When is house hacking not worth the sacrifice in quality of life?

[Susan Tan]

House hacking is often considered here in this forum as a good beginner's move to getting started with the first rental property. When does house hacking & self-managing a property NO LONGER worth the time & effort as your net worth grows? I saw the horror movie Pacific Heights, in which a double-income child-less couple buys a multi-family & rent out the other units to horrifying results. This movie has scared me off of doing house hacking! 

[Steve K.]

@Susan Tan When your best friends move out, and some random new people move in. It goes well for awhile but turnover is high. You get tired of finding new roommates, forming new relationships and getting to know people, so you stop putting as much effort in. Then you let a hippie kid move in who seems cool enough, but later informs you that he’s a legal peyote church priest, and starts growing peyote in his closet. He hosts all-night peyote bonfire bongo ceremonies in the backyard. This irks all the nice old people living on the quiet cul-de-sac, as well as the fire department and the cops. He claims his status as a peyote priest makes him a protected class. He has all the papers. Then he falls off the wagon and starts drinking a bottle of tequila for breakfast, and tries to stab your other roommate who is just trying to use the bathroom they share, because he thinks the other roommate is some kind of demon. So you tie him up and call the cops, then change the locks and move his stuff out to the curb while he’s in jail. Then you replace him with the most boring person you can find. Eventually your girlfriend wants to move in, and you let her (more the merrier!). But she’s a vegetarian and the boring roommate microwaves frozen fish for dinner every night. He buys it in bulk from the expired frozen fish store, and the place reeks. So the girlfriend quickly convinces you to buy a new place that is much less fishy, and the two of you move out. Then you make babies and need more bedrooms for kids and gramma’s and aunties and nanny’s instead of roommates. That’s how it went for me anyway. I lasted 5 years house-hacking in my mid twenties. At first it was a group of close friends and that was tons of fun, even though we had 8 people and 5 furry creatures living in a 4/3, all sharing a single tiny kitchen. We made it work because we were pals in our 20’s, just excited to be living in Boulder with cheap rent. But as time wore on and friends were replaced with whoever, it became less fun. There was also a lame paralegal who tried to screw me over. She stopped paying rent and tried to blackmail me by threatening to file a report with the county for bogus health and safety violations. I had to call the lawyer she worked for and arrange a mutual rescission, but never recovered the lost rent. Lots of good war stories once it became a revolving door of transitional folks, turning over every several months. Great way to get started though, and I’d do it all over again in a heartbeat. The savings from not paying rent or a mortgage, plus five years of principle pay down and appreciation, was truly life-changing. A small 3.5% down payment on that first house hack is what built the initial seed capital which lead to a few live-in flips and eventually investing in small multifamilies. It was also a great way to learn about how (and how not) to manage a property. I’ll definitely never rent to a peyote priest or a paralegal ever again (sorry peyote priests and paralegals, I’m sure many of you are good people but I’m not taking any chances).