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Why Out-of-State Investing Can Accelerate Your Real Estate Goals
While the term “house hacking” might sound modern, the concept is anything but new. Once called “taking in a lodger,” this strategy is simply about earning rental income from part of your personal residence. In today’s high-interest rate environment—with rising property taxes and insurance premiums—house hacking has become one of the most practical and accessible ways to earn passive income from real estate.
What Is House Hacking, and How Can You Do It?
House hacking has evolved far beyond the idea of sharing a bathroom with a roommate. Today, it can take several forms that offer flexibility and financial benefits, depending on your property and local zoning regulations.
- Owner-Occupied Multifamily
Many seasoned investors started by purchasing a duplex, triplex, or fourplex and living in one unit while renting out the others. This allows you to use favorable loan products—such as FHA or 203(k) renovation loans—with low down payments and tax-deductible expenses. Not only can your tenants help pay your mortgage, but the equity you build may allow you to scale into additional investments.
Even big names like Arnold Schwarzenegger got started this way—managing a six-unit building while building his career.
- Basement or Garage Conversions
If your home has an unfinished basement or garage, converting it into a separate rental unit can create an entirely new revenue stream. Cities like New York have relaxed restrictions in response to the housing shortage, making these conversions easier than before—especially when using electric appliances instead of installing gas lines.
- Build an ADU (Accessory Dwelling Unit)
Detached guest houses, garage apartments, or converted sheds—known as ADUs—are gaining popularity across the U.S. as cities embrace density to solve housing affordability. ADUs allow you to offer a fully independent living space while maintaining privacy in your main home.
- Renting by the Room
If you’re open to shared living, renting individual rooms within your home—whether through short-term platforms like Airbnb or directly to long-term tenants—can generate solid returns with minimal initial investment. With local restrictions limiting short-term rentals in many areas, renting by the room has become a popular (and legal) alternative.
How to Rent a Room in Your Home Safely and Smartly
If you plan to rent part of your home, especially to a long-term tenant, it’s important to treat it like a business. Here’s a step-by-step guide to doing it right:
- Know the Law
Familiarize yourself with local landlord-tenant laws. Rules around evictions, lease terms, and tenant rights can vary widely depending on where you live—and even more so if you rent to someone for 30+ days.
- Get the Right Insurance
Standard homeowner’s insurance likely won’t cover a rental scenario. Consider landlord insurance or an endorsement that covers tenant-related issues, such as damage or loss of rental income.
- Prepare the Space
Your rental space should feel like a proper home, not a spare bedroom. Ensure it’s clean, well-furnished, and includes essentials like a desk, TV, dresser, and Wi-Fi access. A locking bedroom door and clearly defined access to shared areas are also must-haves.
- Set a Fair Rental Price
Check local listings to determine market rent. Overpricing a room can lead to vacancies, while underpricing leaves money on the table.
- Screen Tenants Thoroughly
Whether you’re using a platform like Airbnb or handling everything yourself, tenant screening is critical. Look for references, rental history, and run background checks for long-term renters. Remember—you’re sharing your home.
- Market the Listing Like a Pro
High-quality photos, accurate descriptions, and transparent communication about shared spaces and house rules go a long way. Include details about the neighborhood and nearby amenities to help renters make informed decisions.
- Meet in Person (When Possible)
If you’re not using a platform that verifies tenants, meet potential renters in person before finalizing the agreement. Sometimes a brief conversation can reveal red flags that applications miss.
- Customize Your Lease Agreement
Since you’re renting a room—not a full property—use a lease that reflects shared-living dynamics. Clearly define rules for noise, guests, pets, cleaning responsibilities, and how shared utilities are managed.
- Track Income and Expenses
You’re earning money, which means tax implications. Maintain clear records, and consult a tax professional about eligible deductions related to your home’s rental use.
Why House Hacking Makes Sense in 2025
House hacking is arguably the lowest-barrier entry into real estate investing. It lets you leverage what you already own to generate income—often without taking on additional debt. If you’re willing to live with a bit of shared space and manage the process professionally, it can yield steady, low-risk returns.
Whether you want to offset your mortgage, save for your next property, or create financial breathing room, house hacking offers a flexible, effective strategy—especially in a high-cost housing market.
