Arantza Pena Popo/Insider
Late last year, Kelly Clark was flush with cash from a divorce settlement and eager to embark on a new career. It was finally time, she decided, to become a landlord.
Clark, who worked in computer sales and interior design before leaving the workforce to raise her children, had come across the term "house hacking" while scrolling through BiggerPockets, a real-estate-investing website. In forums and webinars, investors sang the praises of buying up a house or small multiunit building, living in part of the home, and renting out the rest to tenants who cover the mortgage payments each month. Her then-husband scoffed at the notion of taking on roommates and sacrificing their hard-earned privacy. Despite his protests, Clark found the idea tantalizing. After all, who wouldn't want to live pretty much for free?
At the age of 56, Clark got her chance. In January, she bought a modest four-unit apartment building in Spokane, Washington, for $399,000. With a loan insured by the Federal Housing Administration, she put down just 3.5% of that sticker price, or roughly $14,000, and poured another $100,000 of her savings into renovating the century-old property. She lives in one of the units and plans to rent out the other three at prices that will more than cover her $2,800 monthly mortgage payment. The terms of her loan require that she live at the property for at least a year, but Clark said she hoped to eventually refinance the property and apply the same strategy to additional investments. Recently, she got a letter from her insurance company informing her that the building was valued at more than $800,000.
"I would love to spend my entire life house hacking," Clark, who now helps other investors find and manage properties, told me.
While live-in landlords are far from a novel concept, the pandemic-era fever around passive income and real-estate investing has sparked a rise in the popularity of house hacking. TikTok influencers and real-estate gurus quickly picked up on this fervor. Using flashy, emoji-laden graphics and buzzwords like "living for free" or "the simplest way to become a millionaire," they brandish house hacking as a no-brainer for those looking to make money in real estate and get their foot in the door of today's brutal housing market. The approach isn't limited to those with rich parents or lucrative jobs: With the aid of government-backed loans that require smaller down payments, they say, pretty much anyone can hack their way to wealth.
The reality, of course, is more complicated than that. Hackers take on large amounts of debt to fund their purchases, which could pose a risk if home prices fall. Aside from typical roommate issues — clean the dishes in the sink, anyone? — house hackers need to brace themselves for the possibility that they'll have trouble finding tenants, or end up with renters who damage the property or don't pay on time. And then there's the backlash against the very idea: Online commenters have accused house hackers of exploiting their tenants.
Silicon Valley "trailblazers" are fond of rediscovering businesses that already exist — from buses and offices to dorms and juices — and selling them at a fat markup. In that sense, the use of house hacking can be viewed as just a thinly veiled attempt to rebrand and sanitize the idea of a "landlord," conjuring images of tech-enabled progress, rather than the balding guy down the hall who picks up your rent check each month. The great innovation of house hacking is just a flashy repackaging of an age-old idea for a new crop of investors — namely, millennials and Gen Zers. But even if the methods aren't exactly original, the broad adoption of the terminology shows how pretty much everyone is searching for an edge in today's cutthroat housing market
'Hack' your way to wealth
Brandon Turner, an influential figurehead of BiggerPockets, kicked off the house-hacking craze in 2013 with a blog post titled, "How to 'hack' your housing and get paid to live for free." The post outlined a simple way for anyone — well, at least those with "decent credit, a stable job, and a small amount of savings" — to free themselves from the shackles of renting and start building wealth through real estate. The key, Turner wrote, was to purchase a small multifamily property such as a duplex, triplex, or four-plex, live in one of the units, and rent out the others for more than the monthly mortgage payment.
"This is much more than simple tricks or ideas to shave five minutes off your workday," Turner, who left the company last year to focus on his own investment firm, wrote. "This is epic, life-changing stuff."
The post became hugely influential, inspiring thousands of copycats who iterated on the idea. While Turner's initial strategy emphasized small multifamily buildings, some house hackers applied the concept to single-family homes. Ryan Lehman, a 25-year-old software engineer and real-estate investor in Seattle, told me he got his start by reading books, talking to investors, and, of course, spending time on BiggerPockets. Lehman said he was drawn to Turner, who didn't grow up around the real-estate business and rose to fame by touting a simple approach to investing that focused on achieving financial freedom.
"I was like, 'If Brandon can do this, I can probably do it,'" Lehman told me.
In August 2020, Lehman arrived in Seattle and briefly rented a room from a couple of house hackers who offered to show him how they managed various aspects of being a landlord, including maintenance and rent collection. A few months later, he bought a five-bedroom home for $620,000, putting down 5% of the purchase price with savings from internships and earnings from the stock market. It was a challenge to find tenants at first, he said, but by sacrificing some privacy, he was able to cover his expenses each month — without pulling from his own pocket.
"I basically bought my house, and then everything started by kind of going crazy as far as house prices and stuff like that," Lehman told me. "There's some skill I guess, just from learning and making sure I'm not doing anything crazy. But there's so much luck involved."
Another key component of house hacking is the use of low-down-payment loans from the Federal Housing Administration. Unlike loans for investment properties, which typically require the buyer to put down at least 15% of the purchase price, these loans offer buyers with lower credit scores or income the opportunity to put down as little as 3.5%. The catch with these loans is that you need to stay at the property for at least a year. But even that isn't much of an obstacle for those looking to build a miniempire of real estate.
There's some skill I guess, just from learning and making sure I'm not doing anything crazy. But there's so much luck involved.
After buying his first house at 24, Craig Curelop, a former employee of BiggerPockets who's now a Realtor focused on helping investors, told me that he began moving into a new property every 12 months "like clockwork," taking on a new loan each time and refinancing other properties in his growing portfolio. In 2019, he published a book called "The House Hacking Strategy: How to Use Your Home to Achieve Financial Freedom."
