Real Estate Investing:
Four Approaches to 'House Hacking' in the Fargo Moorhead real estate market

Ever feel like spending three hours on the phone with an excited, passionate person?  Call up Christopher Leigh at Team Vision Realty and ask about ‘house hacking’ and buckle up!  This innovative approach allows individuals to live in their investment property while simultaneously generating income to offset mortgage payments and expenses. House hacking represents one of the most accessible paths to building wealth through real estate, particularly for those just starting their investment journey.  It’s also an AWESOME teacher; a way to learn about real estate, investing, and all the things by actually doing them with lower risks.

Let's explore four effective house hacking strategies that can help you break into real estate investing with minimal financial strain.

1. The Classic Multi-Unit Approach

The traditional and perhaps most straightforward house hacking method involves purchasing a small multi-family property (2-4 units) and living in one unit while renting out the others.  If you know us and invite us to your child’s graduation party, this is the approach you can expect Christopher to write about in the grad card 😆  And, yes, it’s been so fun to see young people take this on and prosper!

How It Works:

• Purchase a duplex, triplex, or fourplex using a residential mortgage loan
• Occupy one unit as your primary residence
• Rent the remaining units to tenants
• Use rental income to cover a significant portion (or all) of your mortgage payment

Key Benefits:

• Residential financing options (like FHA loans with 3.5% down) are available when you live in one unit
• Creates immediate cash flow while building equity
• Provides hands-on landlord experience
• Often eliminates your housing expense entirely if rental income exceeds mortgage payments

Practical Example:
You purchase a $400,000 triplex with an FHA loan, putting down $14,000 (3.5%) by the Moorhead State University and Concordia neighborhoods.  You live in one unit and rent the other two for $1,200 each, generating $2,400 monthly. With a mortgage payment of approximately $2,200 (including taxes and insurance), you effectively live for free while pocketing $200 monthly.

2. The Roommate Strategy

For those who prefer single-family homes or cannot afford multi-unit properties, the roommate approach offers an excellent alternative house hacking method.  We’ve even had a client pursue this option with a new build out in Horace, so there are many housing options that suit the roommate method (condo, apartment, etc.).  We’ve seen families do this after their child’s first year of college when they have established relationships with other students they want to room with.  We’ve also had clients in healthcare be really successful with this strategy, focusing on interns at the various hospitals in the area and traveling nurses!

How It Works:

• Purchase a single-family home with extra bedrooms
• Live in one bedroom while renting the others to roommates
• Collect enough rent to cover a substantial portion of your mortgage

Key Benefits:

• Works with traditional single-family homes in any neighborhood
• Requires less capital than multi-unit properties
• Can be implemented in areas where multi-family properties are scarce
• Allows for greater flexibility as your living situation changes

Practical Example:
You purchase a $350,000 four-bedroom home. You occupy the master bedroom and rent the other three bedrooms for $700 each, generating $2,100 monthly. With a mortgage payment of $2,000, your personal housing cost is effectively reduced to just $100 per month (plus the benefit of building equity).

3. The ADU or Basement Conversion Strategy

This increasingly popular approach involves creating a separate living space within or adjacent to your primary residence.  We recently helped a couple purchase an ADU property up by NDSU.  They wanted their own place to stay when they come into town to visit their children and grandchildren, but wanted to turn it into an investment and path to retirement income.  They built out the apartment in the basement and rented the 3 bedrooms upstairs to students.

How It Works:

• Purchase a property with unused space suitable for conversion (basement, garage, etc.)
• Convert this space into an Accessory Dwelling Unit (ADU) or separate apartment
• Rent out this space while living in the main portion of the home
• Alternatively, live in the smaller converted space and rent out the larger main area

Key Benefits:

• Maintains more personal privacy than the roommate approach
• Often permitted in areas where multi-family homes are restricted
• Can significantly increase property value while generating income
• Provides flexibility to adjust your living arrangement as needed

Practical Example:
You purchase a $375,000 home with an unfinished basement. You invest $25,000 to convert the basement into a legal one-bedroom apartment, which you then rent for $1,200 monthly. Your mortgage is $2,100, effectively reducing your housing cost to $900 while adding significant value to your property.

4. The Short-Term Rental Approach

The rise of platforms like Airbnb and VRBO has created new opportunities for house hackers to generate even higher returns through short-term rentals.  As mentioned earlier, this can be exceptionally useful in the Fargo-Moorhead area with the large presence of Sanford and Essentia and all of the interns and travelling professionals they have coming through, not to mention patients and their families staying in the area while they receive treatment.  When Cris was in the hospital we met several families taking advantage of this option in that Veteran’s Square neighborhood.  We have one client now flipping a house to offer Airbnb services in the Broadway Essentia Clinic area.

How It Works:

• Purchase a property in a location attractive to travelers
• Live in part of the home while renting other portions on a short-term basis
• Alternatively, rent your entire home during peak periods while staying elsewhere temporarily

Key Benefits:

• Often generates significantly higher income than traditional long-term rentals
• Provides flexibility to use the entire space when needed
• Allows you to capitalize on seasonal demand in certain markets
• Creates opportunities to meet interesting people from around the world

Practical Example:
You purchase a $425,000 three-bedroom home in the Sanford North (Broadway) area. You live in the master bedroom and rent the other two bedrooms on Airbnb for an average of $100 per night with 65% occupancy. This generates approximately $3,900 monthly, far exceeding your $2,300 mortgage payment and creating $1,600 in positive cash flow.

Getting Started With House Hacking

To successfully implement any house hacking strategy, consider these important steps:

1. Assess your comfort level with sharing space and landlord responsibilities
2. Research local regulations regarding rentals, especially short-term rentals and ADUs
3. Analyze potential properties with house hacking specifically in mind
4. Explore financing options designed for owner-occupied investment properties
5. Calculate all expenses beyond the mortgage (maintenance, utilities, vacancies, etc.)
6. Consider exit strategies for transitioning the property to a full rental or selling it

Conclusion

House hacking represents one of the most powerful strategies for breaking into real estate investing while minimizing risk and financial strain. You can accelerate your savings rate, build equity, and gain invaluable real estate experience simultaneously.

The Vision Realty Team can help you with all of these considerations and nil down exactly what your goals are, matching you with the right property for your VISION!   With proper planning and execution, this strategy can serve as the first step in building a substantial real estate portfolio and achieving financial independence.

Remember that the most successful house hackers start with thorough research and realistic expectations. If you’re interested in learning more, or just getting someone on the phone who will be absolutely jacked that you're thinking about house hacking, call Christopher Leigh or reach out using the “Contact Vision Realty in Fargo-Moorhead” form below!