How to Diversify Your House Hack to Recoup More Cash Flow

[Jonathan Greene]

With the upswing in the country's short-term and mid-term rental markets, a unique opportunity is presenting itself to house hackers during a time when it's harder to cash flow than it was a few years ago. You can diversify your house hack inside itself if you combine rental strategies. (I know a lot of investors who are doing this, but I've been surprised to find out that it's a new concept that others haven't considered.)

The more units, the better in this scenario because you can hedge your bets with more units. The diversification comes from using short-term or mid-term in your other unit(s). Of course, you can do this in a stand-alone rental, but numbers are incredibly tight for house hackers now, so I thought it would be better served in this forum.

Let's take a four-family where you house hack one of the units:

1. Unit 1 - you live there

2. Unit 2 - long-term rental (this will usually be with an existing tenant since you already have that running well or in a larger unit that might net the highest rent as a long-term)

3. Unit 3 - mid-term rental (this would be best for the most private unit as most mid-term renters are more concerned with privacy and creature comforts than amenities)

4. Unit 4 - short-term rental (this would be best for a unit with a separate entrance so you reduce the bother to other tenants because the changeovers will be more here)

Is anyone doing all three (LTR, MTR, STR) in their multi or house hack now?

I think it's the best way to A/B test the potential. Mid-term is more likely to work in any market than STR, but I think you would be surprised at how well an STR could do if there are no other options like that in the area (think people's parents or friends coming in for the week(end)).

I've seen a lot of people grimacing at the net-negative house hack (it's just a product of rates and low inventory in a lot of markets) and this is one option to try to recoup some of that loss.

[Tim Delaney]

It would be great to have all three strategies going in one house! Using a househack for an STR could be particularly advantageous in municipalities where STRs have been cracked down on more but still allow you to do it if you are living in the property. Being able to A/B test MTR at the same time would allow you to know if you can convert the STR to MTR if you ever want to move out and keep the property.

As for the net negative house hacks - I always like to remind people that shy away from a deal because they aren't making money that they are usually still coming out ahead if they are spending the same or less than they would on rent.