The Moment That Crystalized My Answer to “Is House Hacking Worth it?”
Oddly enough, I never asked myself the question, “Is House Hacking worth it?”
For me, the pros always outweighed the cons to the point where I couldn’t imagine my first home not being a house hack.
However, House Hacking isn’t a conventional move, and I empathize with those who aren’t convinced House Hacking is for you, and with those who are still weighing out your options. If you’re currently in either one of these camps, I want to tell you a quick story about what I just experienced…
It’s 6:00pm on 11/15/2020 as I write this; the sun has set and the early winter night is cooling quickly.
I’m sitting at the dining room table in my second house hack that I closed on approximately two weeks ago, and headlights of a car just pulled into the driveway. A stranger got out and approached the door of the carriage house or Additional Dwelling Unit (ADU) in the back of the property. They pulled out their phone, the light from the screen casting a blue glow onto their face as they stood beneath the illuminated halo of the front porch light, and then entered a code into the electronic keypad to open the front door and walk inside.
This stranger is my first AirBnB guest, and their 32 day stay will cover 78% of my mortgage this month.
It’s an exciting milestone, and I’m overjoyed with the level of peace and fulfillment that hit me. My first house hack was the result of multiple years of diligent saving, and that first house hack enabled me to rapidly increase my savings rate to be able to afford my second house hack just 1.5 years later. The numbers and scenarios I repeatedly stress tested in spreadsheets over that year and a half for House Hack #2 are now a reality; it feels expected yet surreal, inspiring yet grounding, ambitious yet secure.
The next handful of months are a testing ground for the ADU in regards to how much income it will generate from month to month, but based on the upcoming 4 months of bookings (after just two weeks of owning the property!) it seems likely that the ADU rental will cover a minimum of 60% of my mortgage each month.
Additionally, I received freshly signed leases for my first House Hack this morning which will be cash flow positive when the new tenants move in mid-December.
With the income of both properties combined, I’m confident I’ll be paying just a few hundred dollars each month to own two properties.
This is still sinking in, but to think that I will soon be paying less per month to own two properties than I was paying to rent an outdated 400 sq. ft. studio apartment just two years ago exhibits the power of House Hacking.
Is House Hacking Worth it from a Financial Perspective?
From a financial perspective, house hacking has made a significant difference in my ability to build wealth because it reduced my cost of living, added an asset to my portfolio, created a recurring income stream that will keep pace with inflation, and provides some solid tax advantages.
As I mentioned, with the rental income coming in from two properties, I’ll be paying a few hundred dollars a month in living expenses which will allow me to increase my savings rate even more. Ultimately, when I move out of my second house hack, I will be cashflow positive with both properties.
Is House Hacking Worth it from a Personal Perspective?
In regards to my personal life, living in my first house hack was a great experience. It came with a few inconveniences here and there, but most of the time it was similar to sharing an apartment building because it was set up as an up/down duplex. Every now and then I could smell my neighbors’ meals and hear their music/laughing through the vents, but it wasn’t much different than previous apartments I’ve lived in; and to pay less in rent than an apartment while building equity feels like a big win in my book.
My second house hack will be even less “intrusive” because the ADU is separated from the main house. Unless there are significant problems, the people renting the ADU will mostly be like next door neighbors—I’ll see them come and go, but will only interact with them occasionally.
In both house hacks, my personal life hasn’t been drastically altered in any way, shape, or form as a result of sharing space with tenants.
My Consensus to “Is House Hacking Worth it?”
Without a doubt.
If you are in a position to begin saving for a house hack or purchase a house hack, I can’t recommend it enough. Yes, it requires work. Yes, it can be risky. Yes, it requires you to be a landlord. Yes, it comes with a list of things that many consider “inconvenient” or “unideal.”
However, I personally believe the pros far outweigh all of these cons, and after my experience tonight in my second house hack, I believe that even more firmly.