High home prices and rising mortgage rates have made buying a home a challenge for young Americans. But a strategy called house hacking is helping millennials and Gen Z buyers break through the barrier. By renting out part of their home, they can reduce mortgage costs, earn extra income, and make homeownership more affordable.
Why House Hacking Is the Best Strategy for Young Buyers
In 2025, the housing market remains expensive:
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Median home price: $422,400 for existing homes
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30-year mortgage rate: 6.58%
For first-time buyers with limited savings, these numbers make monthly payments a heavy burden.
House hacking offers a smart solution:
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Over half of young buyers consider renting out part of their home to offset costs
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More homes are available at lower prices, with 20.6% of listings dropping in price
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Housing inventory has grown 24.8% year-over-year, giving buyers more negotiation power
This combination makes house hacking an effective way to buy a home cheaper while earning rent.
Top 5 House Hacking Methods to Earn Rent
House hacking is all about living in your home while generating income. Here are the top five practical ways to do it:
1. Rent Out Spare Bedrooms – The Cheapest Option
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Pros: No renovation required, easy to start earning rent
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Cons: Shared living spaces may reduce privacy
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Best for: Single buyers with a tight budget
2. Rent a Finished Basement – Balance Privacy and Income
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Pros: Independent living space for tenants, stable rental income
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Cons: Renovation costs can be high; check local rental regulations
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Cost estimate: $7,000–$23,000 for a 1,000 sq. ft. basement
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Best for: Buyers who want privacy and can afford renovation
3. Convert a Garage into a Micro-Apartment – Maximize Rent
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Pros: Full separation from your living area, higher rent potential
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Cons: Average cost ~$16,637, may lose parking/storage space
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Best for: Buyers with no need for a garage who can invest in renovation
4. Buy a Multi-Unit Property – Scale Your Rental Income
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Pros: Separate units for tenants, no major renovations needed
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Cons: Higher purchase cost; you cover full mortgage if units are vacant
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Best for: Buyers with a higher budget who can handle temporary vacancies
5. Rent Driveway or Parking Space – Easy Extra Income
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Pros: No shared living space, minimal investment
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Cons: Confirm insurance coverage for renting your parking space
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Best for: Urban buyers with extra parking near their home
Key Risks to Compare Before You Buy
Even though house hacking is a powerful strategy, it comes with risks:
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Compliance: Ensure rented areas meet local safety and health regulations
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Finances: Budget for renovations and have 3–6 months of mortgage backup
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Insurance: Renting part of your home may affect coverage; update policies
Bottom Line: Buy Smart and Earn Rent
House hacking isn’t just a way to buy a home cheap—it’s a smart financial strategy. By planning space wisely and balancing your living and rental areas, young buyers can turn the dream of homeownership into reality while generating extra income.