House Hack Your Way to Homeownership

"What if your next home came with built-in income? Discover how living in one unit and renting out the others could slash your housing costs and build your wealth at the same time."

When most people think about buying a home, they picture a single-family house. But there's another option that could make homeownership more affordable and help you build wealth faster, buying a small multi-unit property.

FHA, VA, and conventional lenders allow qualified buyers to purchase up to a four-unit property if they live in one of the units. That means you could buy a duplex, triplex, or fourplex, move into one unit, and rent out the others. The rental income from your tenants can help offset your monthly mortgage payment, often making your housing cost less than if you bought a single-family home.

This can be a game-changer because of:

• Lower monthly cost: Rental income helps cover your mortgage, taxes, and insurance.
• Forced savings: Part of every payment reduces your loan balance (amortization).
• Rising values: If the property appreciates over time, you build equity on the entire building, not just your unit.
• Future investment potential: You could eventually buy another owner-occupied multi-unit property and keep the first one as a full-time rental. Over time, this can grow into a valuable real estate portfolio.
• Flexibility: Later, you might choose to tap into your equity to purchase a single-family home while keeping your rental properties as income-producing assets.

Not every neighborhood has multi-unit properties for sale, so you may need to broaden your search. And while you don't have to be a professional landlord to start, you should be comfortable with the idea of managing tenants or hiring a property manager.

If you're open to living in one unit and renting out the rest, this strategy, often called "house hacking, can be a smart way to make homeownership more affordable and build wealth at the same time.

Example: How Rental Income Can Lower Your Housing Cost

Let's say you buy a duplex for $450,000 using an FHA loan with 3.5% down.

• Your monthly mortgage payment (including taxes & insurance) might be around $4,287.
• If you can rent one unit for $2,500.
• Your out-of-pocket cost is $1,800 a month to own the property and live in one side.

Instead of paying full price for a single-family home, your tenants help pay the bulk of the bill while you're building equity and benefiting from appreciation on the entire property.  Tax advantages to the rental unit includes deducting maintenance and depreciation.

(Numbers are for illustration only; actual costs and rents will vary by property, location, and market conditions.)

If you'd like to explore multi-unit properties in our area and see how the numbers might work for you, let's talk!  You can also download our Rental Income Properties.

Delay Gratification Now for greater Rewards Later

There's a classic example used in behavioral psychology: the marshmallow test. In this experiment, children were given a choice: eat one marshmallow now, or wait a little while and get two. The lesson? Those who could delay gratification tended to experience greater success later in life.

That same principle applies beautifully to homeownership.

If your ultimate goal is to one day have your home completely paid off, the question becomes: are you willing to make small sacrifices now so you can reap bigger rewards later? Or will you choose comfort and consumption today and carry the financial burden of a mortgage into your retirement years?

Making regular additional principal payments on your mortgage is one of the smartest forms of delayed gratification. It's not glamorous. It means driving the same car a little longer, skipping that expensive vacation, or resisting the urge to upgrade your lifestyle with every raise. But those steady, disciplined extra payments�say $100 to $200 each month�can shorten your loan by years and save you tens of thousands of dollars in interest.

More importantly, it puts you on track to own your home outright.

Imagine reaching retirement without a house payment. Your monthly expenses drop dramatically, giving you more flexibility and freedom. You may not need as much in retirement savings. You could choose to work less, travel more, or simply breathe easier knowing that no one can take your home from you.

On the flip side, choosing not to delay gratification, maxing out your lifestyle, refinancing to take cash out, or simply making minimum payments, can mean carrying a mortgage into your 60s or 70s. When many people want to slow down and enjoy the fruits of their labor, they're still stuck paying for yesterday's choices.

The marshmallow test isn't just about kids and candy. It's about life and how we make financial decisions. A little patience now, a little extra toward your mortgage each month, can lead to a lifetime of reward.

So, ask yourself: will you wait for two marshmallows later? Or settle for just one now? The path to a paid-for home starts with the power of delayed gratification.  Use our Equity Accelerator calculator to make projections to pay your home off sooner.

The Hidden Tax Trap Costing Homeowners Thousands

Through a 28-year lens, tax policies on home sales haven't kept pace with rising home values. That's putting homeowners in a bind and stifling real estate opportunities across the board.

Since 1997, the capital gains exclusion on the sale of a primary residence has remained unchanged at $250,000 for individuals and $500,000 for married couples. Back then, the average U.S. home cost about $145,000. Today, that same home sells for around $422,600, up a staggering 191%. But the tax break hasn't budged, squeezing homeowners who have earned significant appreciation over decades.

Housing economists refer to this as the "Stay-Put Penalty" since tax-free profit has a capped limit, many homeowners are discouraged from selling, even after years of significant appreciation. Research shows that 34% of homeowners (about 29 million people) have already surpassed the $250,000 single-filer threshold, and over 10% have exceeded the $500,000 joint-filer cap according to a recent NAR study. That means the longer you stay, the more you're likely to owe tax on more than the exclusion, penalizing success and freezing inventory.

In high-cost states like California and Massachusetts, this trend is even more extreme: by 2035, over 40% of homeowners in 20 states could be hit with capital gains taxes simply for having built wealth.

