What is this house hacking thing anyways?

The term house hacking at refers to the practice of renting out a portion of a house in order to afford that mortgage. 

This week we’re poking around why it’s a cool option for millennial and gen z homebuyers and what to think about if you want to get into it. 

A Zillow report in2023 found 39% of millennial home buyers said house hacking was a very or extremely important option when it comes to affording a home.

Senior population scientist at Zillow, Manny Garcia, says that house hacking makes the dream of homeownership a reality amongst all the current affordability constraints. 

Amen brother! 

According to a report by Redfin, home prices were 3.5 percent higher in 2023 than 2022, with a national average hitting $413,874 for a home. In October of 2023, 30-year mortgage rates hit 8% which was the highest level seen in 23 years. Yeesh, thank goodness we’ve come down from that sucker. 

So given these numbers, across the US in order to afford a starter home, you need to be earning six figures. 

Across the board, the inventory of small, maybe cheaper homes is just not huge, leaving the average gen z buyer looking at those large hurdles of big price tags just to get in the door on home buying. 

When we take all this into consideration, it makes a lot of sense that home hacking is so popular. It’s a good option! Basically, passive income that’s (hopefully)a reliable check for putting towards your monthly home payment… hopefully.

Hitting you with the huge shocker; turns out, there are risks!

First, we go back to the initial part- it don’t help you buy the dang house. 

While attempting to qualify for your loan, the potential income from renting out a room won’t be considered by your lender. So you’ve gotta be able to afford the spot up front. 

The rental market fluctuates, and what you can bring in from renting a room, or whether you can even get/keep a renter will not be consistent or stable for years at a time. The neighborhood you bought in might become super trendy, or get over run by stray dogs, we’re just spit ballin’ here. There are unforeseen variables that are out of our hands in these situations, and the income should not be something that you desperately need to afford the bills. 

You’ve gotta be able to at least squeeze by making your mortgage payment if you didn’t have the rental income for any amount of months.

You also have to be aware of restrictions or regulations from homeowners’ associations when you’re considering a place. it would be a major bummer to get busted for something you didn’t realize you weren’t supposed to do. Read that fine print baby, it’s a better safe than sorry situation. 

So, to put a bow on this topic, house hacking doesn’t help you with the initial part of buying a house- but it can be awesome to help you continue to afford it overtime. If you’re considering the option of house hacking to make the mortgage payment cut a little less deeply, do your research and remember not to rely on it. It’s like a flaky friend, they might be really fun, but they’ll likely hit on your boyfriend. Its awesome when it works but it doesn’t have your back and it might be painful and disappointing. It can still be fun, as long as you have realistic expectations. You have to be okay with out it.