How Millennials Are Hacking Their Homes to Live for Free

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Home hacking is the practice of buying a property with the intention to rent out a portion of it to other people. It’s no secret that housing costs can be one of the most expensive line items in a monthly budget. In fact, statistics show the average amount spent on housing accounts for about 30% of the average married couple’s income.

Some millennials are circumventing this by learning how to “hack their homes” and live for free. Here’s how they do it.

Buy a Home for Cheap and Get Renters

Some millennials are hacking their homes by buying a cheaper piece of property, such as a home in foreclosure. They typically use an FHA loan to complete the sale, then rent out rooms to roommates, charging them enough to pay the entirety of the mortgage. These savvy landlords essentially live for free. 

Millennials really looking to make an extra buck will live in the least desirable room of the home, like the basement ( if it’s up to code) or the smallest bedroom. That way, they can charge their renters a bit more, and lower their own rent (or eliminate it altogether). If you decide to pursue this path and do take on renters, have them sign a legal renter's agreement and put down a deposit to protect yourself and your investment.

Keep in mind this approach doesn’t take into account things like home repairs, house upkeep costs, and utility bills unless you can secure enough rental income to cover the mortgage and expenses.

Why Hacking a Home Is a Real Plan

Sound unrealistic? It can be done. Let’s say you buy a 3- or 4-bedroom house for $200,000 in an up-and-coming neighborhood. Then secure an FHA loan, which requires a down payment of as little as 3.5% of the total purchase price. After taxes and fees, this ends up being roughly $7,000.

Your mortgage, in turn, will be around $1,500 per month. Estimate about $300 a month for upkeep and bills. Let’s say you secure three roommates, and you crash in the smallest room. You’d charge your roommates $600 each, or even charge them on a sliding scale based on the size of their rooms. This would effectively cover the mortgage, bills, and any upkeep. Check with the zoning laws of any community you would consider.

Apart from your $7,000 initial investment, you’ll be living completely rent-free. And you just freed up 30% of your income. Think of what that would do for your ​401(k), your investment portfolio, or your student loan payback options.

Move-In With Mom and Dad

If buying a home isn’t financially realistic for you, there are other house hacks to explore.

Many millennials are moving back with mom and dad to save some extra cash. In 2019, one in five, 22%, of young adults were either staying home or moving back in with their parents. This is the highest number at any point in this century, according to Zillow, which conducted the research, and is an expert in real estate market trends. One big factor is the unaffordability of housing.

While living at your childhood home may not be considered desirable, it can help cut the cost of housing completely and also free up some cash to achieve financial goals more quickly— like paying off debt or saving up for a home down the line. However, when considering this approach, it’s best to have a deadline in mind.

Think Small

Can’t afford to buy a big house? Have you considered a tiny home? The tiny house craze has taken over both HGTV and the internet, and millennials are getting on board. According to recent data, there are approximately 10,000 of these sub-400-square-foot homes in the U.S.—and many are owned by millennials looking to live a debt-free lifestyle.

However, if pursuing a tiny house is the house hack you crave, be sure to keep in mind common obstacles, like how you’ll finance it. Many lenders won’t grant a loan for these tiny dwellings. Tiny homes can cost anywhere from $10,000 to $40,000, so that’s definitely something to keep in mind. Zoning laws may also be an issue, so you may have to work a little harder to figure out where to “park” your tiny house.

Other Housing Hacks to Consider

There are several other “house hacking” options to consider if you are a millennial or anyone looking to significantly lower—or eliminate completely—your monthly housing costs, including:

  • Becoming a pet sitter or long-term house sitter
  • Using Airbnb to rent out extra rooms in your house
  • Bartering or trading skills for free rent
  • Becoming a live-in nanny

The Bottom Line

Research the transferability of your health insurance, and understand the zoning laws and any other rules pertaining to living with people who are not your relatives. Not all towns are alike.