On the House: House Hacking Your Way Into Your First Home

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Q: What are some creative ideas for first-time buyers to afford homeownership?

As the spring housing market kicks off, first-time homebuyers are staring down high home prices, mortgage interest rates above 7%, and a dearth of newly listed properties for sale. Even if they’re doing well financially, this is going to be a tough market for just about everyone.

I wish I had some magical advice I could sprinkle around to ensure a successful, low-stress homebuying journey that doesn’t break your budget. Spoiler alert: I don’t. You might have to compromise more than you would like and, perhaps, get creative.

Homebuyers struggling to make the math work might want to consider house hacking, an increasingly popular tactic in some areas.

It’s basically a new take on an old concept: Buying a home with the intent to rent out rooms or features on your property to make some additional cash. Many folks house hack to help pay off their mortgage and other bills.

House hacking can involve buying a home with family or friends, or buying a home with the plan to get tenants. You can purchase a triplex and live in one unit and rent the others out, or buy a single-family home with a separate living space that can be rented out for the long or short term. I have a friend who listed her pull-out couch on Airbnb, and I’ve seen folks renting out parking spots they don’t need.

Many homeowners hack their way into nicer, larger homes in more desirable areas they wouldn’t otherwise have been able to afford.

Just be sure to carefully think through what these arrangements entail. Being a landlord—or even an Airbnb host—can be hard work. There’s a risk that tenants and guests could become a nuisance, damage your property, or cause other problems.

And these arrangements might not help you to qualify for a loan. Many mortgage lenders don’t consider future rental income when you’re in the approval process. Some local laws and homeowners associations prohibit short- or long-term rental arrangements. Even if you buy in a community that permits Airbnb listings, laws can change. And you might need to purchase pricier insurance if you plan on renting out your property.

However, if you find a way to make it work, house hacking could be worth it.

Option 1: Buy a home with family or your besties

The co-buying trend is on the rise as buyers are teaming up with friends and family to make homeownership possible. They’re pooling resources with the people they love (or at least like a lot) to come up with down payments and closing costs. It’s also helpful to share monthly mortgage payments, utility bills, and maintenance and repair costs.

There’s a lot to consider before entering into this sort of arrangement, financially and emotionally.

On the financial front, you should definitely work with a real estate attorney who can hammer out ownership stakes and what happens if one person wants to sell or passes away.

Then make sure the people you’re buying with have good credit scores and low debt. Otherwise, you might be saddled with higher mortgage rates and fees—if you can even qualify for a loan.

On the emotional side, you need to realistically assess your situation. Can you live with one another without going nuts? Even if you’re buying a home with your parents or grown children, some years may have passed since you last lived together. Hammering out policies involving guests, parties, pets, and cleaning schedules might save your sanity down the line.

You should also put together a budget, including maintenance and repairs, to ensure everyone understands the financial commitment and how much they will be expected to pay.

Option 2: Get a roommate

I know, I know. You’re buying a home to get away from your roommates—and now I’m suggesting you move them into your new place.

But hear me out. If your lender takes your expected rental income into account, it might help you qualify for a loan or a larger one than you could have gotten on your own. And the extra cash could help you to pay off that monthly mortgage, plus the electric bill and that bathroom remodel you’ve been dreaming about.

This doesn’t have to be a permanent solution. Sacrificing your privacy for a while could pay off, especially in your first years of homeownership when you’re likely to need that extra cash the most.

To protect yourself, you’ll likely want to draw up a formal lease, do appropriate checks on prospective tenants, and set some ground rules before they move in.

Option 3: Advertise a room, or your whole home, on Airbnb

If a full-time roommate is too big of a commitment, you might want to consider short-term rentals. You could list a room in your home on Airbnb or Vrbo. Or, if you’re going out of town, you could list the whole home while you’re away. If you’re in a vacation destination, like a big city or a beach town, your home has unique amenities, like a nice pool or horses on the property, or there is a big event in your area, like the Super Bowl, you could really rake it in.

Before the COVID-19 pandemic, a friend of mine who didn’t even have an extra bedroom in her Bronx co-op rented out the pull-out couch in the living room to carefully screened travelers she found on Airbnb. She never had a bad experience and enjoyed the extra income.

Local laws regulating short-term rentals change all the time, so just be aware that you might not be able to list your property on sites like Airbnb indefinitely.

Option 4: Rent out parking or storage space, or even your pool

Homeowners might have more to rent than just rooms. Take a look around your property to see what else you could profit from.

Some folks rent out parking spaces, which can be a coveted rectangle of real estate in areas with little parking. Others set aside space in their attics and basements to rent out as storage. And there is now a burgeoning trend of homeowners renting out their pools by the hour to those looking for a little summer fun.

Option 5: Purchase a home with a separate rental unit

If you would like to maintain your privacy but could use the extra rental income, you might want to consider purchasing a home with a separate unit (or two) on the property.

This could be a duplex or triplex, where you live in one unit and rent out the other(s). Or it could be an in-law suite attached to the main home or an accessory dwelling unit on the property. The suites and ADUs are separate living spaces, with their own kitchens and bathrooms, that can be rented out full time or used as short-term rentals.

Whatever you choose to do, good luck out there.

If you’ve house-hacked your way into homeownership and would like to share your story, or you have housing questions you’d like answered, email them to OnTheHouse@realtor.com for consideration. 

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