Mortgage Works: House Hacking in Coachella: Your Key to Wealth

December 18, 2023


Have you ever dreamt of house hacking? You know, that clever real estate strategy where your living expenses get a drastic cut? Well, I did. It felt like the day I finally found my grandmother’s secret cookie recipe – exciting and rewarding.

I remember stepping into my first investment property as if it was yesterday; the smell of fresh paint, the echo in empty rooms waiting to be filled with life… And most importantly, realizing this could help cover my mortgage payment.

This isn’t just about buying a home or becoming a landlord though. It’s about creating passive income streams while simultaneously building equity in your own nest.

Get ready, ’cause we’re gonna plunge deep into the realm of house hacking. Before embarking on this journey, it’s important to understand how local zoning laws can affect the feasibility of house hacking for first-time homebuyers. So strap in! We’re on an exciting journey that could totally change your personal finance game.


MortgageWorks offers financing for new home purchases, refinance, home equity, investment property, construction, and a wide variety of loan program options to fit your every need. Servicing the state of California and the entire Coachella Valley, including Palm Springs, Cathedral City, Rancho Mirage, Indian Wells, Palm Desert, Desert Hot Springs, La Quinta, Indio and Coachella. Call Art today @ (760) 883-5700

The Concept of House Hacking

House hacking is a savvy real estate strategy where you get to live for free or at a reduced cost. This happens when the rent from tenants in your multi-unit property covers your mortgage payment and housing expenses.

If executed right, house hacking can be an excellent way to start as a real estate investor while also eliminating one’s largest living expense – housing. Now that’s smart personal finance.

Understanding the Basics of House Hacking

In essence, house hacking involves purchasing a multifamily property (like duplexes or triplexes), living in one unit, and renting out the others. You could also consider single-family homes with accessory dwelling units like finished basements or separate structures on the same plot.

This setup lets you occupy your investment property as an owner-occupant but still earn rental income by leasing out additional dwellings within it.

A great example is investing in properties that include kitchenettes and bathrooms so they can serve as fully independent units generating extra cash each month. For further exploration, Investopedia provides in-depth information about this concept.

Beyond Just Living Expenses: The Benefits Are More

You might ponder why people would go through the effort of attempting to diminish their day-to-day expenses. Well, house hacking offers much more than merely slashing down your monthly bills; It helps cover regular maintenance costs which otherwise are paid out-of-pocket by homeowners without tenants. Moreover, being able to cut down on such hefty payments gives room for saving up short-term funds towards long-term mortgage goals making it easier for first-time homebuyers with limited funds.

As the owner, living on-site provides you with a greater degree of control and oversight for managing your rental units. This gives peace of mind knowing everything is well taken care of without having to rely solely on third-party property managers.

Finding Tenants: Not as Hard as It Seems

Don’t sweat it if the idea of finding tenants seems intimidating. With population growth on the rise and shifts in housing preferences, there’s a growing crowd looking for non-traditional living situations. Therefore, it is becoming more straightforward.

Key Takeaway:

House hacking is a clever way to reduce or eliminate housing costs by living in one unit of your multi-unit property and renting out the rest. Not only does it help cut down on monthly bills, but it also covers maintenance expenses that homeowners without tenants usually foot themselves. Plus, being an on-site owner makes overseeing rental units less stressful. Even finding tenants isn’t as daunting as you might think thanks to changing housing trends.

Advantages of House Hacking for First-Time Homebuyers

For first-time homebuyers, house hacking may seem intimidating; however, it’s an effective way to increase real estate equity and wealth. But trust me, it’s an ingenious strategy that can help build wealth and equity in real estate.

How House Hacking Helps Build Wealth

The concept is simple: buy a property like single-family homes or multifamily properties as your primary residence and rent out parts to cover your mortgage payment. It helps reduce living expenses while letting you invest in real estate with low down payments. MortgageWorks, for instance, offers attractive terms on conventional loans perfect for this strategy.

This approach also builds equity over time. As tenants pay off part of your loan through their rent, they essentially contribute to increasing your net worth – pretty cool right? You don’t just get passive income; you also get an appreciating asset.

Beyond the financial gains from rental income, there are tax advantages too. By taking on tenants, certain outlays connected with upkeep and refurbishment may be tax-deductible.

In essence, house hacking allows you to start small but dream big as a first-time buyer. Think about it – no more stressing over massive housing expenses every month because now someone else is helping foot the bill.

