Is it better to rent or own? And the moment I decided house hacking was NOT for me!

by | Mar 28, 2022 | Money

House Hacking, Defined

Similar to life hacking or biohacking, the term “house hacking” was coined by Brandon Turner of Bigger Pockets, and is a way to buy a property and use creative solutions to free (or even cash flow positive) while renters help you pay the mortgage and your new asset appreciates in value. He literally wrote the book on the subject.

House Hacking by the Numbers

Housing is by far our biggest expense in the U.S. and it is steadily on the rise. Thanks to COVID, the majority of young adults (52% to be exact) are now living with their parents, something not seen since the Great Depression! If that’s you, and you’re saving up money while living at home, then girl… congratulations! You are house hacking!

(Granted, house hacking normally applies to people who purchase the home, but we’ll get to that in a minute.)

calculator graphic

If you want to take this concept a step further (and give mom and dad a break), apply it to your own place where you live with roommates. If you check out the eBook on my journey to financial independence (or FI), that was one of my first major moves at playing the money game.

My Road to Opulence (eBook on an iPad)

The national average monthly rent in U.S. dollars for a 1-bedroom apartment, according to the U.S. Department of Housing and Urban Development (HUD)


The average percent of their income spent by renters in the U.S.


The rate at which rent increases faster than wages

Unhappy with Your Finances? You Have a Choice.

Get a latte and complain about the high cost of housing or get creative and house hack.

Homo Money

While the economy admittedly seems to create new hurdles every day for young people, there are countless entrepreneur-minded folks out there who are house hacking their way to a better financial situation. This is where the biggest strategy comes down to mindset.

For me, seeing people who have house hacked and knowing that it’s possible gives me the fuel to propel myself into action. Here’s a few of my favorites:

@moneyhoneyrachel: she bought houses in Louisville, KY and rented them by the bedroom to maximize cash flow. I believe these were all rental properties she didn’t live in, but the idea could be applied to your primary residence.

@brandonturner: starting out, he lived in a high cost of living and didn’t let it deter him from buying his first starter home. He notoriously used a curtain to turn his living room into a makeshift bedroom for himself so he could rent out the other rooms. You may turn up your nose at that, but he now lives in a beachfront home in Maui like a baller!

@scott_trench: in 2014, he bought a duplex in Denver, invested $8K in some repairs, and rented out the other half. This allowed him to live rent-free AND bring in an extra $250/month. Pretty sweet, right?! If you want to take an aggressive approach to reaching financial freedom, his book “Set For Life” goes into his strategies to be financially free within 3-5 years. To hear from him on a weekly basis, he’s also the co-host of the “Bigger Pockets Money” podcast, where they take listener questions and help them come up with (“not legal advice”) possible strategies.

Planning for the Possibility of a Real Estate Market Correction

This is a possibility. From the real estate podcasts and social media influencers I follow, there’s a mix of competing feelings I’m picking up on.

Some people are eager to sell while the market is so high and I hear others saying that there’s still a housing shortage and expecting the prices to keep going up but just a little more slowly. After getting in over my head with real estate and losing two properties in the 2008 correction, here’s my current philosophy on taking calculated risks.

First off, I treat real estate investing like dollar-cost averaging. I don’t try to buy a single, huge property and hope it was purchased at the perfect time. Instead, because San Diego is so expensive, I have bought small 1-bedroom condos over time. 

But what if I buy and then the market drops?

Skittish Scarlett

Great question! Because I like to buy-and-hold with real estate, anything I buy (whether it’s used as an investment right away or starts as a primary residence and then a rental after I move out) I do the math to see if it will break even if there is a renter in there. Here’s the math I do for myself in the high-priced San Diego market:

    1. Find a property on Redfin and check the Payment Calculator section to see what the total estimated cost would be after I put 20% down. I just did this with a condo in my area and the bottom-line expense after 20% down was around $3,300.

    2. Check the long-term rent estimates in and for the same area. For the same condo above, that was $2,800. Cash-flow negative! No good.

    3. Then I check for a listing in the same building or nearby comps to determine the medium-term rent I could expect for a travel nurse. In that scenario, I see rents as high as $3,500. That gives me a little more comfort, but after covering utilities and 10% for property management, it will again, be cash flow negative. 

    4. With all these numbers calculated, I go to the bid knowing that this property is already at the point of being overpriced (for my comfort level). If there are counter offers or competing offers raising the price above the asking price, I would probably walk. If I do put in an offer, I would do it knowing that the place could be cash-flow negative for a bit if I need to get a long-term renter in there to help cover my expenses. 

Because San Diego is such a tourist destination and we have buyers moving in from more expensive cities like San Francisco, we have a unique market here where we buy for appreciation instead of cash flow. If you live just about anywhere else in the country, your numbers should work out much easier for you to find a place that is cash-flow positive when you decide to rent the place out.

House Hacking Without Buying

Normally, house hacking refers to a property that you purchased and have renters/roommates helping you pay the expenses. But I like to use it to refer to a low-cost way to rent, too.

