Multigenerational Living

Some clever millennials are teaching the older boomers a new way to invest in real estate, which goes by the name of “house hacking.”

What Is House Hacking?

House hacking has nothing to do with computers, although you may go on the Internet to find candidates for real estate investments suitable for hacking. The goal of house hacking is to acquire a multifamily rental property, live in one part of it and rent out the other parts for enough rental income to cover most, if not all, of the expenses of owning the property.

Live Rent-Free

As the on-site manager of a property that you own, you do not have to pay any rent. If you are clever, and the rental market is robust in the area that you choose for house hacking, then the rental income from the other units in the multifamily property will be sufficient to cover the property’s expenses. Then, you live rent-free.

Finding A Hackable Property

Multifamily properties, up to four units, are the best candidates for house hacking. A two-story townhouse that divides into two separate living spaces, a duplex, a triplex, or a small apartment building may be suitable.

Cash Flow

Calculate the cash flow from the portions of the property that rent to others. If the rent covers all the expenses then the property is said to have a positive cash flow. That is the goal. Have some funds set aside to cover any downtime when a unit is vacant between renters.

Financing

Owner-occupied properties qualify for lower financing rates than non-owner-occupied properties, which are held purely for investment.

Landlord Headaches

As the owner/landlord you will deal directly with any tenant relations and problems. If a pipe breaks in the middle of the night, you are the one who will have to deal with the problem. Be sure to screen tenants thoroughly and maintain the property. Some do not like dealing with tenants; however, if you are careful when selecting tenants and handle any problems professionally, this work provides an excellent experience for understanding further real estate investments to build up your portfolio.

Summary

House hacking came about especially for those from the younger generation of millennials simply because buying a property is very challenging on one income and even difficult on two incomes. If you consider the payment of rent by others as part of the total income that supports a property, the math may work out better. When the numbers work out, you may have found an investment opportunity with house hacking. Work with qualified real estate agents and mortgage professionals who specialize in multifamily properties for the best results.

There has been a surge in families who have multiple generations living together. In many cultures, children take care of their parents as they age. This is done in an effort to repay the parents for raising them during their childhood.

At the same time, when there are multiple generations living together in the same home, there are some changes in both home design and financing.

Financing a Multi-Generation Home

Anyone who is looking to finance a multigeneration home will need to detail their financing plan to the mortgage lender. The lender always wants to know how the loan is going to be repaid. The more details someone can supply, the better the chances are that the application will be approved.

A common arrangement is having the grandparents supply the down-payment. They are more likely to have a ready supply of cash-on-hand, often in the home of equity from their prior home.

Then, parents typically supply monthly payments. They are more likely to a stable source of income given that they are likely still employed. 

The Home Design of a Multi-Gen Home

Given that more and more people are indicating their willingness to live in a multi-gen home, this is having an impact on home design as well. Many of these homes have a first-floor bedroom. While these were unusual before, having first-floor bedrooms is important for older relatives. This allows them to avoid having to take the stairs, reducing the risk of falls.

In addition, many people want to provide their older relatives with a feeling of independence while living in the home. This can be accomplished by providing a small kitchenette in the first-floor bedroom. There is often a separate entrance as well. Some families are even interested in having a separate guest house on their property.

Investing in a Multi-Gen Home in the Future

As multiple generation housing arrangements continue to increase throughout society, the financing and home design will continue to evolve. For this reason, it is important for everyone considering this living arrangement to stay up to date on the trends in this industry. It might impact how they design and finance their home for their elderly family members in the future.

Talk with your trusted real estate and mortgage financing professionals to get the best advice on your personal situation. They are experienced in designing solutions for every possible scenario.