Have you heard of the term or concept of “house hacking”? It’s a strategy that is gaining popularity in and outside of the real estate investing community that enables a homeowner to lower their housing expenses or to even live for free by renting out a portion of their home in some capacity. There are a lot of forms this strategy could take and I’m super interested in diving into these options in a future post. That said, the most popular form of house hacking is purchasing a 2, 3 or 4 unit multi-family property, living in one unit and renting the other units to either long term tenants or as a short-term rental. The rental income subsidizes your total housing cost and in many cases allows the homeowner to live for free or even turn a profit!
This summer, we bought our own house hack!
Here’s a bit more about our house hacking strategy:
How we found the deal:
The owner posted the duplex on Craigslist last year (year prior to our purchase). We looked at it and were considering it primarily as a buy and hold rental property. We made an offer to buy on contract for deed. It didn’t work out at that time, but Scott continued to follow up every couple of months. Eventually, we got a call out of the blue this past spring from the seller asking if we were still interested. We were and worked out the deal as a traditional FSBO purchase and closed July 2018.
Why we decided to make it our home:
We decided to house hack the home instead of renting both units because we fell in love with location – across the street from a parkway/open space and a few hundred yards from a huge walking and bike trail system in Minneapolis. It will also cut our commutes down significantly and the idea of subsidizing our living expenses by renting the other side is in line with our financial goals.
How we purchased it:
We purchased the home FSBO with a conventional mortgage at fixed rate with a six year balloon and 5% down. It is an in house loan at a local bank that we’ve used on a few of our past purchases. We recognize the risks with a balloon payment loan like this but we are in the process of making significant improvements to the property and plan to refinance prior to the end of the loan term. We worked through the purchase agreement directly with the seller and then arranged the closing with a local title company we had used in the past.
Our plan moving forward:
After closing we worked with the existing tenants to arrange a mutual termination of the lease and move out dates. This is never an easy conversation to have but we were able to provide a little flexibility and the tenants both moved out by mid-September. Over the course of the fall we are doing fairly significant renovations to both units. I’ll share more about this in future posts. We plan to move in December 2018 and begin renting the 1BR, 1BA unit as a short term rental via Airbnb and VRBO in the spring of 2019.
We’re excited about our house hacking adventure and will share more in the coming weeks!