House Hacking Budgeting

[Tyler Edens]

Hello BP Community!

I've been saving for a house hack over the past two years and recently came across a great property in the Denver metro area that I’d love to pursue. Not only does it have excellent potential as a house hack, but it also offers significant upside for a live-in flip. Even better, I might be able to snag it well under market value since it's an estate sale that's been sitting on the market for nearly 200 days.

Here’s the challenge: while I could afford to purchase the property under market value, I’d be stretching my budget thin to cover the mortgage during the period I’d be remodeling the basement to make it rentable. That said, even with conservative rental income estimates, my living expenses would eventually drop to several hundred dollars less than what I’m currently paying in rent once the house hack starts generating income.

I do have cash reserves to weather some rough patches, but the idea of pushing my budget this hard makes me uneasy. I’m curious: are others who house hack buying homes they can just barely afford, or are you sticking closer to the ~30% housing rule and using house hacking income as an added bonus?

From my perspective, it seems like stretching the budget is almost a necessity to afford a property big enough to house hack in Denver—even with a good job.

Looking forward to hearing your thoughts and experiences!

[Ty Coutts]

Hey Tyler

I'd say it's important to weigh the risks and rewards when considering a house hack, especially in a market like Denver. While purchasing under market value is a great opportunity, stretching your budget too thin can add significant financial stress, especially during the renovation period. It’s crucial to ensure that your cash reserves can cover not only the mortgage but also unexpected expenses during the remodel.

The 30% housing rule is a helpful guideline to avoid overextending yourself, and ideally, you should be comfortable with your monthly housing costs even without rental income. House hacking can certainly be a great way to build equity and reduce living expenses, but it’s essential to have a cushion in case your rental income doesn’t come in as expected or renovations take longer than planned. If you have any questions concerning especially the funding of this project, feel free to reach out.