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Are You a Shopaholic? Signs to Know
People shop for all kinds of reasons — to acquire the things they need or want, to browse stores for new and interesting finds, and (sometimes) for the little thrill that comes with snagging a great deal.
For some people, however, shopping crosses the line into unhealthy territory. If you tend to hit the stores every weekend, spend the majority of free time planning for and making purchases, and/or have have tallied up some major debt as a result of your frequent shopping, you may actually be addicted to shopping.
Read on to learn more about what it means to be a shopaholic, signs that you may be addicted to shopping, and ways to curb the habit.
Key Points
• A preoccupation with shopping and buying to relieve stress are hallmarks of shopping addiction.
• Spending beyond one’s budget and accumulating unopened goods are common.
• Individuals often hide purchases and feel guilt and regret after shopping.
• Shopping addiction can lead to financial strain and emotional distress.
• Managing compulsive shopping involves tracking triggers, finding alternatives, and seeking professional help.
Definition of a Shopaholic
Known as oniomania or compulsive shopping, shopping addiction is a behavioral disorder that involves frequent, excessive buying as a way to feel good and temporarily relieve feelings of stress, anxiety, or boredom. Like other types of addictions, a shopping addiction can substantially harm a person’s life, including their relationships and financial well-being.
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4 Shopaholic Symptoms
People who are addicted to shopping often get a sense of emotional relief right after buying something. Shopaholics also tend to spend more time and money on shopping than they can afford, and many get into financial problems — such as large amounts of credit card debt — as a result of their overspending.
Below are four signs that you may be addicted to shopping.
1. Experiencing a Rush of Excitement When You Buy
Shopaholics generally shop not because they really need something but rather for the sense of euphoria they experience when they’re shopping.
Similar to a drug addiction, compulsive shoppers will often experience a “high” or an adrenaline rush from the act of purchasing something. The brain then associates shopping with this pleasure and the person wants to try and recreate that feeling over and over again. This pattern can be used by a shopaholic to fill an emotional need or override a negative emotion.
2. Experiencing Post-Shopping Regret
Unfortunately, the high shopaholics experience is typically short-lived and later gets replaced by negative feelings, including shame, remorse, and guilt.
Shopaholics will often feel guilty after spending money, whether they splurged on something expensive or snagged something on clearance. Despite any remorse that follows, though, they tend to be good at rationalizing any purchase if they’re challenged.
Buyer’s remorse can force a shopaholic back into a negative cycle, since they know shopping is a surefire way to chase away negative feelings, at least temporarily.
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3. Accumulating Unopened Goods
Though shopaholics enjoy shopping, they often don’t care all that much about their purchases when they get home or when their online orders arrive in the mail. In fact, the items they purchase often end up unopened and shoved in the closet or under the bed.
Those living with a shopping addiction can actually develop hoarding tendencies as they accumulate more goods than they need and yet continue buying.
Recommended: 9 Questions to Ask Before You Buy Something
4. Concealing Shopping Habits
Shopaholics will often try to conceal their shopping habits from their spouses, family members, coworkers, and friends. This is often due to feelings of shame and/or the fact that they are shopping and spending money at the expense of their job or loved ones.
Normal Shopping vs Compulsive Shopping
If you enjoy shopping and make the occasional splurge, does that mean you are a shopaholic? Not necessarily. There are several distinct differences between normal shopping and compulsive shopping. Here’s a side-by-side comparison of normal shopping versus compulsive shopping.
| Normal Shopping | Compulsive Shopping |
|---|---|
| No addictive or compulsive component | Resembles addictive behavior |
| Purchases are generally needed and used | Purchases are often not needed and go unused |
| Isn’t followed by negative emotions | Often followed by guilt, remorse, and shame |
| Does not lead to financial problems | Continues despite negative financial consequences |
| No secrecy involved | Secrecy is often involved |
| Occasional shopping sprees | Frequent overbuying |
Treating Compulsive Shopping
If you feel like shopping has become your main way of coping with stress, there’s a lot you can do to address the issue and regain control of your spending. Here are some strategies to try.
Understanding Your Triggers
Consider keeping a journal of how you feel when the shopping urge hits: Are you bored? Angry? Anxious? Do you feel the desire to buy new things after you hang out with a certain person, spend time on social media, scroll your email, or watch certain shows?
