Exactly as it sounds, house hacking is a hack to reduce your overhead on a residential property. Imagine you buy a one-bedroom apartment with a den. The apartment costs you $1500 a month in mortgage payments. House-hacking in this example would be you renting out your den as a bedroom for a certain amount a month, say $600 a month. You’ve literally hacked your mortgage payment to be lower by renting out a potentially unused space. Some landlords even ask for an equal or a monthly payable for the utilities. House Hacking in Canada can be a great tool to building tool but it may come at a cost.
What can you house hack?
• Multi-family homes such as duplexes or triplex can be house hacked where you live in one unit and rent out the other unit(s)
• Single-family homes with unoccupied garages or basements
• Apartments or homes with additional bedrooms and dens
• Parking spaces, additional storage spaces etc. can also be rented out
Why should you house hack?
- You will build equity fast and the tenants pay for your equity
- Should your tenant move out, you can rent out the space for an even higher amount. Rentals 101
- It can potentially lead the way to acquiring a new property down the road. You may also be able to refinance your apartment (in the example) for a higher amount down the road for a new investment
- One can choose to invest the money in other investment vehicles
- You are in relative control as the tenant lives in the same unit as yourself. Chances of property damages could be lower knowing that the landlord is around
- Financing the home could also be easier if you intend to house hack
Why shouldn’t you house hack ?
- Privacy. You value this a lot and find it hard to live with room-mate(s)
- Your tenant is a bad apple. This remains one of the biggest issues with owning a rental. The implications could be long term and financially draining.
- Check for local regulations, condo board regulations etc.
- Your neighbors may not approve of it
In Summary
Anyone starting out on their real estate journey or currently owning a property with space to spare could consider house hacking. The younger an individual can house-hack, the faster they can leverage a tenant’s contribution to building their portfolio. Even though we did not buy a house until I was 30, I would consider house hacking in my late 20s if I had the opportunity to go back in time. Seriously! One could even consider a multifamily home as their first residential property if they have the 5% saved up. House hacking is also a great way to build some experience in managing a property and a tenant.