Housing Hacking with Second Home Mortgages

[Peter W.]

My wife and I are considering getting a home closer to her family to stay in for extended periods and holidays. The current option that we are looking at is buy, live in 1-2 months of the year, convert to MTR or STR for the other months (especially since we are flexible on our end). The first question is, can I use a second home mortgage (10% down and lower interest rate) for this. Some quick googling suggests the answer is yes provided I don't rent it out more than 180 days for the first year, do I understand correctly?

The other question I have is if anyone has tried this on repeat, like with standard house hacking (live in for a year and repeat). That is, buy one home in city X (where I don't live), live in it a couple of months let it be an STR the rest of the time and then the next year (or in two years) repeat again in the same city.

[Dennis Bragg]

Hi Peter,

Great question! Your idea of using a second home mortgage for house hacking is both creative and practical, especially given your flexibility. Based on my experience, you're right that many lenders allow the use of a second home mortgage for properties intended for personal use, provided you meet certain conditions. Renting out the property for less than 180 days in the first year is typically one of those conditions, as you've mentioned. However, I'd recommend discussing this with a knowledgeable mortgage broker to confirm the specfic terms based on your lender's guidelines.

I once worked with a client who had a similar idea in San Diego. They bought a second home near a popular tourist area, lived there for the summer, and rented it out during peak seasons. They managed to cover the mortgage and still had a comfortable place for family vacations. Their biggest challenge was finding a reliable cleaning crew, but once they built a team, everything ran smoothly.

Let me share another example. A friend of mine, Sarah, and her husband bought a second home near her family in Phoenix, lived there for a few months each year, and rented it out as an MTR the rest of the time. They used the income to cover expenses and reinvested into a second property in San Antonio two years later. Their strategy focused on targeting traveling nurses, a niche market with reliable demand.

As for repeating the process in the same city, it's doable but requires careful planning. Some lenders might scrutinize multiple properties in the same area under second home mortgages, so you'll want to ensure your intent to use each property personally is clear and genuine. Diversifying into different markets, like Omaha or Austin, can help reduce any lender concerns and also spread your risk.

Have you thought about the specfic market for your STR or MTR? For example, areas like Chicago have a strong demand for furnsihed rentals, especially in neighborhoods near medical centers. Identifying the right market can make a huge difference in the success of this strategy.

Curious to hear...are you planning to manage the property yourself, or are you considering hiring someone local?