Ramit Sethi has mentioned how in many immigrant families, they do this all the time: having a single home hold a multi-generational households. This lifestyle helps them reduce their expenses and build generational wealth. Granted, the culture in the U.S. is very different. Most people probably aren’t willing to live with mom, dad, grandma, and grandpa for their entire adult life. But could you manage to live with roommates for 10 years or so to apply this strategy to your own life?

In my mind, the more money I save on the big expenses like housing, the more money I have for other things that will enhance my life but not break the bank. Like this beachfront fish taco and beer happy hour in San Diego!

Happy Hour in Ocean Beach, San Diego

The Good Ole Days When House Hacking Worked for Me

As I’ve shared on my About page, I lost everything in the 2008 real estate crash and had to start from scratch. This hefty slice of humble pie forced me to appreciate the merits of living frugally. My new strategy: house hacking by living with roommates as long as possible to save as much as possible.

The rent for my bedroom was only $600/month and it stayed around that amount for the ten years I lived there. And it was far from a dump. Knowing I was saving on rent every month, I invested money into affordable décor and Marie Kondo’ed the F out of that bedroom!

my master bedroom I rented

After moving in, I lived with my best friend and his cousin, and Zoe loved all of her new housemates. We named our internet router, “Three Men and a Baby Puppy.” It was a blast!

Dan's birthday surprise

The Moment I Decided House Hacking Was NOT for Me

Fast forward 8 years later, and COVID had allowed people to start working remotely. This was great news for me and my then-boyfriend. Our long-distance relationship could finally be a real see-each-other-every-day relationship, so I invited him to move in. He had taken a job in another city, so to go from seeing him one weekend a month to every day was a dream come true!

Until it wasn’t.

what have I done?

I invited my boyfriend to move in with me so that he could save on his housing expenses to help him finally pay down some his consumer debt. This meant my bedroom of the 3-bedroom house hack was suddenly split between two people who were living and working from home.

We moved the bar top table into my room to create an office for us, making the room feel even smaller. This was the view from my bedroom “office” which was shared by my boyfriend, and his conference calls on speaker phone, and hearing the news cycle (with updates about Trump and COVID) playing in the background all day…

bedroom office

Despite our best efforts to make it work, this arrangement (with its insane lack of personal space) took about 6 months until it was the death of our 6-year LTR. 🙁

At this point, my frugality had reached its limit. For my mental health, I needed a break from house hacking and having so many people living and teleworking in cramped quarters under COVID, so I splurged and bought a new condo for my primary residence. This bumped up my living expenses in a big way, from $600/month to over $2,500/month. I would no longer be Mr. Frugal, but at that point in my life, I needed to start enjoying the hard work and hustle I’d put into the last 10 years. I needed a taste of “Opulence” before I hit burn-out.

The Unexpected Bright Side of My Splurge

Little did I know, the 1-bedroom condo I bought for $370,000 in October 2020 would be worth $415,000 just 1.5 years later. Here’s an interesting side note for the rent vs. own debate: the $45,000 equity I gained in those 18 months averages out to $2,500/month that I was adding to my net worth. That just so happens to be the same amount I was paying for my more expensive housing, so it’s like my housing was free if you factor in what I was making from my investment.

my new condo splurge

“But wait, there’s more!”

Every mortgage payment I make has about $700 that goes toward principal to pay down the loan, which essentially means I have even more going toward my overall net worth. And on a larger scale, by owning my home I’m also locking in the price of my housing. If I were renting a place to myself, my entire rent payment could go up every year. By owning, it’s only my HOA fees (and maybe a little bit in property taxes) will go up over time, and NOT my entire housing cost like if I were still renting.

house hacking with my pup

Will I Ever House Hack Again?

While the condo I live in now is pricier than I’m used to, I consider it a mental vacation from my frugal lifestyle. After a couple years of saving, I’d like to house hack again to make use of the VA Loan benefit that’s available to me. (Side note: normally, the VA Loan allows for 0% down but I need to come up with 7% down after the short sales I did in 2008.)

In short, while House Hacking and I have parted ways, we aren’t done for good. We’re just “taking a break.”

Although house hacking was not for me when it came to being quarantined with two roommates, a dog, and a boyfriend all working from home, I still love the strategy and am planning out my next house hack as we speak. Because a VA Loan needs to be used on a primary residence, my plan is to work out something with an accessory dwelling unit (a.k.a. granny flat) where I can live and rent out the main house on the property to cover the bulk of the mortgage.

Anytime I can get my housing expenses close to zero, I know I’ll be sittin’ pretty in all other spending categories.

Homo Money sittin' pretty

Dan, my former roommate just landed a new job and asked for my help getting his finances set up on autopilot with this extra income he’ll soon be getting. I can’t wait to see him start creating wealth for himself with smart money moves, like house hacking.    

Homo Money and his former roommate Dan

Is House Hacking Right For You?

That’s my story, but how do you feel about house hacking? Let’s keep the conversation going!

Would you be willing to live at home or live with roommates for a period of time so you could ramp up your savings and eventually own the place where you all rent? If so, what would you be willing to try and for how long? Share your thoughts and best practices in the comments below.

sunrise near old apartment


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