With the costs of—well, let’s face it—practically everything on the rise, more and more people are looking for creative ways to save money these days.
And it’s not much different with buying a house—they can be expensive! Especially for first time home buyers. So, as housing becomes less affordable, people are looking for cost-effective ways to own a place they can call home. This is where creativity can really pay off.
Introducing—House Hacking. A new term but an old trend that allows people to own a home without breaking the bank. Simply rent out portions of the home to help pay down the mortgage. Sounds simple, but is it a good idea?
Keep reading to learn the pros and cons of house hacking, and what it really means to share a home.
What Is House Hacking?
The concept of house hacking has been around for a long time, but the term itself is gaining in popularity.
House hacking is a home-owning strategy where people rent out portions of their primary residence to generate money to put toward the cost of their mortgage (and/or other expenses that come with owning a home).
House hacking done right allows people to live in more expensive areas, practically for free, with the possibility of generating positive income. But! That doesn’t come without a cost. This money saving idea is tied to having to do more work and offering up some sacrifice.
The Best Property Types for House Hacking
The best way to a successful House Hack is finding the right property to share. You have some flexibility with this. The main idea here is to find a property with as much liveable space as possible. That’s where you’ll generate your cash flow.
- Multi-family properties
- Houses with multiple bedrooms
- Houses that have areas that can easily convert into bedrooms
- Finished basements
- Additional dwelling units (also known as guest or granny houses)
- Garages that can be converted into liveable space
- Space for renting RV or mobile home parking (where applicable by law)
Zoning laws matter, so always be sure to check with the local municipality before committing to any property.
House Hacking Pros and Cons
Now you know what House Hacking is and what types of properties can be used. So, let’s examine some of the pros and cons before you get yourself into a situation where you may not be comfortable with everyone living just a little too close to home.
House Hacking Pros
1. Reduce or Eliminate Your Housing Cost
This is definitely the biggest benefit of all.
Let’s say you purchase a dwelling that has a $1500.00/month mortgage payment. You have 4 living spaces total, and after you take the nicest one, you rent out the remaining 3 at $600.00 a piece per month. That’s $1800.00 collected from your tenants. You pay your monthly mortgage of $1500.00, leaving you with $300.00 extra, without paying a dime for your own living space.
Now that you’ve got yourself an extra $300.00 cash per month, use that money to help pay down the mortgage faster, put it towards utilities, repairs, or groceries, or just bank it! You’re already living for “free”, make the most of what you have.
3. Experience in Landlording
- Advertising vacancy
- Tenant screening and management
- Understanding rental contracts and agreements
- Working through unexpected housing issues/repairs
- Dealing with contractors
House Hacking Cons
1. Added Responsibility
You legally become the landlord. And that responsibility is not for everyone. Depending on the amount of upkeep your dwelling needs, it can be a lot of work, so be prepared to sacrifice some of your extra time. Also, since you’re the owner, be prepared to shell out the cost of upkeeps as well.
Check out your local laws to be sure landlording is something you’re ready to commit to. You’ll also want to run your lease agreement by them to be sure you’re following all laws. You can find general information on landlord and tenants’ rights at the Ontario Landlord and Tenant board here.
Keep in mind that if tenants fall behind on their rent payments, you become financially liable. This can cause tension and feeling uncomfortable living in the home. You’re also responsible both financially and physically to fix any damage occurred by your tenants, whether accidental or intentional.
Lastly, when tenants move out and you don’t have a replacement ready, you’ll need to pay for those portions of the mortgage until you find new tenants. Sometimes this can take a while.
2. Living Alongside Your Tenants
Hopefully you like your tenants—you may be spending a lot of time with them. Depending on the type of dwelling you choose, your tenants may be just a thin wall away. If this is the case, you can say goodbye to your privacy and the freedom of having “your space” all to yourself.
3. Losing Access to Parts of Your Home
Whether it’s the basement, an extra room, or the garage, that space will no longer be yours. House Hacking means you give up access to those parts of your property.
Still Not Sure If House Hacking Is Right for You?
Let’s talk! House Hacking is a big decision that shouldn’t be taken lightly. As tempting as it sounds to live for “free”, it’s not always the smartest decision. Speaking with a trusted realtor can help you sort through the complexities of House Hacking, so you can decide if it’s right for you.
Joel Cooper, a reputable Toronto realtor, has had his clients’ backs for over 13 years. Always putting clients first, he can provide you with the answers you’ve been looking for.
Reach out today to get started.
Hi, I’m Joel, a real estate professional based in Toronto.
My approach is simple—I put you first. I believe in open communication, total transparency, and meaningful results. I’ll guide you through the real estate process, market values, and always keep the focus on you—and your needs.