With long-term homeowners locked in place, there's a ripple effect throughout the market. Inventory thins, competition heats up, and prices climb, locking out first-time buyers and families hoping to upgrade.

Meanwhile, a 2024 Gallup poll underscores real estate's strength: Americans ranked property as the best long-term investment, ahead of stocks, gold, and bonds, for the 11th consecutive year. It's a powerful signal: even with tax limits, Americans still trust real estate's enduring value.

The National Association of REALTORS� is backing the bipartisan More Homes on the Market Act, aiming to:

• Double the exclusion to $500,000 for individuals and $1 million for married couples
• Index it to inflation
• Encourage more homeowners to sell without tax penalties

Homeownership should be a pathway to wealth, not a locked door. Letting equity accumulate only to tax it away runs counter to the American dream. Updating these tax rules would unlock much-needed housing stock, empower older homeowners, and open doors for younger families.

It's time for a tax code that rewards, not restricts, the promise of homeownership.

For more information, download our Homeowners Tax Guide and IRS Publication #523.

 

What and Why Contingencies Matter

When a home goes under contract, many assume it's a done deal, but in reality, most real estate contracts include contingencies, or conditions that must be met for the sale to proceed. These clauses are designed to protect both buyers and sellers and offer a legal way to exit the agreement if something doesn't go as planned.

One of the most common contingencies is the home inspection contingency. This allows the buyer to have the property professionally inspected after the offer is accepted. If the inspection uncovers serious issues, such as foundation problems, roof damage, or plumbing concerns, the buyer has the right to negotiate repairs, ask for a price reduction, or even walk away from the deal without losing their earnest money.

Another widely used contingency is the financing contingency, also known as a mortgage contingency. This protects the buyer in case their loan application is denied or the terms change in a way that makes financing impossible. For example, if a buyer loses their job before closing and can no longer qualify for a mortgage, this contingency allows them to cancel the contract without financial penalty.

A third key contingency is the appraisal contingency, which comes into play when a lender requires an appraisal to determine the home's value. If the appraisal comes in lower than the agreed-upon purchase price, the buyer can renegotiate the deal or cancel it. This protects buyers from overpaying for a property and helps avoid problems with financing shortfalls.

Many buyers who already own a home may include a home sale contingency, which gives them a window of time to sell their current property before being obligated to purchase a new one. If their existing home doesn't sell within the agreed timeframe, they can exit the deal on the new home without penalty.

Buyers are also protected by title contingencies, which allow time for a title search to ensure the seller has clear ownership of the property. If issues like unpaid liens or unresolved disputes are discovered, the buyer can cancel the contract if they aren't resolved before closing.

For homes in a community governed by a homeowners association (HOA), buyers often include an HOA document review contingency. This gives them time to review the rules, financials, and bylaws. If they find something that doesn't align with their needs, like restrictions on short-term rentals or upcoming fee increases, they can opt out of the contract during the review period.

Understanding how these contingencies work, and how they protect your interests, is an important part of any real estate transaction. They create flexibility and safety nets that allow both buyers and sellers to move forward confidently. If you're unsure how contingencies apply to your situation, it's always wise to consult a real estate agent or attorney who can walk you through the process and ensure your rights are protected.

For more information, download our Sellers Guide.

Smart Homeowner Tips

1. Take Advantage of Homeowner Tax Benefits

• Mortgage Interest Deduction: Deduct interest on up to $750,000 of acquisition debt (for loans after 2017).
• Property Tax Deduction: Deduct up to $10,000 in combined state and local taxes (SALT).
• Capital Gains Exclusion: Exclude up to $250,000 ($500,000 for married couples) in profit when selling a primary residence, if ownership and use tests are met.
• Energy-Efficient Home Credits: Federal tax credits available for solar, heat pumps, insulation, windows, and more.

2. Lower Your Monthly Housing Costs

• Refinance When Rates Drop: Consider refinancing your mortgage to reduce your interest rate and monthly payment.
• Appeal Property Tax Assessments: If your home's assessed value is too high, appeal to potentially lower your annual property taxes.
• Bundle Insurance Policies: Save by combining home and auto insurance with the same provider.
• Shop for Home Insurance Annually: Rates and coverage vary�review and compare policies regularly.

3. Reduce Utility Bills

• Conduct a Home Energy Audit: Identify leaks, insulation gaps, and inefficient systems to cut energy waste.
• Upgrade to Smart Thermostats: Save on heating and cooling with programmable or learning thermostats.
• Switch to LED Lighting: Longer life, lower power consumption.
• Seal Windows and Doors: Prevent drafts and reduce heating/cooling loss.

4. Maintain and Protect Your Investment

• Regular Maintenance: Prevent costly repairs with scheduled inspections (HVAC, roof, plumbing, etc.).
• Document Home Improvements: Keep receipts to add to your cost basis for tax purposes when selling.
• Check for Hidden Water Leaks: Early detection prevents mold and expensive damage.

