How to turn a house hack into rental

[Matthew Brown]

I currently own a 5 bedroom 3 bath home that I am house hacking. I am at the stage where I’m looking to buy my next primary residence but I’m trying to figure out how to manage the first one.. how is everyone else doing it? Do they keep separate leases for each tenant or wait till everyone leaves and rent the whole house out to one family? What should my exit strategy be?

[Allan Smith]

Yes, keep the house and rent it out. Renting by the room will usually make a little more money, but it's much more time-intensive (for one, you now have to collect a few hundred dollars from more people). Also keep in mind that you would be paying the utilities. 

I house hacked and when I moved out, I waited for the leases of each of my buddies to expire and asked them what they wanted to do. I preferred to rent it out to one tenant and that's what I ended up doing. 

As for exit strategy, that hinges on what your goals are. Some people want to flip houses, make a lot of cash, drive nice cars, etc. Others, like me, prefer to build wealth with power of rental property. I hold property more and sell less over time. As the property appreciates, you could re-finance it and get cash out. Or get a HELOC on it and use that to buy other properties in cash quickly. Or, you could rent for a while, and when everyone moves out, do a renovation and sell it for an equity pop. If you execute it properly, you wouldn't pay income taxes on the flip because you had lived in it.