House Hacking a Single Family v.s. Multifamily - Is it THAT different?

[Jake Andronico]

The short answer: Yes. 

There are pros and cons to both, and also key differences to consider for your financial and familial situation. 

Below are some key differences (in my opinion) after successfully house hacking two single family homes and renting each out by the room: 

House Hacking a Single Family

Pros: 

- Likely no existing tenants - Purchasing a vacant property allows you to do what you want, when you want. (Renovations, rental timing, moving in, moving out, etc.)

- It's a Swiss Army knife - You can live in it, rent out certain rooms and not others, do LTR, MTR, STR, students, rent it out fully once you move out, etc. It's extremely flexible.

- Selling - If/when you resell, you reach ALL of the market. You can sell to an owner occupier or an investor to get the highest price for your house hack. 

Cons:

- Space - you're likely directly sharing space with your tenants. There are ways to mitigate, define space, etc. But, if you're renting by the room in a typical Single Family home, this is difficult to avoid. 

- Parking - This one varies on a case by case basis, but if you're filling up a 4-5 bedroom house with tenants that all have cars and you have a car or multiple cars, parking can be an issue. 

- Laundry - When I was sharing a house with 4 college students, the laundry machine was almost always running. I found myself occasionally going to a laundry mat or doing wash and fold. 

House Hacking a Multifamily

Pros: 

- A defined living space - When you are in one unit in a multifamily property, you likely have more privacy, overall safety, and more peace of mind. 

- Ability to renovate while living there - If you're handy, you can renovate a unit WHILE living in it, which is the ultimate hack in my opinion. If you move into the remaining unit(s) year after year and repeat this process, on year 2-4 you can have a fully renovated multifamily hopefully performing at it's highest and best use. 

- Residential financing - The benefits of diversified income sources with the advantage of low money down fixed rate conventional financing. 

Cons: 

- Selling - this may be controversial, but hear me out. If/when you resell, not everyone wants to buy a 2-4 unit property. There are less available, but there is also considerably less demand. Investors don't ALWAYS buy small multifamily, but people typically always buy homes no matter the market. 

- Older Inventory - this varies from location to location, but typically small multifamily is much older than new single family homes that are always being built. This may mean that there are more capital expenditures and upkeep with small multifamily as opposed to a newer single family home (but not always). 

- Assuming Current Tenants - this also varies location to location (check your local laws), but in most places you will need to assume and adhere to the current leases that are in place. If you need to move into the property for an FHA/Conventional loan, you may not be able to due to the tenants leases expiring long after closing would take place.

There are many more pros and cons for each, but these were the main ones that immediately came to mind. 

What do you house hackers out there think? Any more to add? Do you agree, disagree?