House Hacking:

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What is house hacking?

The concept is simple, basically you live in part of the property and rent out the other part (owner occupant rental).

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Example:

• Buy a 4 plex and you live in 1 unit and rent out the other 3 units

• Buy a home with a mother-in-law suite and rent out the mother-in-law suite and you live in the home.

• Buy a home and rent out individual bedrooms.

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I have done this two different times in my life. When my wife and I got married we were looking for a place to live and all we could really afford was a 1 bedroom basement apartment. At the time the government was offering a first time home buyer credit, so my dad recommended we buy a duplex. We started looking around and found a great one. We ended up living in one side and renting out the other.  It basically cost us $300 a month to live in a 2 bed / 1 bath unit which was a lot cheaper then a 1 bedroom basement apartment.  We were also building equity in our investment. Down the road we would end up leveraging this duplex to buy some other investment properties.

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The second time was when we got pregnant with our first child, my wife wanted to start looking for a home. I wanted to get another duplex or 4 plex, so we compromised. We would look for a house that we could rent out the basement and live in the upstairs. Then eventually as our family grew we could take over the whole house. We found the perfect house and got a great deal. Between the income from the duplex (now that we were renting out both units), and the basement apartment we were living mortgage/rent free (our rental incomes were coving all the mortgages).

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As a owner occupant you typically have to stay in the property for 1 year before you move out and make it a rental unit. If I could have done it all over again I would have tried to get a 2-4 plex each year for the first 4-5 years of our marriage, and then bought our house. 

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It can be a lot of work sometimes being a landlord and living next to your tenants, but there are a few benefits that come with house hacking.

1. Having a free or low cost place to live. (If not make money each money on top of a "free" place to live).

2. low down payment when purchasing the property (3.5-5%) instead of 20-25% down.

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