Tracking your triggers can provide insight into what drives you to want to shop and how you can better manage (or avoid) those triggers in the future. For example, you might seek out other friends, unsubscribe from marketing emails, and unfollow shopping-focused social media accounts.
Developing Other Coping Strategies
Overcoming any addiction typically requires learning alternative ways of handling the stress of everyday life. You might come up with a list of non-shopping activities you find relaxing and enjoyable, such as calling a friend, watching a movie, reading, going for a walk, listening to music, doing yoga, or engaging in a hobby. You can consult your list when you get the overwhelming urge to shop. This can help you break the cycle of using shopping as a way of trying to feel better about yourself.
Delaying Gratification
Another way to deal with impulsive or compulsive shopping is to establish a waiting time before you spend money on anything nonessential. “Combat the urge to impulse spend by instituting a holding period on all purchases,” suggests Brian Walsh, CFP® and Head of Advice & Planning at SoFi. “Before hitting the buy button, wait 24 to 48 hours. After the holding period, come back to the shopping cart and reevaluate. In some cases, you might not even remember why you wanted it in the first place.”
Seeking Expert Help
If you think you may be addicted to shopping and can’t seem to get a handle on it on your own, it can be worth seeking professional help.
A mental health professional can help you understand the emotional roots and psychological factors contributing to your compulsive shopping. Addiction therapy, including cognitive behavioral therapy (CBT), can help you understand your triggers and come up with coping strategies that don’t involve shopping.
You might also benefit from financial counseling, particularly if your shopping behavior has left you in debt. A financial advisor can help you set up a spending budget that allows you to pay off expensive debt, while also building — or rebuilding — your savings.
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Financial Consequences of Compulsive Shopping
Many compulsive shoppers continue making purchases even when they struggle to pay bills, max out credit cards, or face financial hardship. This behavior can create a cycle of stress and anxiety, reinforcing their shopping addiction.
Key financial consequences of compulsive shopping include:
• Excessive debt: Constant impulsive purchases can quickly accumulate, causing you to spend beyond what you can pay off at the end of the month and mounting overwhelming credit card debt.
• Poor financial decisions: Compulsive shoppers may neglect essential financial planning, fall for scams, or buy unnecessary items instead of prioritizing needs.
• Damaged credit score: High credit utilization and any missed payments can have a negative impact on your credit profile, making it difficult to secure loans, mortgages, or even rent an apartment.
• Depleted savings: Continuous spending on nonessential items can drain your savings account, leaving little to no financial cushion for emergencies.
• Bankruptcy risk: In extreme cases, uncontrolled debt from compulsive shopping may lead to bankruptcy, further complicating financial recovery.
How to Support a Loved One Struggling with Shopping Addiction
Supporting a loved one with a shopping addiction requires patience, empathy, and constructive action. You might start by having an open, non-judgmental conversation about their behavior, expressing concern without blame. You could also offer some helpful suggestions, such as tracking their spending habits, avoiding triggers, and (possibly) seeking professional help like therapy or support groups.
At the same time it’s important to set healthy boundaries and to avoid enabling their behavior by lending money or covering debts. Instead, you might offer alternatives like budgeting together or engaging in non-shopping-related activities. If they’re open to it, you could help them set financial goals and spending limits or offer to be their accountability partner.
Letting Your Savings Grow With SoFi
If your goal is to start saving more and spending less, you’ll want to choose a bank account that helps your money grow faster than it could in a traditional savings account and charges minimal or no fees.
When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
What are the signs of being a shopaholic?
Signs of a shopping addiction include frequent impulsive purchases, spending beyond one’s budget, hiding purchases from family or friends, feeling guilt or regret after shopping, and using shopping as a way to cope with stress or emotions. Shopaholics may also experience financial strain, accumulate debt, and have difficulty controlling their shopping urges.
What is the root cause of shopping addiction?
Negative feelings, such as stress, anxiety, and loneliness, are often the underlying causes of shopping addiction. Shopping can provide a distraction from these unpleasant emotions and help you feel more in control. It can also elicit a kind of psychological “high,” which is why compulsive shoppers often seek this behavior out again and again.
How do you cure a shopping addiction?
People who are addicted to shopping often respond well to various treatments, including antidepressant medications, talk therapy, cognitive-behavioral therapy (CBT), self-help books, support groups, and financial counseling.
Are there support groups for compulsive shoppers?
