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Writing always helps me to consolidate my thoughts, so since real estate has been consuming a lot of my brain space lately, and mortgage rates are so low, I decided to write down why we're even looking for an investment property to begin with, what we're hoping to find, and the doubts we have. Real estate investing is something Ben and I have been interested in for years, but we always figured we'd have to wait til we had more money. A couple years ago, I started listening to the BiggerPockets podcast and learned about the concept of house hacking, aka renting out a portion of your house to cover the mortgage. The classic and most straightforward example is to live on one side of a duplex and rent out the other half, but it can also work with getting roommates in a single family house or renting out a mother-in-law unit. The really cool thing is that the money required to get started with house hacking is significantly less than with traditional investing. Since you'll be an "owner occupant," your down payment can be as little as 3.5% on 1-4 units, instead of 20-25%. After a year, you're no longer required to live there, so you can repeat the process all over again, renting out both sides for cashflow. A lightbulb went off for me, and I saw the potential for house hacking to really change our financial position in a meaningful way. By eliminating our biggest expense (housing), we could ramp up our savings, allowing us to acquire more investment properties and build up some decent passive income in just a few years. The only problem? We had just bought a regular single-family house (with no guest house or basement to rent out), plus we had a toddler and another baby on the way. We briefly considered hosting an international student in our guest room, but we didn't feel good about having a stranger living IN our house with little kids.
Photo: Young House Love's cute duplex
We decided house hacking wasn't right for us at this life stage. I kicked myself...if only we had house hacked when we lived in Edmonds! After all, we actually lived in the basement unit of a duplex for four years!!! During that time, we were both working and would have easily been approved for a mortgage. We could have totally afforded a 3.5% down payment. We didn't have kids to worry about at the time. And darn it, any house we bought in the Seattle area in 2013 would have appreciated so much by now!!! Hindsight is 20/20.
Since we couldn't go back in time, we decided to just focus on the house we'd already bought and make it a good home for our family. We still liked so many things about it: the neighborhood, the school district, the overall layout, the amount of natural light. And I'd always heard that if you buy a house, you should live in it for at least five years to end up ahead vs. renting. So we committed to this house and worked on remodeling it, with the intention of staying here five years. But as I continued listening to podcasts and reading books about real estate investing, I couldn't give up on the idea of house hacking quite yet.
I convinced Ben to try listing our entire house on Airbnb, leaving whenever it got booked. Kind of our own version of house hacking. We opened our house for seven months last year, got nine bookings total (at an average of 3 nights each), and earned enough to cover six month's worth of our mortgage. Yep, we covered half of our mortgage last year just by leaving our house for nine weekends! That doesn't count taxes, insurance, or utilities...but still, we reduced our housing cost considerably, and our lifestyle was hardly impacted. We even had fun with the process of getting ready: putting together a welcome basket, getting nice toiletries, buying cute bedding and towels, creating a local guide with restaurant suggestions, and so forth.
But it was exhausting getting the house clean for guests. In addition to making beds and all the normal Airbnb prep, we would also clear out the fridge, take the kids' clothes out of their dressers, wipe toddler fingerprints off the windows, and generally try to make it feel like a true vacation rental instead of our personal home. As we talked about our goals and plans going forward, we agreed that it would be fun to run a dedicated Airbnb...but renting our personal home on weekends wasn't going to work much longer. Especially with three kids.
So that left us with the question of what next?? Should we give up on the idea of house hacking again, and just LIVE in our house like normal people?
Hahaha. Would I be writing this post if that was the conclusion we came to? If you know me, once I have an idea I believe in, I am like a raccoon holding a shiny object: I cannot let go. And I truly believe in the power of house hacking. So I'm still determined to find a way for us to (safely, successfully, sanely) house hack as a family. Our goal is to find a move-in ready duplex in a safe neighborhood this year. We will move into one side, and either rent out the other side on Airbnb or get a long-term tenant (this decision will likely depend on the neighborhood and the house itself).
As for our current house? Well, originally the plan was to sell it. Houses in Spokane have appreciated crazy fast over the past three years, and we have a pretty good chunk of equity that we could put towards our investing dreams. But we also like this house quite a bit. We've made updates that fit our tastes, we have great memories here (so we're emotionally attached), and our neighborhood is zoned for some of the best schools in town. We wonder, if we move, will we be priced out of this neighborhood? What if this area appreciates faster than other neighborhoods, and we miss out on that? We considered renting this house for a year while we live in a duplex, then moving back into it (just in time for Ian to enter kindergarten). The idea is tempting...but our house is definitely not what we would have purchased if we were looking for a rental. And I would be pretty sad if tenants trashed the house in that year. It would also mean that we could only purchase one investment property with the low down payment, instead of having the opportunity to repeat the process. Most importantly, we don't even know if keeping the house is an option. So most likely, we will be selling it. We've only lived here for two and a half years, but with the above-average appreciation, we'll still end up with a nice profit even after closing costs and realtor fees.
But WHY, you ask? Why go through the hassle of moving out of a house we like, into a living situation that will probably be less enjoyable? What's our end goal?
I know it seems a little crazy. But we're looking into the future. To steal a Dave Ramsey quote, the plan is to "live like no one else now, so we can live like no one else later." We have realized that a bigger house and nicer things do not make us happier. What does? More time together as a family. So we're trying to build up our savings and passive income so we can have more time together in the future. That means that for the next few houses we live in, we will not be looking for our DREAM house, but a house that will help us pursue our dreams.
Do I have doubts? Yep. As I mentioned, the real estate market in Spokane has been hot. On the one hand, that makes me think we should sell now to capture all that equity. But on the other hand, it makes me worried about jumping into a new house that might drop in value right away. Could we get stuck in a duplex? I also worry about whether this is the best idea for our kids. I believe kids are flexible and adaptable, but I also know they like stability and routine. And I do wonder if we'd later regret selling our house (already, there's no way we could get into this neighborhood for the price we paid back in 2017).
Sooo that was long and wordy! If you have any thoughts or if you've done something similar, I would love to hear from you. Also, if you're in Spokane and you're considering selling a duplex (or a house with a mother-in-law unit), we would definitely be interested!! Hey, you never know...
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I totally get where you’re coming from! And I love how thorough you are, I need to look into this more!!
PS: want to buy our house? 🥰
Haha thank you for calling me "thorough" instead of "such an overthinker." ;D You guys are already doing this! You're part of what inspired me! If you ever want to sell your house, seriously let us know. We would for sure be interested!
Love your house! What color is your front doors??? I am remodeling and am thinking about that color. Thanks for sharing!