What if the home you purchase could help pay for itself? House hacking is a real estate strategy that allows homeowners to generate rental income from part of their property to help offset their monthly mortgage payment and other housing expenses.
For first-time buyers, military families, and those interested in real estate investing, house hacking can provide an opportunity to become a homeowner while building equity and generating rental income.
What is House Hacking and How Does It Work?
House hacking involves purchasing a property as your primary residence and renting out a portion of it to generate income. Instead of covering the entire mortgage payment on your own, rental income from tenants can help reduce your monthly housing costs.
There are several ways to house hack, depending on your budget, lifestyle, and investment goals:
- Duplexes, Triplexes, and Fourplexes: Live in one unit while renting out the remaining units.
- Homes with Guest Houses or ADUs: Purchase a property with a separate living space that can potentially be rented out.
- Single-Family Homes: Rent out additional bedrooms while continuing to live in the property.
The amount of rental income you generate depends on the property, local rental demand, and operating expenses. While some homeowners may offset a significant portion of their mortgage payment, others may use the additional income simply to reduce their overall housing costs.
A Real-Life Example of House Hacking in San Antonio
One example of house hacking involved a buyer who purchased a newly built fourplex using eligible VA financing.
Three of the four units already had tenants in place, allowing the buyer to move into the remaining unit as their primary residence. Rental income from the occupied units helped cover nearly the entire monthly mortgage payment.
Rather than purchasing a traditional single-family home and taking on the full monthly payment, the buyer was able to significantly reduce their personal housing expense while building equity in a multifamily property.
This example illustrates how house hacking can combine homeownership with the opportunity to generate rental income.
Can You Use a VA Loan to House Hack?
For eligible military buyers and veterans, VA financing may provide opportunities to purchase an owner-occupied multifamily property with up to four residential units.
To qualify, the buyer must meet VA eligibility, occupancy, credit, income, and other applicable lending requirements. The property must also meet VA and lender guidelines.
Other financing options may include:
- FHA Loans: Qualified buyers may be able to purchase an owner-occupied property with up to four units, subject to FHA requirements.
- Conventional Loans: Certain conventional mortgage programs allow qualified buyers to finance owner-occupied multifamily properties.
Financing requirements, down payments, and the treatment of potential rental income can vary by loan program and lender. Working with a knowledgeable mortgage professional can help you understand which options may be available for your situation.
What Are the Benefits of House Hacking?
House hacking can offer several potential financial advantages beyond simply reducing your monthly mortgage payment.
- Lower Housing Expenses: Rental income can help offset your mortgage payment and other ownership costs.
- Build Home Equity: As you make mortgage payments, you may build equity in a property that also generates income.
- Start Investing in Real Estate: Owning a multifamily property can provide hands-on experience with rental property management.
- Create Future Investment Opportunities: Some homeowners choose to keep their property as a rental investment when they eventually move into another home.
For buyers who want to begin investing in real estate but aren’t ready to purchase a separate investment property, house hacking may offer a practical starting point.
What Should You Consider Before House Hacking?
Although house hacking can provide financial benefits, becoming a landlord also comes with responsibilities and expenses.
Before purchasing a property, consider:
- Maintenance and Repairs: Property owners are responsible for maintaining the property and addressing necessary repairs.
- Vacancies: Rental income may decrease when units are unoccupied.
- Tenant Management: Finding tenants, collecting rent, and handling lease agreements require time and attention.
- Unexpected Expenses: Major repairs, insurance, property taxes, and other costs can affect profitability.
- Privacy and Lifestyle: Sharing a property with tenants may not be the right fit for every homeowner.
It’s also important to evaluate realistic rental income rather than assuming tenants will cover the entire mortgage payment. Understanding the property’s expenses and potential cash flow can help you make a more informed decision.
Interested in house hacking or purchasing a multifamily property in San Antonio? Explore available homes and investment properties or contact The Schrader Group to discuss your options.
Want to Learn More About House Hacking?
Lauren and Raul from The Schrader Group explain how house hacking works, financing options for qualified buyers, and the potential benefits of generating rental income from your primary residence. You’ll also hear about a real-life example of a San Antonio buyer who used VA financing to purchase a fourplex and significantly reduce their monthly housing expenses.