Yes, support groups like Shopaholics Anonymous and Debtors Anonymous provide help for compulsive shoppers. These groups are available in-person and online and offer a safe space to share experiences, gain support, and learn coping strategies from others facing similar challenges. These groups can also help you determine when you might need additional help from a mental health professional.
How can I prevent relapse after overcoming shopping addiction?
Preventing relapse involves maintaining strong financial habits, avoiding triggers, and developing alternative coping mechanisms for stress or emotions. Some strategies that can help you stay on track include regularly reviewing your budget, using shopping lists, implementing a waiting period before making purchases to help control impulses, and engaging in non-shopping activities (like hobbies or volunteering). You might also seek out ongoing support from therapy, accountability partners, or support groups.
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2025
10 Top Monthly Dividend Stocks for March 2025
While most dividend-paying stocks do so every quarter, some companies make monthly dividend payments. Getting dividend payouts on a monthly schedule may appeal to investors, especially those relying on dividends for a steady income stream.
A dividend is a portion of a company’s earnings that it pays to shareholders on a regular basis. Many investors seek out dividend-paying stocks as a way to generate income.
Note that there are no guarantees that a company that pays dividends will continue to do so.
Key Points
• Monthly dividend stocks can provide steady income, but are less common than quarterly dividends.
• Utility and energy companies may offer consistent dividends due to steady consumer demand and limited competition.
• Dividend ETFs are passive and often track indexes of companies with a history of strong dividend growth.
• REITs pay dividends from income-generating properties and must distribute 90% of income to shareholders.
• Consider not only a dividend stock’s yield, but the long-term stability of the company and its dividend payout ratio.
What Are Monthly Dividend Stocks?
As mentioned above, dividend stocks usually pay out quarterly. However, some companies pay dividends monthly.
Stocks that pay dividends monthly may appeal to investors who want steady monthly income. Additionally, monthly dividend stocks may help investors who reinvest the payments to realize the benefit of compounding returns.
For example, through dividend reinvestment plans (DRIPs) investors can use dividend payouts to buy more shares of stock. Potentially, the more shares they own, the larger their future dividends could be.
How Does Dividend Investing Work?
Most dividends are cash payments made on a per-share basis, as approved by the company’s board of directors. For example, if Company A pays a monthly dividend of 30 cents per share, an investor with 100 shares of stock would receive $30 per month.
Some investors may utilize dividend-paying stocks as part of an income investing strategy. Retirees, for example, may seek investments that deliver a reliable income stream for their retirement. It’s also possible to reinvest the cash from dividend payouts.
A stock dividend is different from a cash dividend. Stock dividends are an increase in the number of shares investors own, reflected as a percentage. If an investor holds 100 shares of Company X, which offers a 3% stock dividend, the investor would have 103 shares after the dividend payout.
Understanding Dividend Yield
Understanding dividends is one part of an investor’s decision when choosing dividend-paying stocks. Another factor is dividend yield, which is the annual dividend amount the company pays shareholders divided by its stock price, and shown as a percentage.
If Company A pays 30 cents per share in dividends per month, that’s $3.60 per year, per share. If the share price is $50, to get the dividend yield you divide the annual dividend amount by the current share price:
$3.60 / $50 = 7.2%
The dividend yield can be useful as it can help an investor to assess the potential total return of a given stock, including possible gains or losses over a year.
But a higher or lower dividend yield isn’t necessarily better or worse, as the yield fluctuates along with the stock price. A stock’s dividend yield could be high because the share price is falling, which can be a sign that a company is struggling. Or, a high dividend yield may indicate that a company is paying out an unsustainably high dividend.
Investors will often compare a stock’s dividend yield to other companies in the same industry to determine whether a yield is attractive. Whether investing online or through a brokerage, it’s important to consider company fundamentals, risk factors, and other metrics when selecting any investment.
Top 10 Monthly Dividend Stocks by Yield
Following are some of the top-paying dividend stocks by yield, as of March 1, 2025. The dividends for these stocks are expressed here as a 12-month forward dividend yield, meaning the percentage of a company’s current stock price that the company is projected to pay out through dividends over the next 12 months.
| Company | Ticker | 12-month forward yield |
|---|---|---|
| Orchid Island Capital | ORC | 16.84% |
| ARMOUR Residential REIT, Inc. | ARR | 15.12% |
| AGNC Investment Corp. | AGNC | 13.81% |
| Dynex Capital | DX | 13.08% |
| Ellington Financial | EFC | 10.87% |
| Gladstone Commercial | GOOD | 7.39% |
| Apple Hospitality REIT | APLE | 6.62% |
| EPR Properties | EPR | 6.61% |
| LTC Properties | LTC | 6.56% |
| Realty Income Corp. | O | 5.64% |
Source: Data from Bloomberg, as of March 1, 2025. Universe of stocks derived from Wilshire 5000 index. Companies have >$500M market cap and positive forward EPS.
