From Mortgage to Money-Maker: Your Guide to House Hacking Success
House hacking is your financial superhero cape – a strategy that transforms your home from a money-eating monster into a wealth-generating powerhouse that can literally pay you to live.
In this blog post, I’ll show you how this strategy helped me leave my 9 to 5 to build my own business, buy more rental units, and follow my passion for travel blogging.
Table of Contents
Introduction
Picture this: While our friends were spending every penny they earned, we (Daniel and I) were playing the long game – living with our parents, hustling at work, meticulously saving every dollar, and dreaming of building real wealth.
Then we discovered house hacking – thanks to podcasts like BiggerPockets (circa 2016) a strategy that transformed our savings into a powerful financial launch pad.
This isn’t just another investment technique; it’s a blueprint for turning your first property into a money-making machine. It’s a life-changing approach that can turn your biggest expense into your greatest asset.
It did for us and we hope we can inspire you to do the same.
The “Failed” American Dream
The American Dream of homeownership? More like the American Nightmare right now where buying a home feels like trying to win an impossible lottery.
Home prices have gone absolutely bonkers, mortgage rates are making everyone’s wallets cry, inflation outpaces wages every year, and the math just doesn’t add up anymore.
What used to be a straight path to financial security now looks like a maze designed by someone who definitely does not have your best interests at heart. Houses are expensive to maintain, property taxes and insurance goes up every year, and then there’s natural disasters to look out for.
Our parents bought homes on a single income, took vacations, and still managed to save – but for our generation? We’re lucky if we can even dream about a down payment without breaking into a cold sweat.
The game has changed, and the old rulebook of “work hard, buy a house, build wealth” has been tossed out the window, replaced by a brutal reality where homeownership feels more like a financial trap than a milestone.
So we need to get creative, with house hacking.
What is House Hacking?
House hacking is more than just a buzzword – it’s a way to live essentially for free while building wealth.
It is essentially a real estate investment strategy that allows you to offset or dramatically reduce your housing costs by generating income from the same property you live in.
At its core, house hacking is a strategy where you purchase a property and generate income from it, often by renting out portions of the same property you live in.
It could be renting out by the rooms, owning a small multi-unit, converting your garage or portion of your house into an ADU, or building a new ADU.
Why House Hacking Works: My Personal Journey
I first heard about house hacking on the Bigger Pockets podcast in 2016 and I was hooked. Every day at work I’d listen in to the interviews of small, successful real estate investors and how they transformed their lives and lived with more freedom.
Better yet, these people were only a few steps ahead of me, so this was totally doable. Daniel and I were saving up to buy our first house and not just any house – a place we can house hack: a duplex.
I start to wonder, could living in a property I own really generate enough income to cover my mortgage? The answer was a resounding yes. Here’s how it transformed my financial landscape:
- Reduced Living Expenses: My mortgage went from being a burden to being nearly self-funded
- Building Equity: Instead of paying someone else’s mortgage, I was building my own wealth
- Multiple Income Streams: One property became multiple revenue sources – by adding more units
We purchased our duplex in June 2018 and remodeled it right away because it was in a terrible condition, and turned it into a duplex with attached ADU. We officially moved in June 2019 and since then don’t pay any of the mortgage and utilities anymore.
We did however, had to pay for the mortgage for a whole year while the house was remodeled (plus the remodeling cost), so I do suggest having money saved up because housing construction isn’t cheap.
House Hacking Strategies to Consider
Not all house hacking looks the same. Here are the most popular approaches:
Multi-Unit Property Strategy
- Purchase a duplex, triplex, or fourplex
- Live in one unit, rent out the others
- Potential to cover most, if not all, of your mortgage
Room Rental Method
- Buy a single-family home with extra bedrooms
- Rent out rooms to offset your mortgage
- Great for homeowners in high-demand urban areas
- Great for young homeowners starting out who don’t mind having roommates
Short-Term Rental Approach
- Utilize platforms like Airbnb, VRBO, and Furnished Finders
- Rent out spare rooms or entire property when you’re away
- Potentially higher income than traditional long-term rentals
- More regulations surrounding Short-Term Rentals
Accessory Dwelling Units (ADU)
- Convert an existing garage, rumpus room, storage, etc into an ADU (only in certain cities and states)
- Build a brand new ADU
- Convert part of the house into an ADU or Junior ADU
- This strategy works in single-family and multi-family zoned properties
- Needs capital to do the work: cash savings, HELOC, refinance, etc.
SB-9 Urban Lot Split or Two-Unit Development
- Relatively new regulations introduced in California that allows you to split your lot into 2 and build 2 units per lot
- You can sell the other lot provided you live in the remaining lot for 3 years
- Ability to build a total of 4 units across both lots
- Needs the highest capital
Who knows, maybe in the future our neighborhoods could look as dense as the image below of a cluster of homes in Santorini, Greece.
Key Considerations Before You Start
House hacking isn’t just about throwing a “For Rent” sign up. You’ll want to consider:
- Local zoning laws and rental regulations
- Potential tax implications, make sure to set aside money
- Your comfort level with being a landlord and with living with other people
- Initial investment and renovation costs
- Location and market demand
Financial Benefits: Breaking Down the Numbers
Let me break down why house hacking is so powerful with real numbers from my own property:
Total Expenses: $4,570
- My PITI (Principal, Interest, Taxes and Insurance): $3,250
- Utilities and Monthly Maintenance: Average $850 (we pay for the utilities of the ADU because at the time we didn’t split the utilities). We also pay for landscaping and water for the whole property and installed a security system with Vivint.
- Property Management: $0 (because we currently live in the property and self-manage)
- Maintenance and Repairs Fund: $470 (we set aside money for potential future repairs)
Total Rental Income: $4,275
From a 3 bedroom / 2 bathroom house and a 1 bedroom / 1 bathroom ADU.
As you can see, we pay $295 to live in the property. That’s our housing expense. The maintenance and repair fund is totally optional, we do it so we cover our bases. Some months our utilities are lower so that always changes.
Pro Tips for Successful House Hacking
- Start Small: Don’t try to buy a massive multi-unit property as your first venture.
- Know Your Numbers: Calculate potential income, expenses, and return on investment
- Be a Great Landlord: Happy tenants mean stable income and fewer headaches
- Maintain Your Property: Regular maintenance prevents costly repairs down the line
- Hire the Right People: Have a great team by your side: realtor, loan officer, property manager, lawyer, accountants, handyman, contractor, architects, etc.
- Join Real Estate Investing Groups: Congrats! You’re a real estate investor now and it can be a lonely journey. Your parents might think it’s a bad idea to house hack (us certainly did). Talk with likeminded people and grow your portfolio together (if you want).
The Emotional Journey
House hacking isn’t just a financial strategy – it’s a mindset shift. It’s about seeing your home not just as a place to live, but as a strategic financial tool.
It’s also a business and you’re offering another person or family a safe and clean place to stay.
When I first implemented my house hacking strategy, I went from feeling financially stuck to feeling empowered and excited about my financial future.
We’ve done it three times since, with our last purchase being a total disaster (we sold it off in May 2024 – will talk about that in another post).
Conclusion: Your Financial Freedom Starts Here
House hacking isn’t a get-rich-quick scheme. It’s a deliberate, strategic approach to reimagining homeownership.
Whether you’re a young professional, an aspiring investor, or someone tired of throwing money away on rent, house hacking offers a path to financial freedom.
Are you ready to turn your mortgage from a monthly nightmare into a wealth-building opportunity? House hacking might just be your ticket to financial transformation.
Check out how we’ve helped clients transform their houses and contact us if you’d like to know how we can help you.