Rental Income – A Passive Stream

Becoming a landlord might seem daunting at first; however, this fear quickly fades when you see how much it reduces living expenses. Living on-site allows close supervision over renters which often results in less damage compared to non-resident landlords. Investopedia even goes so far as to call it “live-in flipping.”

Tax Deductions – Reducing Your Tax Burden

In addition to pocketing some extra money every month via rents received, a huge advantage lies in significant tax benefits accessible only because you are both the resident and owner of the premises. TurboTax mentions that landlords can claim deductions on interest, taxes, insurance, depreciation, and even some professional services.

Mortgage Paydown – Building Equity

Moreover, your tenants are not just giving you a steady income stream. They’re also indirectly boosting your wealth by helping build equity in your property. Each month’s rent payment chips away at your mortgage, leading to an increased ownership stake over time.

Key Takeaway:

House hacking, a savvy real estate strategy, not only offers you shelter but can also help slash your living costs. By renting out units in a multi-family property you own, the rental income could potentially cover your mortgage payment each month. But that’s not all – house hacking allows for significant tax deductions too. Think expenses related to maintenance and improvements on the investment property. And let’s not forget about building equity; every rent payment received is another step towards increased ownership of your property.

Multi-Unit Properties and House Hacking

If you’re into real estate, particularly the house hacking strategy, multi-unit properties should be on your radar. These assets are more than just buildings; they can serve as stepping stones towards financial freedom.

Apart from single-family homes, many seasoned real estate investors find value in multifamily property investments. Why? Well, these units offer an opportunity for multiple streams of passive income while living on-site. Now that’s a win-win.

You might ask how this works. Imagine owning a triplex (that’s three dwelling units under one roof). You live in one unit and rent out the other two. The rental income helps cover your mortgage payment and potentially some extra cash left over each month. This setup significantly reduces your living expenses while giving you first-hand experience managing a rental property.

The Attraction to Multi-Unit Properties

House hacking with multi-unit properties isn’t just about attractive terms or lower housing expense. It also provides an exciting chance to get involved with property management firsthand without being overwhelmed by large-scale operations.

Becoming a landlord may seem daunting at first glance but remember – Rome wasn’t built in a day. Regular maintenance is part of any homeowner’s life anyway – so why not take it up a notch?

Finding Tenants: A Key Aspect

Tenant search is another crucial aspect of investing in multi-unit properties as part of your house hacking strategy. Your ability to keep vacancies low will determine how much you benefit financially from this approach.

MortgageWorks: Your Partner for Success

To successfully implement this plan though, getting finance sorted right at the start is key. MortgageWorks is a trusted homeloan lender that can provide attractive terms on conventional loans or FHA (Federal Housing Administration) loans for your house-hacking venture.

Their team of experienced professionals comprehends the special requirements of real estate investors and presents extended-term loan alternatives to suit those needs. Whether you’re eyeing a duplex, triplex, or larger multifamily property – they’ve got you covered.

Key Takeaway:

Embrace the house-hacking lifestyle with multi-unit properties. These real estate assets are your ticket to financial freedom, offering multiple streams of passive income while you live on-site. But remember, becoming a landlord is a journey – Rome wasn’t built in a day. To get started right, make sure to partner with trusted lenders like MortgageWorks who understand the unique needs of investors.

The Role of FHA Loans in House Hacking

Let’s talk about how Federal Housing Administration (FHA) loans play a pivotal role in house hacking. The idea behind this is simple but powerful – use an FHA loan to purchase a multi-unit property, live in one unit and rent out the others.

FHA loans stand out because they offer attractive terms for aspiring real estate investors. Low down payments of just 3.5%, coupled with lenient credit requirements, make FHA loans an attractive option for those who are beginning their real estate investing journey.

Getting Started with an FHA Loan

To get started with your house hacking journey using an FHA loan, you need to meet some specific criteria set by the Federal Housing Administration. You must plan on living on-site at the investment property for at least a year after purchase – a condition known as owner-occupancy requirement.

Beyond that, while conventional loans may require up to 20% down payment, using an FHA loan allows you to put just 3.5% down if your credit score is over 580 or 10% if it’s between 500-579 – making it easier for people like us who want more bang from their buck.

Finding Your Multi-Unit Property

Now comes finding your ideal multi-unit property. Be sure you’re considering properties ranging from duplexes up to fourplexes – since anything more than that falls under commercial lending standards which don’t qualify for these favorable terms offered by federal housing administration programs.

A key aspect here is working closely with experienced real estate agents who understand the local market and FHA regulations. They can help guide you through the process of finding suitable properties that align with your house hacking strategy.

