Househacking a condo in the San Francisco Bay Area
Househacking has been around for years, but has been made even more popular with BiggerPockets and several investors citing this tactic as a way to live cheap or even free. We typically hear of investors owning duplexes and living for free, but house-hacking can come in several different forms.
If you live in a large metro area, where multi-family properties are priced at a premium, it can be difficult to find a home to househack and live for free or generate positive cash flow.
In this post, I’ll go over how I househacked in the San Francisco Bay Area.
In 2016, I bought a 2 bedroom, 2 bathroom condo in the San Francisco Bay Area for $380K. Following my rule of thumb of buying a home with at least 2 bedrooms and at least 2 bathrooms, soon after I moved in, I sought out a renter to occupy the second bedroom and help with the cost of the mortgage. With a $380K price tag, this was the highest price home I had ever purchased and it was eating away at my W2 take home pay with each mortgage payment. This made it difficult for me to save up money to buy future investments.
Lesson #1: Househacking in any environment. While I didn’t have a multi-unit property, I was a single man with a minimalist lifestyle who did not need much space. I came to the conclusion that I should utilize the spare room and bathroom to rent out. The condo I bought was only about 900 square feet, but I really only needed 300 square feet for my own personal living. What worked out in my favor here is that there is always demand for a bedroom, regardless of size, in the San Francisco Bay Area. Space is at a premium in large metro areas, so even a spare bedroom in a condo is enough for a renter.
Lesson #2: Tapping into your network for renters. When searching for a roommate, I thought to leverage Craigslist and Airbnb. After listing the room for a few days, I received inquiries and applications from people with less than stellar backgrounds, likely because of the neighborhood my condo was located in and the affordable rent rate I was asking for. I didn’t feel comfortable sharing a living space with a stranger, so I decided to tap into my own network. I ended up finding a co-worker who was looking for a place to live. When we both occupied the condo, my co-worker was paying $1,000 a month, which helped with the mortgage payment.
Lesson #3: Discount rent for a hands-off investment. By 2018, I needed to relocate to be closer to a new job and my housemate agreed to rent the entire condo. He is now renting the entire condo for $2,000 a month. While market rent is closer to $2,400, he has been paying his rent on time and takes really good care of the home, even doing much of the maintenance and repairs himself and not requesting reimbursement. I am more than happy to offer a discount on the rent rate and sacrifice a bit on cash flow to retain a tenant who cares for the home since I am still working a full-time job and my strategy is to be hands-off.
To recap
Lesson #1: Buy properties that have flexibility to househack. Any type of home, whether condo or single-family home with at least 2 bedrooms and 2 bathrooms is a good, flexible baseline that I personally use.
Lesson #2: Tap into your network for potential renters. Reach out to friends and co-workers who you can trust before you resort to renting out to strangers who may appear less dependable to pay rent and maintain the home.
Lesson #3: Consider renting the home for a discount to your housemate in exchange for a hands-off tenant. If your housemate is trustworthy and offers other benefits (such as taking on repairs and maintenance), you can afford to be more flexible in the rent rate.
In conclusion, househacking is possible in any home and geography, as long as you have the space to rent out, and tapping into your network and sacrificing some cash flow can help with finding and securing a tenant. With these tips in mind, you’ll be able to househack any home.
