![](https://forsalesavannah.com/wp-content/uploads/2024/02/HH-Cover.png)
A Traditional Real Estate Investment Strategy for Modern Times
House Hacking Explained
Real estate investor, author, and co-host of the successful Bigger Pockets podcast, Brandon Turner, originated the term House Hackers. The term House Hacking is used to describe a real estate investment strategy that combines your primary residence with your investment property. While this owner-occupied property investment strategy is not a new concept, it has recently become more popular as a way for investors to enter the highly competitive and expensive real estate marketplace.
In the simplest of terms, if you are a House Hacker, you are sharing your principal residence with other individuals. This alternative approach to homeownership is a lifestyle choice. It is achieved in one of two ways; purchasing a multi-unit property (duplex, triplex, or quadplex ), living in one unit and renting the other units, or purchasing a single-family home with multiple bedrooms to rent out or other suitable areas to lease such as a finished basement or garage apartment. Essentially an investor is combining home ownership with rental property investing.
The Advantages of House Hacking
There are several advantages of being a House Hacker. Bigger Pockets Data Analytics VP, Dave Meyers, cites these top three advantages:
- “Taking advantage of owner-occupied financing. In the world of mortgages, properties with four units or fewer are considered residential properties. As long as the investor lives in the property, they are eligible for owner-occupied financing—which comes with one of the lowest interest rates of any loan. Furthermore, these types of properties can qualify for an FHA loan, which means the investor can put as little as 3.5% down and buy up to four units.
- House hacking deals can make money in a variety of ways. Some house hacks will cash flow, which is excellent. But, even if they don’t, the tax savings, loan pay-down, and potential for appreciation typically help boost the investor’s net worth more than renting or traditional homeownership.
- House hacking is an excellent way to learn the real estate business. Having house hacked for many years myself, I can confidently say there is no better way to learn the property management side of the real estate investing industry than by living in your investment. You’ll become a master at working with your tenants, managing maintenance and repair, and spotting value-add opportunities.”
House Hacking Example
Here is a prime example of an actual House Hacking transaction I completed. I recently helped a military client become a Savannah House Hacker. He obtained a VA mortgage with a zero down payment and 100% financing to purchase a Midtown Savannah, four-bedroom, single-family home. The purchase price was $230,000. Closing costs amounted to $11,000, which he paid out of pocket. Recently renovated as a flip by the investor seller, this property was turn-key and move-in ready for occupancy. After closing, my buyer occupied one bedroom and rented the other three bedrooms to friends who served on his military base.
This example meets all the criteria of a House Hacker investment. The buyer was able to purchase a home with low down payment financing since it was his primary residence. By renting the additional three bedrooms, he could cover most of his living expenses, including the mortgage. After living in the property for two years, my buyer was reassigned to a new army base. After relocation, he rented the entire property to one family at a lease rate that covered all the property expenses. Success! My client now owns his first investment property and can now look for another investment opportunity.
A Traditional Real Estate Ownership Strategy For The Modern Savannah Investor
The House Hacker real estate ownership concept is not new. Sarah Davenport, the widow of master builder Isaiah Davenport, is one of Savannah’s original House Hackers. The Davenport House Museum, located on Columbia Square, was built in the early 1800s as the Davenport family home. When Isaiah died in 1827, Sarah became a House Hacker when she turned this primary residence into a boarding house to cover her family’s living expenses.
Let’s fast forward to House Hacking opportunities in today’s Savannah area real estate marketplace. What investments can you find? Start by exploring the Victorian District. This district is known for its duplexes, triplexes, and quadplexes, perfect properties for investors to occupy one unit and rent the others.
The Savannah Historic District offers homes that include garden-level and carriage house apartments ideal for generating passive rental income. I successfully negotiated the purchase of a three-unit Jones Street luxury residence for a client. In addition to the four-story, three-bedroom main home, the property has a two-bedroom garden-level apartment plus a one-bedroom carriage house.
In Ardsley Park, just south of the Historic District, homes have larger yards, and it is common to see homes for sale with garages. Check local zoning to see if garage apartments are allowed. Also, research the regulations regarding the construction of an (ADU) additional dwelling unit on a potential investment property. These are just two of Savannah’s neighborhoods that offer House Hacking opportunities.
Interested In Becoming A House Hacker?
If the House Hacking lifestyle interests you, be diligent in your property market research. To find suitable rental investment opportunities, rely on a local Realtor who knows the Savannah real estate market. Always be aware of neighborhood Home Owner Association regulations or other zoning laws that affect leasing activity when evaluating a potential property. Find a mortgage lender who offers a variety of mortgage products and understands your goals. Consult your accountant and tax professionals for advice, and don’t forget Uncle Sam! Rental income is taxable and must be reported on IRS Schedule E.
In addition to being a Seabolt Real Estate Associate Broker, I am a Bigger Pockets Investment Network preferred agent, an investor-friendly Savannah Realtor, and a Savannah rental property owner-investor. Contact me, and together we can achieve your real estate investment dreams.
![seabolt-logo](https://forsalesavannah.com/wp-content/uploads/2024/02/seabolt-logo-150x150.jpg)
Pam Peterson
Associate Broker
Seabolt Brokers | Christie’s International Real Estate