The only thing winning the ‘playing hard to get game’ is the housing market, especially for the Millennial and Gen Z folk. They’re finding it to be a pretty rocky road, nevertheless, they’re not backing down.
These two clever generations have come up with a way to swim through the nasty currents of the rising real estate market prices and interest rates with ease. They’ve taken up what we call ‘house hacking’, a tricky approach to homeownership, but they seem to be handling it well.
The act of renting out a part of your home or the full property to generate extra revenue is known as “house hacking”. According to new research by property market website Zillow, nearly 4 in 10, or 39%, of recent homebuyers feel the practice represents a “very” or “extremely” crucial opportunity. The last two years have seen an 8% point increase in that share.
The idea is particularly popular with younger people. Over half of Gen Z and millennial home buyers—51 % and 55 %, respectively, expressed favorable opinions on house hacking in the Zillow poll.
In an April to July 2023 survey, Zillow surveyed over 6,500 recent purchasers. The adults who answered were those who had relocated during the last 24 months to a newly purchased primary house.
The house hacking 101: the new game plan
Allow us to break it down for you. This isn’t a game plan limited to just real estate gurus, it’s a way of working through the mud and finding a solution that beats the problem. Millennials and Gen Zs are one’s to keep it simple but smart. So here’s the catch, initially you find a place that feels comfortable that you can call home, and then get creative by finding ways to make the house pay for itself—and that’s the theory of house hacking.
It can take many different forms, such as renting out extra rooms, turning garages or basements into rental spaces, or even embracing the digital era by making use of websites like Airbnb. The main goal is to use the property’s income-generating potential to make owning financially feasible.
A deeper dive into personal financial insights
Manny Garcia, the senior population scientist at Zillow, stated that given the numerous affordability restraints on the present market, the extra money from house hacking can “help make those dreams of homeownership penciled into reality”.
According to research by real estate website Redfin, the typical sale price of a property in the United States was $413,874 in October, up 3.5% from the same month last year.
Also, according to Bankrate, the average 30-year mortgage rate reached 8% in October, the highest level in 23 years. In January 2021, rates peaked somewhat below 3%, for comparison.
Potential buyers need to consider a few things before purchasing a property, even though renting out a piece of it can help defray some of the costs associated with owning one.
The starter home dilemma: affording six figures
A recent Redfin analysis indicated that for future homeowners to afford a median-priced house in the United States, their salary must be $114,627 due to rising housing prices and interest rates. Redfin’s analysis was conducted using the August median home price of $420,000.
According to Redfin Chief Economist Daryl Fairweather, “You have to make six figures in many places to afford a starter home, so it makes sense for young people who are seeing how expensive homeownership is to want options”.
A millennial or Gen Z buyer might have to settle for a more expensive property than they would have preferred because there aren’t many small beginning homes available, according to Fairweather.
In a situation when there aren’t many small houses for sale, having the choice to rent or have a roommate is crucial, the speaker stated. These homeowners might benefit from house hacking if it gives them more money to pay for bills or even helps with the mortgage.
How to try house hacking
Even though it might seem like a wonderful idea, house hacking requires a lot of homework. In light of that, here are a few things you should be aware of before trying it yourself.
A strong real estate team is essential.
When purchasing a home, you should always ensure that you collaborate with a knowledgeable group of experts, such as a lender and a real estate agent. This is particularly true, though, if you’re house hacking. You’re ultimately searching for an investment property, so even though the house you purchase will serve as your permanent residence, you should work with a lender and an agent who has experience with that kind of transaction.
It’s all about the numbers when looking for investment property.
Because you are an investor, you should approach the process of finding the house you want to house hack with that mindset. What is more important than finding the right fit when purchasing an investment home is making sure the maths adds up. Not only should you wish to be content in your house, but you also need to make sure that you can charge enough in rent to pay for your main expenses.
Renting has responsibilities
Even if it’s lovely to have someone else practically pay for a large portion of your living expenses, it’s not free. Once you’ve bought your house, you’ll be the landlord. Make sure you are prepared to take on responsibilities such as leasing preparation, tenant selection, and ongoing maintenance.
That’s our not-so-secret weapon in this drive for homeownership: house hacking. Making the market work for us is the goal; waiting for it to get simpler is not an option. Because there’s no reason to accept the current state of affairs, let’s get creative, breach the norms, and transform our environments into something more.
(Tashia Bernardus)