My apartment project was a long time coming. In early 2023, I purchased a small horse farm that included a single-family home, a barn, and a garage with 800 sq ft of attached rooms. At this point, I had started to dive into the world of real estate investing. Having just moved out of my first home and finding it a renter, I realized that the 3 bed, 1,600 sq ft home I just bought was too much space for just me. I quickly found a room mate who took over one of the bedrooms, and their rent alone was paying most of my living expenses (I did not have a mortgage as I paid cash for the home).
While this arrangement worked for awhile, I felt that it wasn't the best use of the space. My garage had 3 rooms connected to the back of it. The largest room was an unfinished workshop, and behind it was an unfinished storage area. There was one room back here that was finished, though it had previously been set up as a gym. I realized that all this wasted space could be renovated into an apartment that I could rent.
Here's some photos of what the apartment looked like at the beginning of the renovation:
To save you the miserable details of me being scammed by a few contractors, the project eventually was finished about a year later. I didn't care for the house, so I decided I would live in the apartment and rent the entire house out. This is one of the many ways that investors can "house-hack".
House-hacking is a great way for homeowners to delve into real estate investing, because it can typically be done on a smaller budget. The way I did it was certainly not on a low budget, but that is only one example. The most common methods of house-hacking are room rentals, multi-family properties, and ADUs (accessory dwelling units).
Room Rentals
Renting a room in your home is probably the most economical and accessible option for investors just starting out. While this won't net the most cash, renting out a room for even a few hundred dollars a month can greatly lighten your housing bills. When I rented out a room, I charged $700 a month. This usually covered all of my monthly housing bills and then some, so I was able to save more.
Room rentals aren't ideal for all tenants, but their low rent and low maintenance can be an attractive option for lower-income renters and traveling professionals. Before you rent a room in your home, make sure that you are legally permitted to do so. Every state has different laws regarding rentals, though room rentals tend to be more lax. While live-in landlords are exempt from following fair housing laws, they are not allowed to discriminate in their advertising. With that being said, you should not discriminate against any of the Federal or State Fair Housing Law protected classes.
As with any renting situation, properly vetting and qualifying prospective renters is of upmost importance. Renting a room in a home that you live in is much different than renting a separate unit, so its imperative that you chose the right renter. I won't go into detail on qualifying renters in this post, but at the bare minimum ensure that your renter is financially capable and does not pose any safety risks to your household.
Multi-Family Properties
Multifamily properties are my main focus now, and they may be the way to go if you don't already own a home (or if you can afford another). A multi-family property is a building that has 2-4 separate units in it, such a duplex, triplex, or quadraplex. They can be found almost everywhere, and often for the same price (if not cheaper) than a typical single family home. The beauty of buying a multi-family property is this:
You buy a duplex for even less than that single-family down the street
You pick from a variety of first-time-homebuyer and budget-friendly loans since you plan to live in the property.
You move into one side
You rent the other side out to a tenant
You live for free (or cheap)
Of course, I am not a mortgage loan expert, so you must talk to a loan officer and get pre-approved for a loan before you go searching. However, buying a multi-family is typically just as "easy" as buying any other residential property. Depending on your loan terms and your current rental market, its entirely possible that the rent you charge your tenant can cover most if not all of your housing costs, so you essentially live for "free". And even better, when you eventually decide to move out, you can keep this property and rent both units out, resulting in instant cash flow (if you're smart about it!).
Accessory Dwelling Units (ADUs)
Ah, if you couldn't already tell, I'm a huge fan of milking your property for all its worth. Currently, I rent out my main house and live in my garage ADU. 100% of my housing expenses are covered, and all the money left over goes into my investment property operating fund. If you aren't a fan of a stranger living in your house with you, and you have some extra space, consider the possibility of adding an ADU.
An Accessory Dwelling Unit is defined as "a smaller, independent living space on the same lot as a single-family home". The ADU can either be attached to the main home or separate on the same lot. There are varying laws on the legality of ADU's, with many areas banning them completely. Sussex County Delaware, for example, had banned ADU's for the longest time. However, in June of 2024, the County Council amended their code to allow ADU's under certain conditions (if you're interested in reading the ordinance, it can be found here: ADU Ordinance).
I like ADU's because they allowed me to add living space to a property I already owned. If your local zoning board allows, you may consider converting part of your property into an ADU. This is one of the more expensive house-hacking options, but if you have the opportunity then I highly recommend it.
Here's what my garage ADU looks like now:
All of these house-hacking options require you to find and manage tenants. If being a landlord is not your thing, then you have the option to hire a property manager. For one or two units, I believe most people can manage themselves. Property managers, on average, take 10% of the monthly rent as their fee, plus additional fees, so they aren't financially conscious for house-hacking.
If you have questions about house-hacking, or would like to learn more about real estate investing, reach out to me. Real estate investing is my passion, and is what drives my real estate career. I would love to help other aspiring investors and home owners get started in achieving great wealth and financial freedom through real estate investing.
Comments