I Was “Househacking” to Pay My Mortgage—Then Things Fell Apart

When my husband and I first saw the mammoth Victorian, we fell right in love. Like, we stepped into the foyer and were smitten. We were surprised to find out that the 4,000 square-foot beauty cost only $200,000. It was built in 1890 and came complete with a carriage house and a third floor with its own outside entrance. Now, $200k was a sizable chunk of change compared to the tiny shotgun-style fixers-uppers we’d initially been eyeing. But once we did the math, we found it came out to 50 bucks a square foot—a bargain compared to the $132/sq-ft median list price here in Louisville, Kentucky.

And while it was steal, it was still a huge, $200,000 house (in both price and size). At the time, I was a freelance writer and my husband was an HR manager at a struggling manufacturing plant. Enter the idea of househacking. Essentially we decided we would buy the home, rent out the parts we weren’t using (the third floor as a short-term rental and the garage apartment as a leased unit), and cover our mortgage with the income.

Now this wasn’t so scary because it wasn’t our first foray into househacking. We had dipped our toes into the method before with a $17,000 triplex in Detroit, Michigan. We bought the home, renovated it on a shoestring budget, and then successfully ran it as an Airbnb/long-term rental. Easy peasy, mortgage covered—we thought.

With all that in mind—and knowing that houses in our neighborhood sell quickly—we listed our teeny bungalow. We didn’t want to make an offer on the Victorian until we sold (we were afraid to give the seller a reason to say no with a contingent offer), but once we did sell, we offered the full-asking price (even though the house had sat empty for a year!)

Because we found it scary to take on a mortgage that relied on other people’s money, we did the math to make sure we could always make the payment just on our own incomes. While it would require some scrimping, we worked out that it would be doable. That way, if there were ever costly problems with the house, we wouldn’t risk foreclosure.

We got a $4,000 credit from the seller after the inspection, so we made a down payment of $7,600 and got an FHA mortgage for $196,000 (the price of the home after closing costs). We also ended up selling the Detroit house, so we had some cash on hand (around $50,000) to do some much needed renovations.

We spent about $20,000 of the cash from the Detroit sale to fix up our part of the house (an 80s time-warp) and the garage apartment. Then to transform the murder-house looking third floor into an Airbnb-able space, we spent another $30,000—half of which came from these savings, and half which we ended up putting on our credit cards (my husband was unexpectedly laid off).

But after three months of waiting to be approved for a short-term rental permit and six months of work, we launched the Airbnb in Summer 2017. I couldn’t believe our good fortune. For about a year, we stayed almost fully booked, grossing an average of $1,600 a month. Add the $525 rent from the studio over the garage, and we covered our mortgage, insurance, taxes, and utilities without having to dip into our salaries. We even decided to rent out the main house a few times (for between $400 and $2,000 a night—the high end at Kentucky Derby time), and paid for the renovations we had charged in a little less than a year.

After all our improvements, our awesome realtor came back to give us an estimate appraisal: He said he’d hang up his license if it wasn’t worth at least $340,000 (!!!). Happy with the equity we raised, we decided to apply for a home equity line of credit for the next round of renovations—a new roof and a more functional (OK, and pretty) kitchen.

Then everything started to go downhill. The new heat and air system (a mini-split) on the third floor was shoddily installed, and went out in the dead of winter. Of course, this happened during a zero-degree holiday week while we had guests. We ended up losing more than a thousand bucks out of pocket between refunds and cancellations, and we had to buy space heaters for those who did end up staying. And if that wasn’t enough, later that year on a 90-degree day, the air conditioning went out—and the roof we had just repaired (for the third time) started leaking again.

Not only were these going to be pricy fixes, but I had to scramble to notify upcoming guests and help them find a place to stay. Airbnb penalizes hosts big time for canceling (understandably), so I also needed to be sure the support reps I spoke with understood the extenuating circumstances. Otherwise, I would be fined, lose my super-host status, or even be suspended.

And when it rains, it pours—literally. The next day (our wedding anniversary, to boot) my husband burst through the front door. “I need the key to the apartment!” he shouted, possibly the only time I’ve ever heard him shout. When he’d pulled the car into the garage, water was pouring like Niagara Falls from the apartment above. I couldn’t find the key and naturally the renter was out of the country.

We ran over to the apartment and I tried our ridiculous assortment of keys with shaking hands until one finally worked. It turns out, a small part on the toilet line connector had gone bad and the thing just went off like a fire hydrant (pro tip: if you’re going out of country for two weeks, go ahead and turn off your water main!). Once we got the water turned off and the mess cleaned up, I called our insurance company in case we’d need anything major, like, say, a new floor.

Oh, right. I’d forgotten that in order to afford insurance on a house that would cost a mid-sized fortune to rebuild today (and also would be impossible, but whatever) we had to go with a $5,000 deductible. I recall our reasoning: we agreed we would never make a claim unless it was catastrophic because rates would go up, so we may as well get the savings through the deductible. I’d do it again, but that was a kick in the gut to be reminded.

The AC debacle dragged on and I lost several more bookings to the tune of about $1,800. I spent so many hours on the phone with Airbnb representatives, contacting guests, and pleading with the manufacturer to help. I couldn’t keep up with some work deadlines and had to do the dreaded ask for more time on some. In sum, there was more money going out than in—but again, thank god we did the math before purchasing.

Meanwhile, the HELOC application was its own mess. One, two, three, four banks wouldn’t work with us because of our “unorthodox” living situation. Are we a multi-family? An investment property? Residential? Single family? No bank could put a label on us, and none of them would count the Airbnb income. Of course, we found this out only after we went through reams of online paperwork.

Some days I wonder why we go through so much trouble. Then I look around at the house that we’re so fortunate to call home, or I have lunch with a neighbor and we commiserate over old house problems and remind each other how amazing our neighborhood is and what treasures these homes are. Our mortgage payment wouldn’t cover a halfway decent condo in the more popular parts of town and one of us would have to earn more at our day jobs to pay for it. And—I pinch myself, really—when all is functioning well, this house pays for itself. I wouldn’t trade this house-hacking adventure for a less complicated living situation. Just remind me of that next time there’s a mishap, will you?

Have a home-finance story you’d like to share? Whether it’s paying off your mortgage early, finding a super cheap NYC apartment, or even a smart rent payment strategy, we’d love to hear it! E-mail repitches@apartmenttherapy.com with your story.