Key Takeaway:

Unlock the power of FHA loans for house hacking. Buy a multi-unit property, live in one unit, rent out the others. With as little as 3.5% down and flexible credit terms, it’s perfect for first-time real estate investors. Just make sure you meet specific criteria like owner-occupancy requirements and choose properties that align with these favorable terms – duplexes up to fourplexes are ideal.

Property Management in House Hacking

The art of house hacking involves more than just owning a property and renting out parts of it. It requires effective property management skills to ensure your venture thrives.

Becoming an Efficient Property Owner

As a house hacker, you wear the hat of both homeowner and landlord. This dual role demands savvy handling from you as the property owner.

You need to address tenant issues promptly and handle regular maintenance tasks effectively, while also making sure that all legal requirements are met. The key here is striking a balance between keeping your tenants happy and ensuring your investment pays off.

Mitigating Risks with Proactive Measures

Avoiding risks forms another significant part of property management in house hacking. While earning rental income can be rewarding, neglecting responsibilities such as insurance coverage or failing to maintain properties could lead to unforeseen expenses.

Taking proactive measures like conducting routine inspections helps identify potential problems early on so they can be fixed before becoming major headaches later down the line.

Leveraging Professional Help When Needed

Sometimes managing multiple aspects simultaneously may seem overwhelming but remember: You’re not alone. There’s no harm in asking for help when needed.

Hiring professional property managers, although adding an expense line item, could free up time for other pursuits – perhaps even scouting out additional real estate investments.

Finding Balance Between Living and Renting

Living on-site, while also managing a rental property requires tact. Respect the seclusion of your tenant as much as you would anticipate them to respect yours.

You’re sharing space with others but setting clear boundaries is crucial for maintaining harmonious living conditions. Draft lease agreements carefully outlining the dos and don’ts for both parties.

The Importance of Building Good Tenant Relationships

Establishing strong relationships with tenants can be an invaluable asset in house hacking. A positive landlord-tenant relationship can lead to longer tenancies, reducing vacancies that eat into your profits.

Key Takeaway:

House hacking goes beyond simply owning and renting out property. It calls for smart management skills to juggle homeowner and landlord roles effectively. You’ll need to address tenant issues, perform regular maintenance, meet legal requirements, mitigate risks with proactive measures like routine inspections, seek professional help when needed, and balance living with renting while maintaining good relationships with tenants.

The Impact of Zoning Laws on House Hacking

When diving into the world of house hacking, you can’t ignore zoning laws. They dictate what structures are permitted on a property and how they can be used.

Zoning Laws: The Invisible Boundaries

Understanding zoning regulations is essential to successful real estate investing, as they dictate the types and sizes of buildings allowed in certain areas. These rules determine whether your dream multifamily property can become a reality or remain just that—a dream.

Apart from controlling land use, these ordinances also govern the types and sizes of buildings allowed in specific areas. But don’t worry. With due diligence, these invisible boundaries won’t hinder your house hacking strategy.

Permitted Structures and Their Influence on Your Strategy

Your ability to execute an effective house hack often hinges on knowing which structures are permitted by local zoning laws. This is especially important when planning accessory dwelling units (ADUs), popular with hackers looking for additional rental income streams.

If ADUs aren’t allowed in your chosen area or if there are strict size limits—say goodbye to adding that basement apartment or converting the garage into another unit.

Navigating Through Zoning Restrictions

Making sense out of dense legal jargon may seem daunting at first glance but remember—you’re not alone. Reach out to MortgageWorks, where we’ve helped numerous clients navigate through their respective cities’ housing codes successfully.

We have hands-on experience dealing with all sorts of zoning complications—from mixed-use properties combining residential and commercial uses, up to complex cases involving variances—an exception granted by local authorities allowing construction beyond zoning limits.

Turn Zoning Laws into Opportunities

On the flip side, understanding your area’s zoning laws can uncover hidden opportunities. For instance, a single-family zone might allow duplexes or even triplexes under certain conditions. Or perhaps there’s potential to divide an oversized lot into two properties.

The point is—zoning laws aren’t just about restrictions—they also open doors for savvy investors who know how to use them to their advantage.

Key Takeaway:

Mastering Zoning Laws: House hacking success hinges on understanding local zoning laws. They shape what’s possible for your property – from adding rental units to dividing lots. Don’t view them as obstacles but as tools to unlock hidden opportunities in real estate investing.

Look for Part Two of House Hacking here.