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House Hacking: What You Need to Know

Couple Embracing and Looking at their New Burlingame Rental HomeAre you looking for a way to buy your first Burlingame investment property? House hacking might be an answer to that. House hacking is when investors purchase a property that either has or can be converted into multiple rental units, live in one unit, and then rent out the others to tenants.

The concept behind house hacking is you use the rent from your tenants to cover your mortgage payments as well as other property expenses. This will result in you living in your home for free while the property’s value increases. This is a very attractive idea especially if you are just starting as a real estate investor. But there are some things to ponder on before proceeding with your house hacking plan.

House hacking can offer investors a range of great benefits. Surprisingly, there are only a few who use this strategy to acquire properties. Done correctly, living in your Burlingame rental property can help lessen or eliminate your mortgage or rental payment and allow you to enjoy some tax benefits, all while giving your property time to increase in value. Still, house hacking is not for everyone due to a few downsides to the process.

In exchange for living virtually rent-free, you will be spending a lot of time leasing and managing your property. Being a landlord is a real job so you should take it seriously. Most house hackers don’t have their properties managed professionally so they end up doing most of the legwork involved in owning a rental property.

House hacking also means you will be living with your tenants. Yes, you won’t be sharing the same unit with your tenants, but they will be so close by that you have to put up with the noise, their pets, cars, and even personal belongings. If your tenants turn out to be not the best type of neighbors, you could have trouble keeping things professional between you. But if you do not mind such an arrangement or if your tenant is great, house hacking could work out for you.

As you go over the possible situations you could face as a house hacker, make sure you include your willingness to live in an investment property. Most new investors choose lower-priced properties at first. If you plan on living on the property, you have to be certain you will be comfortable doing so. It is highly likely that your first investment property will not be your dream home, and this brings about frustration for some people. But if you are fine with scaling back your lifestyle for a few years, house hacking can be your entry point into real estate investing.

One more thing to consider has to do with rental payments and what could happen if your tenants stop paying them. You are still responsible for everything from the mortgage to the utilities since you are the property owner. With a lease, you can encourage your tenants to pay their share of the expenses, but if something happens that makes them unable or unwilling to pay, you have to be able to pay your bills despite not having that income for a few months. It takes some time to evict a non-paying tenant and find a new one, so it is a smart move to set up a cash reserve account as soon as you can.

Are you in the market for your next Burlingame investment property? Or would you like to learn more about how professional property management can make it easier to invest in rental real estate? The Real Property Management Mid Peninsula team is ready and willing to help you. Contact us online today or call us at 650-696-1800. We work with investors like you to help build the rental real estate portfolio of your dreams.

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.