April 23, 2024
House Hacking

Photo: 1st Class Real Estate

Tevan Millette is using rental income from "house hacking" to buy more properties.

Economic Backbone: Millennial Economy

House Hacking

Some Millennials are finding creative ways to build property portfolios.

Carlton Proctor | 6/29/2023

Rising home prices, shrinking inventories and the highest mortgage rates in two decades are forcing some Florida Millennials to turn to an old concept with a new name: “House hacking.” The term refers to people who rent out part of their home to help cover a monthly mortgage payment they otherwise could not afford.

A recent national survey by Realtor.com showed Millennials were especially hard hit by rising interest rates last year.

Advocates of house hacking say renting out a room or rooms within a primary residence also can enable the owner to avoid the higher property and investment rate taxes associated with investment properties.

Tevan Millette, 27, a part-time real estate investor and sergeant with the Army’s 7th Special Forces Group assigned to Eglin Air Force, has turned to house hacking to build his growing inventory of residential properties.

“House hacking has helped me build my portfolio of short- and long-term rental properties,” says Millette. “The more rental income I make from rental, the more I can borrow to cover new mortgages.”

One of his recently acquired house-hacking properties was a quadplex. He lived in one unit and rented out the other three.

Millette’s house-hacking strategies follow a national trend in which more homeowners, including a growing number of Millennials, are offering space in their homes for short- and long-term rentals.

A recent national survey by Realtor.com, a real estate listing website, revealed that nearly half of American homeowners are interested, or have considered, renting out extra space in their homes to pay a mortgage or boost their savings.

Millette says his property investing has proven so lucrative that he is planning to open a real estate company in the Destin area when he leaves the military. 

A Place to Call Home

Buying or renting a home has become expensive for everyone in Florida. For Millennials, it's particularly difficult, says economist Ken Johnson, at the Real Estate Initiative at Florida Atlantic University.

Three of the top 10 most expensive metros for renting in the nation — as judged by how much rents exceed long-term trends — are in Florida. Cape Coral-Fort Myers led the nation in the spring with a 15% premium above what the trendline suggests is appropriate rent historically, followed by Northport- Sarasota-Bradenton (12.5%) and Miami/Southeast Florida (12.1%). Tampa Bay (8.2%) was in the top 10.

When it comes to home buying price premiums above historical growth levels, Florida had five markets in the top 10 of the nation’s largest metros. Cape Coral-Fort Myers (No. 2 at 47.2%), Lakeland (No. 6 at 43.2%), Palm Bay-Melbourne (No. 7 at 43%), Deltona- Daytona Beach (No. 8 at 41.9%) and Tampa Bay (No. 9 at 31.3%). Northport-Sarasota was 11th at 39.2%.

The National Association of Realtors found in 2022 the average age of first-time home buyers was 36, up from 33 in 2021. First-time buyers made up 21% of Florida home buyers, compared to 34% across the country, according to the organization’s most recent research. — By Mike Vogel

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