Final Thoughts
You don’t need to buy a separate rental property or manage dozens of units to benefit from real estate. Sometimes, the most profitable move is right under your own roof. With the right approach, house hacking turns your primary residence into a personal asset that works for you—and not just the other way around.
In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“
Why Out-of-State Investing Can Accelerate Your Real Estate Goals
Has the U.S. Housing Market Finally Begun to Thaw After the Pandemic?
It seems like the housing market might be showing signs of life. According to a recent report from Redfin, pending home sales in early October have seen their largest year-over-year rise since 2021, with a 2% increase in the four weeks ending October 6.
This news is likely to be welcomed by real estate investors who have felt the market has offered limited opportunities over the past few years. However, it’s important to take a cautious approach—one promising statistic doesn’t necessarily indicate a broader trend.
Is the Housing Market Truly Recovering?
Let’s explore the different factors at play.
Interest Rate Reductions: A Critical Factor or a Red Herring?
The Redfin report links the surge in pending sales to the Federal Reserve’s much-anticipated rate cut announcement in mid-September. According to Redfin, this announcement prompted buyers to re-enter the market in late September, despite mortgage rates having already been falling for weeks before the cut.
This psychological boost is crucial. Although buyers were aware of the falling rates beforehand, many seemed to be waiting for a formal signal to act. This could be attributed to a lingering fixation on the ultra-low rates of 3% to 4% that buyers enjoyed before 2022.
Any rate cut announcement serves as a nudge for prospective buyers, making them feel that now might be the right time to purchase, even if mortgage rates had been decreasing already. In an unstable mortgage market, such announcements hold significant influence.
However, mortgage rates are just one piece of the puzzle when analyzing housing market performance. As noted by Investopedia, the real estate market is driven by four primary factors: interest rates, demographics, economic conditions, and government policies.
Demographics: Shaping the Market
During the pandemic, demographic shifts had a profound effect on U.S. real estate, with major population movements like the Sunbelt migration fueling booms in cities such as Phoenix and Austin, which later became unaffordable for many.
Age is another key demographic factor, and the millennial generation’s pent-up demand continues to be a driving force behind the rise in home purchases. Despite the challenges of the past few years, millennials who have longed to become homeowners are now entering the market in greater numbers, as more properties become available.
Rising Inventory: A Sign of Stabilization
A key factor contributing to the market’s stabilization is the growth of housing inventory over the last year. The pandemic had a significant impact on the availability of homes, with sellers hesitant to list properties due to COVID-19 restrictions and, later, higher mortgage rates.
Some homeowners, particularly those upgrading to larger homes, found it financially challenging to sell and take on higher mortgages. Others, however, simply chose to wait for a more favorable market.
Although the latest Realtor.com report shows that inventory remains down by 23.2% compared to pre-pandemic levels, we are seeing an upward trend. For instance, new listings have been rising since last year, with a 5.7% year-over-year increase for the four weeks ending October 6.
As of September 2024, some states have even surpassed their pre-pandemic inventory levels, including Tennessee, Texas, and Idaho, with others, like Washington, close behind.
Vulnerabilities in Certain Regions
However, not all regions are showing positive signs. For example, some areas, particularly those affected by extreme weather, have seen inventory spikes not because of market recovery, but due to homeowners trying to offload damaged properties they can’t afford to repair.
For instance, regions like Florida and North Carolina, hit by hurricanes, have experienced increases in home listings, but these may reflect a response to climate-related challenges rather than market health.
Opportunities for Investors
Investors should be discerning when choosing markets, focusing on regions where inventory is growing due to increased home construction rather than climate-related distress. States like Idaho, Utah, North Carolina, and Texas, which are building new homes, offer potential, though caution is needed in areas prone to natural disasters.
The Midwest and Northeast, meanwhile, still face significant challenges in recovering to normal market conditions. These regions have lower rates of new construction, meaning inventory remains scarce, which could present both opportunities and difficulties for investors.
The Bottom Line
The U.S. housing market is showing signs of recovery, but the situation remains complex and varies by region. Interest rates play an essential role in unlocking the market, but investors should also consider other critical factors, such as homebuilding trends, climate risks, and government policies. While the market is heading in the right direction, it’s crucial to examine regional differences carefully before making investment decisions.
In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“