5. Use Your Home for Additional Income

• Rent Out a Room or ADU (Accessory Dwelling Unit): Generate passive income.
• Host Short-Term Rentals (where legal): Use platforms like Airbnb to offset mortgage costs.
• Deduct Home Office Expenses: If you qualify, write off a portion of your home-related costs for business use.

6. Plan for Aging in Place

• Invest in Accessibility Features: Lever-style handles, wider doorways, or a main-floor bedroom can improve safety and long-term livability.
• Consider Reverse Mortgages: For older homeowners with substantial equity, this can provide supplemental income.

7. Improve Enjoyment and Resale Value

• Enhance Outdoor Living Spaces: Patios, landscaping, and lighting can boost both daily enjoyment and curb appeal.
• Renovate Smartly: Kitchen and bath updates often offer strong returns.
• Paint and Refresh: A fresh coat of paint is one of the most cost-effective upgrades.

Are expiration dates necessary in offers?

In real estate negotiations, it's not uncommon for both buyers or sellers to include expiration dates on offers and counteroffers. These deadlines serve several important purposes that help keep the process efficient, transparent, and fair to both sides.

First and foremost, expiration dates create urgency. They encourage the other party to respond within a specific timeframe rather than leaving the offer open-ended. Without a clear deadline, one side could be left waiting indefinitely, which can cause unnecessary delays or lost opportunities.

Expiration dates also prevent stale offers from being accepted later. Real estate markets move quickly, and a buyer or seller's circumstances can change rapidly. A buyer who submits an offer today may no longer be in a position to move forward a week later. The expiration ensures that all terms are current and that both parties are negotiating in real time.

From a strategic standpoint, expiration dates help maintain leverage. For example, a seller may give a buyer only 12 or 24 hours to respond to a counteroffer, encouraging them to make a prompt decision rather than shopping around or stalling. It keeps negotiations focused and moving forward.

Another key reason to include expiration dates is to limit exposure and manage commitment. In competitive markets, buyers may be considering multiple homes, and sellers may receive several offers. A defined expiration helps all parties manage timelines and make informed choices.

It's also important to understand that any offer or counteroffer can be withdrawn at any time before it's accepted, even if the expiration time hasn't been reached. However, that withdrawal must be done in the same manner as the offer was made, ideally in writing, to ensure clear communication and avoid legal confusion.

For sellers, it's critical to manage counteroffers carefully. If you have an active counteroffer with one buyer, you should withdraw that counteroffer in writing before accepting a new offer from someone else. Failing to do so could put you in a position where two different buyers believe they have accepted contracts, creating a potential legal conflict.

In short, expiration dates help clarify intentions, reduce risk, and keep negotiations on track. And understanding how to properly withdraw an offer or counteroffer is just as important. If you're unsure about the timing or the process, always consult with your real estate agent or an attorney to ensure your rights are protected and the deal moves forward smoothly.

Understanding Normal Settling vs. Foundation Problems

Every home experiences some degree of movement over time, often called settling. It's a natural part of the aging process for any structure, especially in areas with varying soil conditions, temperature swings, or after the first few years of construction. While minor signs of settling are usually no cause for alarm, some changes can hint at serious foundation issues that deserve immediate attention.

Knowing the difference between normal settling and foundation trouble can save homeowners and buyers from costly surprises and protect the value of the property.

Common Signs of Normal Settling

Minor cracks or imperfections often develop as homes adjust to their environment. These signs are usually cosmetic and not indicative of major structural problems:

• Small, hairline cracks in drywall, particularly around windows, doors, and at the corners of rooms.
• Doors or interior windows that stick slightly during humid months but operate normally as seasons change.
• Tiny gaps between moldings and ceilings or walls, which may appear as wood and drywall expand and contract.
• Fine surface cracks in concrete patios, driveways, or garage floors, usually caused by normal shrinkage over time.

If these issues appear but don't worsen significantly, they are typically part of a home's normal life cycle. Regular monitoring is recommended to ensure they don't develop into bigger problems.

Warning Signs of Foundation Problems

In contrast, some signs point to more serious issues that may threaten the structural integrity of the home:

• Cracks larger than 1/4 inch wide, especially if they appear in stair-step patterns along brick or block walls.
• Horizontal cracks across foundation walls or basement floors, which may suggest pressure from soil or water.
• Noticeable sloping or uneven floors, where rolling objects don't stay put or walking feels tilted.
• Persistent sticking of doors and windows, along with visible gaps around the frames even after seasonal changes.
• Separation between walls and ceilings or walls and floors, creating visible gaps.
• Detached cabinets or countertops pulling away from walls.
• Water intrusion in basements or crawl spaces, possibly from foundation movement allowing moisture to seep inside.
• Visible bowing or bulging of foundation walls from the outside.

These red flags should never be ignored. If you notice several of these issues, or if existing cracks worsen over time, it's important to seek an evaluation by a qualified structural engineer or foundation specialist.

For homeowners, spotting issues early can help address problems before they escalate. For buyers, hiring a thorough home inspector�and asking questions about any visible concerns�is critical before finalizing a purchase.

A home is one of life's biggest investments. By understanding the difference between everyday settling and foundation trouble, you can better protect your property, your wallet, and your peace of mind.