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Types of Monthly Dividend Stocks
To invest in monthly dividend stocks, investors may want to consider companies in industries that tend to offer monthly dividend payouts. These companies usually have regular cash flow that can sustain consistent dividend payments.
Energy and Utility Companies
In the world of dividend payouts, utility and energy companies (e.g. water, gas, electricity) offer investors a certain consistency and reliability, thanks to the fact that consumer demand for utilities tends to be steady, and thus so is revenue.
Utility companies are considered a type of infrastructure investment, meaning that they provide systems that help society function. As such, these companies tend to be highly durable, offering tangible benefits to consumers and investors.
Also, many energy and utility companies may have little competition in a given region, which can add to the stability of revenue and thereby dividends.
ETFs
Just as an ordinary exchange-traded fund, or ETF, consists of a basket of securities, a dividend-paying ETF includes dividend-paying stocks or other assets. And similar to dividend-paying stocks, investors in dividend ETFs may benefit from regular monthly payouts, depending on the ETF.
Like most types of ETFs, dividend-paying funds are passive, meaning they track an index. In many cases, these ETFs seek to mirror indexes that include companies with a solid track record of dividend growth.
REITs
Real estate investment trusts (REITs) offer investors a way to buy shares in certain types of income-generating properties without the headache of having to manage these properties themselves.
REITs pay out dividends because they receive steady cash flow through rent payments and sometimes profits from the sale of a property. Also, these companies are legally required to pay at least 90% of their income to shareholders through dividends. Some REITs will pay dividends monthly.
Note: REIT payouts are ordinary dividends, i.e. they’re taxed as income, not at the more favorable capital gains rate.
Ways to Evaluate Monthly Dividend Stocks
Investors may want to analyze several criteria to determine the dividend stocks ideal for a wealth-building strategy. Here are a few things investors can consider when looking for the highest dividend stocks:
Dividend Payout Ratio
Investors will also factor in a stock’s dividend payout ratio when making investment decisions. This ratio expresses the percentage of income that a company pays to shareholders.
The dividend payout ratio is calculated by dividing a company’s total dividends paid by its net income.
Investors can also calculate the dividend payout ratio on a per share basis, dividing dividends per share by earnings per share.
The dividend payout ratio can help determine if the dividend payments a company distributes make sense in the context of its earnings. Like dividend yield, a high dividend payout ratio may be good, especially if investors want a company to pay more of its profits to investors. However, an extremely high ratio can be difficult to sustain.
If a stock is of interest, it may help to check out the company’s dividend payout ratios over an extended period and compare it to comparable companies in the same industry.
Company Stability
Investors may also wish to focus on stable, well-run companies with a reputation for paying consistent or rising dividends for years. Dividend aristocrats – companies that have paid and increased their dividends for at least 25 years – and blue chip stocks are examples of relatively stable companies that are attractive to dividend-focused investors.
These companies, however, do not always have the highest dividend yields. Nor do these companies pay monthly dividends; most companies will pay dividends quarterly.
Furthermore, keep in mind a company’s future prospects, not just its past success, when shopping for high-dividend stocks.
Tax Implications
Dividends also have specific tax implications that investors should know.
• A qualified dividend qualifies for the capital gains tax rate, which is typically more favorable than an investor’s marginal tax rate.
• An ordinary dividend is taxed at an individual’s income tax rate, which is typically higher than the capital gains rate.
Investors will receive a Form DIV-1099 when $10 or more in dividend income is paid out during the year. If the dividends are in a tax-advantaged account, an IRA, 401(k), etc., the money will grow tax-free until it’s withdrawn.
Recommended: Ordinary vs Qualified Dividends
Pros and Cons of Investing in Monthly Dividend Stocks
While dividend stocks offer some advantages, they also come with some risks and disadvantages investors must bear in mind.
Pros
• Passive income. As noted above, investing in dividend stocks can provide a source of passive income (although dividends can be cut at any time).
