House Hacking

Monday Sep 28th, 2020


​House Hacking has gained a lot of attention lately as a way for homeowners to afford real estate while contributing to their net worth.  The idea may seem complicated to some, however, the basic premise is simple.  Have someone else pay all or part of your mortgage while you pay down your home.  For first time buyers, this idea can allow them to enter the market without being house poor.  In a city like Calgary, there are two ways first time buyers can take advantage of this.  Renting out a room, or developing a rental suite.  The following article written by Jacob Perez provides valuable insight into how new buyers can benefit from this newer trend.

Four Reasons Why Millennials are Choosing House Hacking

May 7, 2028

Jacob Perez  -

Buying a starter home is about purchasing your first home at a modest price point with the idea that, after years of hard work and career growth, you will purchase your “forever home” that will suit your family’s long-term needs.

The issue today’s young people are facing is that many are not seeing their finances grow at the same pace as the cost of real estate. And since houses are viewed as an investment, millennials have gotten creative. Enter “house hacking.”

What is house hacking? It’s a mix between buying a personal residence and an investment property. Simply put, house hacking is buying a multi-unit property, living in one unit and renting the other(s) for supplementary income.

How is house hacking a game changer for this generation?

1. House hacking can save you money


Mortgage payments can be expensive, so having a separated unit paying rent will help lower your month-to-month costs. This is obvious, but house hacking also allows you to buy a more expensive house while paying less month-to-month.

The following example is a cost breakdown of buying a starter home for $300,000 vs a multi-unit home for $400,000 as it relates to mortgage payments.

*5% down payments are subjected to a Mortgage Loan Insurance premium (CMHC) added to your monthly payments.

Disclaimer: These figures may not represent your exact market, however, it’s food for thought and is a real example directly from a market in Ontario.

Considering house hacking but are not sure what you can afford? Estimate your mortgage payments with our mortgage and affordability calculators.
In this scenario, purchasing a home worth $100,000 more can potentially save you $1,000 per month in costs. In addition to monthly savings – the versatility of house hacking is a big reason for its popularity.

2. House hacking suits almost every lifestyle

Your twenties and thirties bring significant changes in your life. House hacking provides the flexibility needed to create a living experience that suits your life as you evolve. Here are some scenarios that can help you figure out how to structure your living situation:

Do you want to save the most money possible? Live in the least desirable unit in your home.

Do you want the nicer suite? Rent out the less desirable unit.

Do you want the nicer suite and maximize the money saved? Rent your less desirable unit, and get a roommate for your unit.

What if you’re only comfortable with exclusive access to the backyard and driveway parking? You’re the landlord and can specify the use of common spaces in your tenant’s lease.

You’ve received a job offer out of town, what now? Rent your unit out, move, and use the cash flow towards your rent elsewhere while you figure out your next move.

You love the neighbourhood and don’t want to move but your family has grown? Convert the multi-unit to a single-family residence and stay in the neighbourhood you’ve grown to love.

As you can see, house hacking is extremely versatile and can provide flexibility as your – and your family’s – needs evolve.

3. House hacking helps you get in your “forever home” faster

House hacking could be a stepping stone to help you buy your second home faster, while allowing you to hold on to your first. This works in a few different ways:

Increased personal savings: Since house hacking can decrease your month-to-month costs, you’ll be able to save more money faster to allocate towards your next purchase. Just make sure you are putting the extra money into savings each month.

Increased principal paid: While your personal month-to-month costs are lower, your mortgage payment is still higher. As a result, you’re paying more principal towards your mortgage by choosing a more expensive property.

Using the scenario in the chart above, even though we pay $1,000 less per month, we’re still paying just over $200 more principal per month. The result is an additional $12,000 in equity paid down after five years (all while saving more month-to-month).

Increased benefit from appreciation: If your $300,000 starter home and $400,000 duplex both appreciate by 6%, which makes a greater return? Of course, the $400,000 asset. When you factor that this is compounded year over year, the difference becomes more significant.

4. House hacking can lead to some massive passive income

If you purchase a well-located, desirable property, you’re more likely to have consistent renters and maintain a healthy cash flow over and above your monthly expenses. Having a steady cash flow will allow you to refinance equity out of your existing home and leverage that cash to place a down payment on an additional revenue property.

Building a portfolio of properties as you upgrade from home to home will act as the building blocks towards your retirement, children’s future or whatever other goals you have in mind. House hacking is a great way to build a sustainable portfolio of property as you periodically upgrade from home to home.

House hacking can suit any lifestyle and will keep you flexible enough to pursue the many opportunities that come your way. Have you bought or considered buying a multi-unit property?
We’d love to hear about your experiences or answer some of your concerns in the comment section below.



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