Contact
Back to Resources

Is House Hacking Worth It?

Alyssa Strom
Category

Buying

Is house hacking worth it?

Whether you would like to work less, travel more, or pay down debt, house hacking can be the first step to financial and lifestyle freedom.

A majority of people’s most significant monthly expense is their mortgage or rent payment. A common rule of thumb recommends that you spend no more than 30% of your total income on your housing; however, with apartment and housing prices continuing to rise, this has become more and more difficult.

What if we told you there was a way to reduce or eliminate your housing payment completely?

What is House Hacking?

If you’re going to live somewhere, why not live somewhere that makes money? Renting out space while living on the property, also known as housing hacking, is not a new idea. Roommates, duplexes, mother-in-law suites have been around forever and are all considered different forms of house hacking.

When you house hack your roommates or tenants pay your mortgage by paying you rent. Depending on the purchase price and the amount of rent collected, some people can live completely free through house hacking. That’s right! With the right property, you can eliminate your mortgage payment.

So ... is house hacking worth it?

Let’s look at some real life house hacking examples:

*PITI = Principal/Interest/Taxes/Insurance

**Utility payments are not included in the below amounts because in both examples you will need to pay them. With multi-family properties, tenants will typically cover the gas and electric bills for their unit.

House hacking example 1:

Northeast Minneapolis Duplex vs Northeast Single-Family Home

Northeast Minneapolis is a very popular area with increasing prices and limited days on the market.

Northeast Minneapolis Single-Family Home

Average Purchase Price: $285,000

Down Payment (5%): $14,250

Monthly Payment (PITI): $1875

Estimated Private Mortgage Insurance: $235

Your Portion: $2110

Northeast Minneapolis Duplex

Average Purchase Price: $344,000

Down Payment (5%): $17,200

Monthly Payment (PITI): $2255

Estimated Private Mortgage Insurance: $285

Rent Collected (Average): $1700

Your Portion: $840

With this house hacking strategy, you will save $1270 a month and $15,240 annually.

House hacking example #2:

4 Bedroom Single-Family Home

Are you planning to rent with some friends? What if you purchased a single-family home and rented the bedrooms out to them?

*2019 Median Home Price in Ramsey and Hennepin County = $350,000

*Assuming an average of $5000/yr in taxes

Without Roommates

Purchase Price = $350,000

Down Payment (5%) = $17,500

*Monthly Payment (PITI) = $2316

Estimated Private Mortgage Insurance: $290

Your Portion: $2606

House Hacking With Roomates

Purchase Price = $350,000

Down Payment (5%) = $17,500

*Monthly Payment (PITI) = $2316

Estimated Private Mortgage Insurance: $290

Rent Collected ($400/bedroom) = $1200

Your Portion: $1406

With this house hacking strategy, you will save $1200 a month and $14,400 annually.

House hacking example #3:

West 7th Saint Paul Duplex vs. West 7th Saint Paul Single Family Home
West 7th Saint Paul Single-Family Home

Average Purchase Price: $222,000

Down Payment (5%): $11,000

Monthly Payment (PITI): $1535

Estimated Private Mortgage Insurance: $185/month

Your Portion: $1720

West 7th Saint Paul Duplex

Average Purchase Price: $268,000

Down Payment (5%): $13,400

Monthly Payment (PITI): $1815

Estimated Private Mortgage Insurance: $220/month

Rent Collected (Average): $1500

Your Portion: $315

In a more affordable and up and coming neighborhood like West 7th St. Paul, house hacking will save you $1405 a month and $16,680 annually.

Imagine what you could do with savings of $14,000-$16,000 annually.  

Pay down your student loans or other debt?

Take a dream vacation?

Buy another rental property?

The best thing about house hacking is not only do you receive this savings for as long as you live in the property, but once you move out, you have a cash flowing rental property that you can keep or sell for profit.

To read more about house hacking, check out this article in the Southwest Journal featuring Scott and Drew or contact us today to help you get started with house hacking!

Upcoming Events
No items found.
Other Posts From This Category:

Upcoming Events

The Blog

Other Categories: