Question of the week:

Is my house hacking idea a good one?

Hi,

 

I’m currently renting and I know I need a place to live. I’ve very minimalist and was thinking of purchasing a 3 bedroom and renting out the two other rooms. I make more than enough to cover expenses if the rooms aren’t rented out as the mortgage would be less than 33% of my post tax income. My plan is to do this for a few years and then change my primary residence and do it all over again.

 

I have two options while staying there, my portion of paying the bill would be around $1000. That would leave me with $5000 in additional income to save after necessities.

 

Would you recommend aggressively paying off the loan, investing some, or a mix of both. I don’t want to be too imbalanced however the I understand Canada is the fastest growing developed country by population (3% growth yearly with a target of 100 Million by 2100) and I know for a fact demand will continue to rise in the long run.

 

Any Thoughts?

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Nick's Response

House hacking can be a great way to get ahead financially on home ownership, and build equity that you can choose to move forward into more of a “forever home,” investment property or simply to have more financial flexibility.
 
It can be a bit of a pain having roommates as an adult, since you’re all in each others’ shared space and you may be beyond that emotionally if you’ve lived alone for a while. On the other hand, if you get great roommates it can be excellent. If a duplex, or even a triplex, is within your budget that might be one way of having the best of both worlds, since you can live in one section, have a portion of your costs covered while having your own space.
 
As far as what you should do with the extra cash each month, this depends entirely upon your level of risk aversion. The ceiling for gains is higher with investment, but the floor is also much lower, depending upon where you put your money. Paying back your mortgage aggressively not only saves you interest paid over the life of the loan, but it also shortens the life of the loan and insulates you from upward interest rate fluctuations.
 
You’re right that housing will continue to be in demand for the foreseeable future in Canada as the population increases, so from a financial perspective the move to home ownership seems to be a good one for you in your current situation.
 
Source: I’m a Realtor in Ottawa, Ontario.

3 excellent resources if you’re considering house hacking

1

Bigger Pockets Podcast and Online Forum offer market-tested advice and a chance to connect with investors in a supportive community.

2

Government and Financial Institution Resources: In Canada, resources from the Canada Mortgage and Housing Corporation (CMHC) and various banks can provide insights into financing options, regulations, and other important considerations.

3

Online Courses: There are online courses and webinars that offer structured learning about real estate investment. Platforms like Udemy, Coursera and even some universities provide such courses.

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