"With mortgage payments high and rent so high and all of that, how do you get ahead in this world where wages aren't rising but costs are?" Curelop said. "There's all of this 'Woe is me' talk, but then there's a handful of people that are actually doing something about it. And I think house hacking is one obvious way to eliminate, or at least drastically reduce, what likely is your largest expense."
Selling the dream
You'd be forgiven for thinking that all this sounds sort of ho-hum — a mere refresh of the ancient idea of owning and renting out property. In fact, a huge swath of landlords in the US could fall under the "house hacker" umbrella: Of the roughly 49.5 million rental units in the US, about 46% are on small rental properties with between one and four units, according to the US Census Bureau. About 70% of those small rental properties, or about 15.9 million, are owned by individual investors.
But online influencers have worked hard to make the idea seem groundbreaking and alluring to young investors and people who are sick of their 9-to-5 jobs. TikTok is full of videos that break down the strategy, often in effusive terms that sell the idea of "living for free" or never having to pay rent again.
"Wait, you're my landlord?" the personal-finance influencer Addison Jarman, playing the role of an astonished renter, asks in one TikTok post.
"Yeah, it's called 'house hacking," the owner and roommate, also played by Jarman, who has 4 million followers, replies. "I make $1,900 off y'all paying rent each month."
YouTube will definitely make it seem very easy
Recently, some property owners and real-estate influencers have even insisted upon doing away with the term "landlord" altogether and replacing it with euphemisms like "housing provider." The term "house hacker" offers a similar shield: If you own a house and are renting out a couple of rooms to friends who cover your mortgage, it may sound kinder than calling yourself their landlord.
"The term 'landlord' is archaic, offensive, and divisive," Jay Parsons, the head of economics for RealPage, a real-estate-software company, tweeted in November 2021. "And it's used more by reporters/policymakers than it is used in real life everywhere but in a few big coastal cities like NYC and SF."
John Liang, a YouTuber and TikToker who shares tips on credit cards, personal finance, and real estate to an audience of more than 2.3 million TikTok followers, said house hacking represented "one of the more accessible ways" for people to jump into the housing market. The ability to finance nearly 97% of the purchase opens the door to buyers who don't have huge piles of savings, he said. And the strategy solves several problems at once: the questions of where you'll lay your head at night, how you'll pay for it, and how you'll build wealth. In May, Liang posted a TikTok video in which he acted out a scenario between a house hacker and a pair of tenants whose rent payments exceeded the monthly mortgage expense.
"Wait, so we're buying you this house?" one renter asks.
"Technically, you're paying me to buy this house," Liang's landlord persona replies.
The hacking haters
In the comments sections of several flashy TikTok posts on house hacking, some people pushed back, proposing harsher substitutes for the term, including "leech" and "parasite." The complaints either revolved around the duplicity of posing as a roommate when you're really the landlord or the very act of using someone else's monthly payments to cover the expenses of a property — again, not a new concept.
In day-to-day life, some house hackers seek to avoid sticky situations by concealing that they're the owner of the house, hiring property managers to handle things such as rent collections, cleaning and maintenance, and, in the worst-case scenario, evictions. The hacker might then pose as just another tenant, or an associate of the management company. Curelop, who told me he's aware of this practice, said he's "very against it."
"I think lying in any capacity is just wrong and shouldn't be done," Curelop said. "My suggestion is always to not flaunt that you own the place. If a tenant asks, don't lie. But you don't need to tell them if they don't ask. It's not really an important detail."
For his part, Liang, who now owns three multifamily properties, said he had no problem with the term "landlord." "I understand, definitely, some of the resentment toward landlords over the past couple of years," Liang said. Curelop called the online backlash "unfortunate," making the case that "anyone can do this."
While house hacking is often more accessible than other forms of real-estate investing, the videos used to sell people on it tend to gloss over the very real risks of buying up property — risks that both Liang and Curelop made sure to point out when I spoke with them.
"YouTube will definitely make it seem very easy," Liang said.
Curelop said he emphasized to clients the importance of tenant screening to make sure they ended up with renters who would be considerate and prompt on payments. House hackers should also be prepared to front the entire mortgage payment if their roommate arrangement doesn't work out the way they'd hoped, although Curelop told me hackers are usually able to offset at least some of their mortgage by collecting rents, even if they have to lower prices. Plus, there are macroeconomic factors to consider: Rising home prices have made it tougher to find good deals, while the rental market has softened from its COVID-19-era peak. Even Turner, the original house-hacking evangelist, told Insider in 2021 that the rental market had shifted from "something you can do as a mediocre investor to something you need to be an expert at."
"In 2012, any property you bought would make money as a rental," Turner told Insider's Daniel Geiger. "Today if you take a random property, it will lose money."
The benefit with house hacking, as opposed to a regular investment property, is that it doesn't have to turn a profit for it to be considered worthwhile. If you're able to defray your housing costs at all, you may chalk that up as a win.
At the end of the day, no matter the semantics, house hackers can't fully insulate themselves from the sometimes messy realities of being a landlord. When I first spoke with Clark, the house hacker in Spokane, she was renovating one of her units and had another that'd been sitting on the market for three weeks — way longer than she'd wanted. She dropped the price and eventually found a tenant, but acknowledged that the rental market has cooled off from its heyday in spring 2022. Regardless, Clark told me, she'll be fine with the income she anticipates will one day materialize. And the temporary struggles haven't dimmed her view of house hacking.
"I totally love it," Clark told me. "I would love to do it for as long as I can."
James Rodriguez is a senior reporter on Insider's Discourse team.