Meaning behind Gen Z craze 'house hacking' - and the dangers for first-time buyers following it
Britt Jones
Featured Image Credit: Getty Stock Images
What is house hacking? According to banking websites, it’s all the rage for Gen Z and Millennial home buyers because it allows them to do one thing.
If you’ve been considering buying a property for the first time but aren’t sure how to maximize your income in the process, then you might want to read ahead.
‘House hacking’ is the new trend that’s taking the housing market by storm, and the best part is that it won’t cost you anything extra to take part.
If anything, joining this house buying trend could help you to earn, as the entire premise revolves around renting out your space.
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Now, I’m not talking about a rent-a-room situation, but far bigger.
According to Webster First, a banking company, house hacking means to generate an income via purchasing a ‘multi-family home, living in one unit, and renting out the others so that your tenants are paying the majority’ or all of your mortgage repayments.
Because housing affordability isn’t great right now for those aged between 28, 38 or 48, says Housing Center codirector Ed Pinto, the author of a new study that reveals the housing crisis is a major issue in the US for all ages, not just Gen Z.
“The less-rich are getting squeezed out, and that trend is uniform across all age groups,” Pinto told Fortune.
This has led to younger people taking on a different approach to home ownership, which is vastly different than generations before.
While people often consider living in the entire home they own, Gen Z and Millennials are living in a portion, and choosing to earn a living from the rest.
This then allows them to build up enough money to be able to refinance their mortgage and lower their monthly payment, building equity on the home.
From there, you can buy a new home to live in, rent out the now-vacant unit in the multi-family home, and use that rent to pay for the new mortgage...basically starting a profitable operation of buying and renting.
However, you don't have to just rent out a unit, as you can just rent a room, charge someone to park in your garage, yard or parking space, or simply bypass a third person altogether.
You can do this by opting to flip a run-down home after buying it for cheap, renovating it, and selling for a profit.
But be wary, if you choose to buy a home with an HOA (Homeowner’s Association) you might not be able to do anything listed above, as a HOA usually enforces strict rules on homeowners.
There's also some other dangers to be aware of.
According to Webster First, being a landlord is tough. If your tenant needs something fixing, you need to get the job done.
There's also the case of having to rely on them for timely rental payments, choosing bad apples that you'll ultimately have to live beside, and more.
If you buy the property in a bad area, you might also unwittingly deter renters from wanting to live there, and if you choose to build extra units on your property, you have to make sure it's in line with your local ordinances.
If now, you could be breaking building laws, and you'd be legally liable.