**The Realities of House Hacking: What You Need to Know**

[Nate Shields]

House hacking is often promoted as the easiest way to get into real estate—buy a property, rent out part of it, and let tenants cover your mortgage. Sounds perfect, right? The reality is, while house hacking can be a fantastic way to build wealth, it’s not always as simple as it seems. Let’s take a look at some hard truths that many people overlook.

### 1. You Might Not Live for Free

Many first-time house hackers expect that their rental income will fully cover their mortgage, but that’s not always the case. Consider this scenario:

- You buy a $400,000 duplex with 5% down ($20,000) at a 6.5% interest rate.

- Your monthly mortgage payment (PITI) is about $2,800.

- You rent out the other unit for $1,800 and maybe a spare bedroom for $500.

- Total rental income: $2,300.

- You’re still responsible for a $500 gap each month.

Add in maintenance, unexpected expenses, and vacancies, and your costs can climb even higher. House hacking can significantly lower your housing expenses, but full elimination isn’t guaranteed.

### 2. Living With Tenants Can Be Challenging

Sharing your property with tenants sounds great—until you’re dealing with late-night noise, maintenance issues, or awkward run-ins in shared spaces. Some potential challenges include:

- Tenants being consistently late on rent.

- Issues with cleanliness and respecting common areas.

- Requests for repairs at inconvenient times.

- Navigating tricky landlord-tenant relationships when you live on the same property.

While some people thrive in this environment, others find it difficult to balance personal space with their role as a landlord.

### 3. Property Management Is Still Work

Even if you only have one or two tenants, you’re still a landlord—which means handling maintenance, lease agreements, and potential disputes. Consider this scenario:

- A tenant calls at midnight because the heater stopped working.

- You need to find a new tenant when someone unexpectedly moves out.

- The bathroom sink is leaking—do you pay a plumber or fix it yourself?

House hacking isn’t passive income; it requires time, effort, and a willingness to handle problems as they arise.

### 4. Financing and Exit Strategies Matter

Many house hackers use FHA or low-down-payment conventional loans. While these loans make it easier to buy a property, they come with challenges:

- **PMI Can Be Costly:** With less than 20% down, you'll likely pay $150-$300/month in private mortgage insurance.

- **Interest Rates Can Affect Refinancing Plans:** If rates increase, refinancing to remove PMI or lower payments may not be an option.

- **Scaling Can Be Tricky:** FHA loans are typically for primary residences, meaning you'll need to strategize if you plan to purchase additional properties.

Thinking through financing options and backup plans before you buy is essential.

### 5. Market Conditions Aren’t Always in Your Favor

House hackers often assume their property will appreciate and rents will rise, but that’s not always guaranteed. Some risks include:

- Declining property values, leaving you with little or no equity.

- Rents staying flat while property taxes and insurance increase.

- Unexpected expenses that eat into profits.

For example, some investors who bought in 2022 at high interest rates expected strong rent growth to cover costs. Instead, they faced stagnant rents and rising expenses, leading to negative cash flow.

### The House Hack I Wish I Had Tried

If I could do it all over again, I would have started with house hacking. When I got into real estate, I didn’t realize the power of reducing my biggest expense—housing—while building equity. Instead, I bought a home at full price and missed out on years of potential savings and rental income. If you’re just getting started, house hacking is one of the smartest moves you can make to accelerate your financial growth.

### Final Thoughts

House hacking is a great strategy—but it’s not a shortcut to instant wealth. It takes planning, effort, and the right mindset to make it work. If you go in with realistic expectations and a well-thought-out plan, house hacking can be an incredible tool for building financial freedom.

Have you tried house hacking? What was your biggest lesson? Share your experience in the comments below!