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Updated over 1 year ago on . Most recent reply

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Annie Tran
4
Votes |
1
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House Hacking: is it worth the higher house price?

Annie Tran
Posted

I’m based in Utah. I’ve been thinking about househacking and would appreciate some advice, since I still don’t quite understand the advantage of house hacking. Two scenarios:

Scenario 1: House A

- Purchase price: $380k

- Monthly expenses (mortgage, insurance, tax): $1500

- No house hacking, so my family would pay the full $1500 monthly.

Scenario 2: House B (bigger, with an ADU)

- Purchase price: $460k

- Monthly expenses (mortgage, insurance, tax): $1900

- Rent out the ADU for $1200/month.

- My family would live in the main house and pays the remaining mortgage of $700/month

Considered that I’ll put down the same $ amount of down payment for both houses. Both houses are single family homes.

Here's the math:

- House A: Monthly expense is $800 lower ($1500 - $700).

- House B: The property is $80k more expensive.

- Time to recoup the difference: $80k / $800 = 100 months or 8.3 years.

In terms of finance, is house hacking worth it? It does decrease my monthly mortgage expense, but the houses that can be house hacked are often more expensive.

I'd appreciate your insights and experiences with house hacking. what number did it make sense for you to consider paying more for a house to house hack. Did I miss something as to why people want to househack so much? Please enlighten me! Thank you so much !

Most Popular Reply

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386
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Josh Bowser
  • Real Estate Agent
  • Atlanta, Ga
208
Votes |
386
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Josh Bowser
  • Real Estate Agent
  • Atlanta, Ga
Replied

Hey Annie - you're asking the right question here.

With the assumption you can comfortably afford both houses without the rental income AND they are in equivalent neighborhoods, the house hack will be better from a pure financial perspective for the following reasons:

1. Appreciation of a higher priced house will lead to a $$ of appreciation due to leverage. Let's say both houses appreciate 10% over the next 10 years, then you have gotten an extra $12k in networth from the same down payment.

2. You can save/invest the $800 dollar difference over 10 years and have an extra $96k liquid over that period of time OR use that extra $800 to help pay down the mortgage faster.

3. Higher home value means you can depreciate more $$ every year

4. If you choose to move in the future, you have the ability to rent out both units and will likely cashflow based off your numbers.

5. It is possible that market rent for that ADU will also increase over time.

In other words, your time to recoup the difference will likely be less than 8.3 years on paper depending what you do with the extra $800

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