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The House Hacking Basics — Tips & Tricks To Reduce Your Mortgage

The other day, I was having a conversion with my friends about their mortgages and the conversation turned into a discussion about house hacking. As a realtor, I have heard this term numerous times over the years, but my friends were not aware that house hacking is a common thing in Los Angeles. So this blog is for all the homeowners in Los Angeles, or around the world, interested in reducing their mortgage and learning about house hacking.


What Is House Hacking?

House hacking is when you own a one to four unit property, live on that property while also renting space to reduce or eliminate your monthly mortgage. Typically, house hacking is used as a way to cut down your mortgage by renting out rooms or units on your property to someone else, either long-term or short-term.


Is House Hacking A Good Idea?

Yes, in the long run, owning a home is typically better than renting. If you want to buy a house to “house hack,” please keep in mind that owning a home can increase your net worth immediately.

How Do You House Hack?

There are a couple of ways to house hack, here are the 2 most popular ways to house hack:


1. The Traditional House Hack

This is the most common house hacking method in Los Angeles. Typically, this is when the owner lives in one unit or bedroom and rents out the other units or rooms on the property. In this method, the homeowner can choose to furnish or unfurnish the space.

The advantages of this traditional method are that it is relatively easy to find renters, plus the homeowner has control over the price for rent/utilities and the terms of the contract.

The disadvantage to this model is that the homeowner will have people in his/her space. If you decide to rent out a room you will have to see these renters on a day-to-day basis; in the kitchen, in the bathroom, in the living room, etc. If decide to rent out another unit you will only have to see the renters in passing on the property.


2. Airbnb and Other Short-Term Rental Platforms

House hacking can easily be done with Airbnb or any other short-term property rental platforms. This is when the homeowner lives on the property, while also utilizing Airbnb to find people to rent out a space in their home while they are there or even away for holiday.

The advantages for this modern method of house hacking are that the homeowner has complete control over the renters, can charge a higher nightly rate and the guests are only there temporarily.

The disadvantages of using Airbnb are that it requires more communication with the guests and the homeowner will have numerous, different strangers coming & going from the property.

Please Note: if you are considering this method of house hacking, please review your city's rules for Airbnb. If you live in Los Angeles here are the New Airbnb Rules for Los Angeles as of 2019.


Where Can You Find Tenants for House Hacking?

There are many, many ways to find tenant(s) if you're a homeowner wanting to house hack. Here are the most popular platforms: Airbnb, VRBO, booking.com, Craigslist, Roomster, SpaceRoom, etc. Most people think that these platforms are limited to short-term renters, but you can also find a lot of long-term renters on them, as well. I have a friend that rented an apartment in Pasadena, California for 6 months from Airbnb.


House hacking is extremely popular in Los Angeles. One of the most popular reasons for house hacking is that it allows homeowners to purchase higher-end homes while paying the mortgage of a less expensive house. Another reason people start house hacking is that it's an easy way to begin investing. Investing can seem daunting or risky at first, but house hacking is a great way to start having someone else pay your home's mortgage without feeling like you took on a huge financial risk. 


What are the downsides of House Hacking?

If you do want to house hack, you must be ready to invest your time and energy. You don’t want to rent to just anyone. Keep in mind that it may take some time before you find an ideal tenant with great credit who is compatible with your living style. On top of that, renting to one or multiple tenants requires management -- You have to establish your house rules, contracts and be prepared to be a landlord. Here are a few simple things to think about before house hacking:

  • Screen your tenants like you would a job applicant! (Yes, personality is really important, but don't forget to check their credit score & current income)

  • Write down your property policies & stick to them! (e.g., No noise after 10:00pm M-F, No pets, Clean the washer & dryer after doing laundry, don't put any scraps down the sink, create a written policy regarding guests, etc.)

  • Be prepared for any problems that may arise! (e.g., Collecting rent, dealing with late rent, potential property damage, etc.)

  • Have a handy list ready!  This goes for all homeowners, not just house hackers! Always keep a list around of handymen/contractors that service your neighborhood! If you don’t want to fix the plumbing, then don’t fix the plumbing! A great way to start this list is by talking to your neighbors, see who they use/recommend for roof repairs, landscaping, etc.


House hacking can be fun and life-changing when it is done properly! Think about how much you can save and how much sooner you can pay off your property when you have multiple incomes. If you are interested in finding an investment property in Los Angeles. Please contact me, Monica Singer, today to learn more.

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