House Hacking for Extra Income? Here's How You Can Make Money and Preserve Your Sanity
Sharing your space can be profitable but burdensome. These five tips can get you through.
Many people are turning to house hacking as an option to cut costs. Between financial hardship and finding creative ways to make additional money, house hacking is a popular strategy for real estate entrepreneurs or investors that most frequently involves purchasing a multi-unit property and offsetting mortgage payments by renting out one or more units.
Non-traditional approaches to house hacking can involve making livable space in basements, garages and even within the same unit, effectively creating something of a college dorm experience (without the college). House hacking isn’t just for new or established real estate entrepreneurs. In fact, regular tenants frequently house hack their way into rent money through a process known as subletting.
Whether you are the property owner or the tenant, inviting someone to share your space to cut costs may be an effective financial strategy in the long run, but it can come with short-term negative impacts to your mental health. Here are five things you can do to house hack effectively and preserve your sanity.
1. Establish a plan
This plan should include what your financial goals are, how long you plan to house hack and how you will break the agreement if things go sour. Keep in mind that ultimately you are responsible for the space. This can give you leverage, especially if you aren’t a confrontational personality type.
2. Put your agreement in writing
At some point, we’ve all made verbal agreements that were interpreted one way and meant another way, or forgotten elements around what the expectations and terms of that agreement were. Having a written agreement outlines all expectations up front so that nothing is left up for interpretation. This way, if things do go sour you can preserve the relationship — or at least have legal recourse in small claims court!
3. Talk about money early
Money is a sensitive and intimate topic. That's even more true in relationships. In fact, studies have determined that fights about money are the second leading cause of divorce, behind infidelity. Even when not tied to a marriage, the topic can be devastating to friendships. Discuss topics such as how you'll split the living expenses and rental payments; issues impacting income, like job loss and outstanding debt; and plans to mitigate overall financial risk. These are all crucial conversations that you must have if you want it to work.
4. Communicate frequently (and promptly)
Outside of money concerns, you might have to worry about chemistry. Differences in opinion, hygiene practices, noise tolerance and frequency of guest visits are all things to consider as you learn to adjust to sharing your space with someone else.
5. Establish Boundaries
Although you are in a communal living situation, it’s important to establish boundaries as they relate to your privacy, personal space and personal belongings. There’s nothing more frustrating than coming home to the unsanctioned use of your personal belongings, even if it is a friend or family member.
Once your predetermined length of time elapses or you meet your goal, you can reassess whether you want to continue sharing your space or move on to bigger and better! Many real estate entrepreneurs will save enough to put a down payment on a different property, then rinse and repeat. Non-real estate entrepreneurs will save by keeping low overhead and additional capital they can funnel into their business.