House hacking or how to get someone else to pay your mortgage
House hacking can take multiple forms. It is the perfect way to have someone else pay your mortgage. You can house hack in the following ways:
- Get a roommate
- Make a mother-in-law suite or accessory dwelling unit (ADU) and rent that out.
- Rent your garage
- Rent out space to park an RV or other vehicle
Roommate
The easiest and most traditional way to house hack is to get a roommate or two. One recent college grad I know bought a 3-bedroom townhouse with a mortgage plus an HOA payment of $1700. He decided to house-hack, and got two roommates who pay him $900/month each plus utilities. He can live almost for free and build equity using his roommate’s rent money. He’s decided to go back to college for an MBA, which he wouldn’t be able to do if he didn’t have roommates.
Besides having a full-time roommate, you could furnish the extra rooms to rent to a short-term renter or a corporate or nurse traveler by the month. This option gives you the flexibility to have the whole place to yourself at certain times of the year. You could make $500-$1800/month by renting to a travel nurse, depending on your location.
One family who attends our local real estate met up group house hacks by renting a room in their house on AirBnB and makes a $1,000 per month. The guest shares a bathroom with the children.
Make a mother-in-law suite or accessory dwelling unit (ADU) and rent that out.
Another way to house hack to make extra income is to add an additional housing unit to an existing property. This is known as an Accessory Household Unit (AHU) or accessory dwelling unit (ADU). ADUs and AHUs are commonly known by many other names, including granny flats, in-law units, alley flats, coach houses, and casitas. I will use the term ADU.
ADU come in many shapes and sizes and can fit into a variety of neighborhoods. Older areas often have properties with existing carriage houses, mother-in-law suites or garage apartments. Typically ADUs have a separate entrance, a kitchen, and a bath. The layout can be a studio apartment or one or two bedrooms.
Here are some examples:
AN ATTACHED ADU
is a unit connected to an existing house, usually in the back or rear. This separate unit has its own entryway.
DETACHED ADU
doesn’t share any walls with the larger main house and could be a converted outbuilding, existing carriage house, guest house, or casita in the southwest.
A CONVERTED GARAGE ADU
is constructed by using an existing attached or detached garage and converting it into a living space.
AN OVER GARAGE ADU
when space above an existing or new garage is made into an ADU. In this case, there are spaces for both people to live and vehicles.
An INTERNAL ADU
uses a portion of the existing square footage of a home to create a separate living area. The unit could be on the main floor, second floor or use attic space.
A Basement ADU
is a living area in the basement of an existing home; this is possible if ceiling clearance and exits that meet fire codes and other considerations are met.
If you want to house hack using an ADU, you could purchase a property with an existing attached or detached ADU or construct one.
Rental options for ADUs are varied. You can rent as an unfurnished traditional rental or furnish it and rent it as a medium-term rental (see my blog post on renting to travel nurses) or short-term rental (like an Airbnb).
If space is limited, an efficiency kitchen is cost-effective to install and can consist of a smaller refrigerator, and combination microwave/convection oven, a sink, and a small countertop. There are also 24″ ranges (standard is 30″) that fit in small spaces.
You may be able to convert a garage (detached or otherwise) into a unit or add a unit over the garage. If you purchase a property for this purpose, look for one where the garage already has water lines installed or where the garage is near the main water and sewer line. Many counties have this information on public records. Ask your realtor to help locate this information if you are unsure where to find it.
Our story
My husband and I purchased a property with a 3-car garage that we converted to a two-bedroom one bath cottage. The most significant expense was running water and sewer from the main house to the cottage.
If you want to house hack using an ADU, you could purchase a property with an existing attached or detached ADU or construct one.
Rental options for ADUs are varied. You can rent as an unfurnished traditional rental or furnish it and rent it as a medium-term rental (see my blog post on renting to travel nurses) or short-term rental (like an Airbnb).
If space is limited, an efficiency kitchen is cost-effective to install and can consist of a smaller refrigerator, and combination microwave/convection oven, a sink, and a small countertop. There are also 24″ ranges (standard is 30″) that fit in small spaces.
You may be able to convert a garage (detached or otherwise) into a unit or add a unit over the garage. If you purchase a property for this purpose, look for one where the garage already has water lines installed or where the garage is near the main water and sewer line. Many counties have this information on public records. Ask your realtor to help locate this information if you are unsure where to find it.
Our story
My husband and I purchased a property with a 3-car garage that we converted to a two-bedroom one bath cottage. The most significant expense was running water and sewer from the main house to the cottage.
Things to consider before adding an ADU
There may be other restrictions in place in your municipality. Some common restrictions include the distance from lot lines, the size of the dwelling, the overall size of the lot, lot coverage, and what fixtures may be installed. Consult a builder and a realtor who has experience with making improvements on properties. It is also wise to consult your local zoning and building officials to ensure you are allowed to add a unit. Just because a property is zoned for two units doesn’t mean you can add a unit to the property.
The running water and sewer costs can vary depending on how deep the lines must be to meet the code so they don’t freeze. Water lines in Minnesota need to be deeper than Arizona, so the cost to run water and sewer lines will be higher in MN. Depth varies from about 8 feet in cold climates to just one foot in warm areas.
Rent your garage or other outbuildings
If you have an unused garage, you can make extra money by renting it out as a boat, vehicle, or household goods storage. In TX, CO and MN, you can use Stowit.com to list your garage. You can charge between $150-200 for vehicle storage in most areas.
You can also rent a detached shed, workshop, barn, or other outbuildings for someone who needs a place to work or store items.
Rent out space to park an RV or boat
Depending on the zoning and HOA, if you have one, you may be able to charge someone to store an RV or boat on your property. Check to make sure this is allowed in your neighborhood.
Conclusion
The key to house hacking is flexibility and creativity. However, the payoff can change your financial situation and provide a source of almost passive income.