and begin to generate cash flow right where they live. When most people think of short-term rentals, they think of vacation destinations such as mountain or beach towns, often bringing them out of state.

In hot metro areas, which are both vacation destinations and residential hubs, investors have the unique opportunity to combine these strategies to boost their cash flow in their own city.

While it typically requires a bit more work than long-term rentals, house hacking with STRs in popular metro areas allows you to live where you want and maximize your return while living there. More specifically:

Live where you want: Short-term rental laws in many U.S. cities are somewhat in flux, with many cities instituting a primary-residence requirement, meaning you must live in the property in order to rent part of it as a STR. For investors who want an investment property they don't need to live in, these rules limit their search to the cities that have non-primary residence STR-friendly laws. Renting out part of your primary residence as a STR opens your search to the majority of the metro area where, often with a license, you can legally rent part of your residence as a STR.

Maximize your return while living there: I have rented part of my primary residence as both a long-term and short-term rental. While our long-term rental covered 60% of our mortgage, switching to a STR consistently covered 100%+.

When you move out, if it's in a non-primary residence STR-friendly city, you can convert the entire property to a STR - whether 1 unit or 2 based on that city's STR rules. If it's not in a non-primary residence STR-friendly city, you can convert the property to a long-term rental and still cash flow if you run your numbers right when initially analyzing the property, but you will have maximized your return during the time you spent living there, helping to set you up for your next deal.

If you have any thoughts or questions about STRs, I’d love to hear from you!