Table Of Content

House hacking works by allowing a homeowner or investor to generate cash flow from a property they own. The homeowner or investor can then put that money back into the property by paying down the mortgage or using that cash to make improvements that boost the home’s value. Finally, as you transition into the role of a house hacker and landlord, prioritize clear communication, timely maintenance, thorough tenant screening, and relationship-building.
Rent Your Entire Home on Airbnb
For example, not every house can be switched from a single-family residence into a multi-family dwelling. Before you jump into that particular strategy and rent out a detached garage or basement unit, check in with a local general contractor or attorney - they’ll know the state-specific laws. First, the owner can get attractive financing for the purchase of the property. As mentioned earlier, residential property owners get access to better interest rates and higher leverage than investment owners.
Today's Mortgage Rates

Overall, it cost $220,000 to build, which was higher than I anticipated. I had expected the closing costs to be around $5,000 to $6,000, but they ended up being almost $30,000. I believe they were higher because the lender had to oversee the contractor's work and administer the loan throughout the construction process. Living there while renting out the main house is saving me about $2,200 each month.
Skimm Money: Good debt vs. bad debt, “house hacking,” and caregiving work - theSkimm
Skimm Money: Good debt vs. bad debt, “house hacking,” and caregiving work.
Posted: Fri, 18 Aug 2023 07:00:00 GMT [source]
Live-In Flip
I’ve stayed in guest houses on Airbnb before, and for that matter in above-garage apartments. Instead of leasing as a long-term rental, you welcome short-term guests. You don’t have to worry about personality conflicts, rent defaults, evictions, pets, poor maintenance and lawn care, or any of the other headaches that sometimes accompany long-term tenants. Area, the Airbnb strategy could very well prove to be the most profitable strategy for house hacking in Los Angeles. We’re focusing on neighborhoods where there are realistic options for house hacking for the average to above average earner in the area.

We recommend refinancing your FHA loan after living in the property for a year, assuming the rates make it advantageous to do so. Others may opt for the BRRR method, which stands for buy, rehab, rent, and refinance. Visit this resource on how to employ the BRRR strategy for house hacking, which involves the use of short-term funds to initially rehab and rent out your property, followed by long-term mortgage refinancing. Because of your status as an owner-occupant, not only will you have access to conventional loans, you may also have access to homebuyer-assistance programs.
Property Data & Owner Information
You’ll create an LLC (or possibly a land trust, depending on your situation) to hold the title. Then you’ll have that LLC held, in turn, by a Wyoming LLC, for asset protection purposes. Your tenants will pay their monthly rent to one of those entities. However, as a house hacker with access to cheaper financing and a greater understanding of the local market, you can reduce a lot of the typical challenges short-term rental owners experience. Navigating the world of financing can be complex, especially when diving into the realm of house hacking.
Dangerous Los Angeles Neighborhoods to Avoid Completely
Other benefits include owner-occupancy financing for your home, which means lower interest rates and better financing terms, and a potentially smaller down payment. It's also a fast and easy way to get started investing in real estate. The reason this strategy is worth looking into is that it can be combined with other house hacking strategies.
Because you live on site, you can quickly address tenants' concerns and keep your eyes on the property at all times. It also allows you to handle any maintenance or repairs as quickly as possible, preventing further damage. Buying a home that you plan to hack requires some research and planning just like any other property purchase. Whether you’re interested in buying a single-family home and renting out a room or getting a multifamily home that you can live in, the process for getting started is similar. Once you have a clear vision, focus on finding the right property—one that offers house hacking potential and aligns with your goals. Consider factors such as location, rental demand, and potential cash flow.
Should You House Hack Los Angeles?
The important step is to discuss all your financing options with a lender before assuming you can house hack. When you purchase a home for yourself, you have the ability to use owner-occupied mortgages such as VA loans or FHA loans. These allow you to close with 3.5% down and in some cases 0% down. This is much more advantageous than when you purchase an investment property that you don’t occupy — in that scenario most lenders require at least 20% – 25% down.
Try to set up group showings within a timeframe for prospective tenants to tour your property. Group showings allow you to show more people the property in less time, and also create a sense of urgency between potential tenants. If someone really likes your place, they may be compelled to quickly fill out an application in fear of losing it. If you’re purchasing a fixer-upper, you’ll need to make some repairs and renovations. Before you buy the first fixer-upper you see, you need to know how much home you can afford. Streamline this process by gathering every financial document you can think of, including bank statements, tax records, pay stubs, your stock portfolio, and more.
Even if you only want to do one house-hack and then get your own place, once you move out you can place tenants who will be helping to pay off your mortgage while your property also likely appreciates in value. If you’re a new landlord or want to become one, house hacking is a great place to start. We hope this guide has given you some ideas on how you can hack your primary residence and start earning passive income. Beyond that, house hacking teaches you the ins and outs of being a landlord.
A property that is a viable candidate for house hacking may have characteristics that are slightly different than a home that the owner will live in year after year. Interest rates are often attractive, even for borrowers with lower credit scores, and down payments may be 5% or less. VA loans backed by the Department of Veterans Affairs even allow veteran borrowers to obtain 100% financing on a home. House hacking can also be a way to get used to being a landlord, because the tenant literally lives down the hall or right next door. Any issues that arise can be immediately addressed, and many beginning investors find that learning-by-doing helps to lay a solid foundation for eventually becoming a full-time real estate investor.
Flashback to early 2022, individuals could secure homes with loans bearing a mere 2.75% interest rate. Fast forward to August 16, 2023, and the landscape has shifted dramatically. That's why I had the idea of sacrificing living in a larger space and moving into a small one. This as-told-to essay is based on a conversation with Blanca Barragan, a 42-year-old electrician, who completed construction of an accessory dwelling unit she built in her front yard and moved into in April.
My first property was a 4-unit using FHA 3.5%-down financing in a suburb of Los Angeles. They come with their own restrictions, so talk to a lender before making any offers. You can compare Homestyle rehab and FHA 203K loan terms on Credible as well for quick quotes. As the conforming alternative to FHA 203K loans, borrowers with strong credit can buy with a Fannie Mae Homestyle Renovation loan.
On the bright side, as a landlord, you may be eligible for tax deductions on rental expenses like repairs, maintenance, and even depreciation. Before diving headfirst into your first house hack, there are a few key considerations to remember. After all, with great house hacking power comes great responsibility. As a general rule, to determine the occupancy for a house, you can use the 2+1 rule. Using this guideline, a two-bedroom house that also has a separate living room could hold five people.
Consulting with real estate professionals and financial advisors can provide valuable guidance in determining the feasibility and suitability of this strategy based on your goals and circumstances. Multi-unit properties include duplexes, triplexes, and fourplexes. People commonly take out FHA loans for multifamily properties, especially first-time home buyers. Since your property is also your primary residence, you’ll qualify for lower interest rates and better financing terms.