• The ability to reinvest. Dividend stocks allow for reinvestment (using dividend payments to buy more stocks, thus compounding returns). Steady dividends may also allow investors who reinvest the gains to buy stocks at a lower price while the market is down — similar to using a dollar-cost averaging strategy.
Additionally, the stocks of mature companies that pay dividends also may be less vulnerable to market fluctuations than a start-up or growth stock.
• Potential income during a downturn. Another plus for those who choose dividend stocks is that they may receive dividend payments even if the market falls. That can help insulate investors during tough economic times.
Recommended: Pros & Cons of Quarterly vs. Monthly Dividends
Cons
• Dividends are not guaranteed. A company can decide to suspend or cut its dividends at any time. It could be that the company is truly in trouble or that it simply needs the money for a new project or acquisition. This may be especially true for monthly dividend stocks; many REITs that pay monthly dividends suspended or cut dividends during the Covid-19 pandemic.
Either way, if the public sees the dividend cut as a negative sign, the share price could fall. And if that happens, an investor could suffer a double loss.
• Tax inefficiency. First, a corporation must pay tax on its earnings, and then when it distributes dividends to shareholders (which are considered profit-after-tax), the shareholder also must pay tax as an individual. Owing to this tax inefficiency, sometimes referred to as a type of double taxation, some companies decide not to offer dividends and find other ways to pass along profits.
Note that this tax issue doesn’t impact REITs the same way. Entities such as REITs and Master Limited Partnerships (MLPs) pass along most of their profits to investors. In these cases, the company doesn’t owe tax on the profits it passes onto the investor.
• Limited options. Also, choosing the right dividend stock can be tricky. First, monthly dividend stocks aren’t as common as quarterly dividend payouts. And the metrics for analyzing attractive dividend stocks are quite different from those for selecting ordinary stocks.
• Dividends can drop or be cut. It’s important to remember that dividends may fluctuate depending on how a company is performing, or how it chooses to distribute its profits. During a downturn, it’s possible to see lower dividends, or for a company to cut its dividend payout.
• Share price appreciation may be limited. Gains in the share price of some dividend stocks can be limited, as many dividend-paying companies are typically not in a rapid growth phase.
|
Pros and Cons of Monthly Dividend Stocks |
|
|---|---|
| Pros | Cons |
| Provide passive income | Dividend payments are not guaranteed |
| Dividend reinvestment can lead to compound returns | Selecting monthly dividend stocks can be tricky |
| Investors may earn a return even when the stock price goes down | Dividends may be cut or reduced during a downturn |
| Qualified dividends have preferential tax treatment over ordinary dividends; they qualify for the capital gains tax rate | Some companies view dividends as tax inefficient |
| Share price appreciation may be limited compared to growth stocks | |
Things to Avoid When Investing in Monthly Dividend Stocks
When investing in monthly dividend stocks, there are a few things to avoid:
• Avoid investing in a company that pays a monthly dividend solely to pay a monthly dividend. Many companies pay monthly dividends, but not all are suitable investments. Do your research and only invest in companies that you believe will be successful in the future.
• Avoid investing in a company or industry that you don’t understand. If you don’t understand how a company makes money, you should hesitate to invest in it.
• Avoid investing all of your money in monthly dividend stocks. Diversify your portfolio by investing in other types of stocks, bonds, funds, and other securities.
The Takeaway
Dividend-paying stocks can be desirable. They can add to your income, or offer the potential for reinvestment via dividend reinvestment plans or other strategies you pursue. Monthly dividend stocks offer the potential for steady income, but they are less common than stocks that pay on a quarterly basis.
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FAQ
How do monthly dividend stocks work?
A monthly dividend stock is a stock that pays out dividends every month instead of the more common quarterly basis. This can provide investors with a steadier stream of income, which can be particularly helpful if you rely on dividends for living expenses.
How can you get stocks that pay monthly dividends?
To invest in stocks that pay monthly dividends, you need to research financial websites and publications to find companies that pay dividends monthly. There are not many monthly dividend stocks, especially compared with stocks that pay quarterly dividends.
How can you determine the stocks that pay the highest monthly dividends?
Investors use metrics like the dividend yield and dividend payout ratio to determine the stocks that might be most desirable. However, stocks that pay the highest monthly dividends can change over time, and it’s important to consider other methods of assessing a stock, since a higher dividend isn’t always a sign of company health.
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SOIN-Q125-124
Read moreMar
05
2025
What Is House Hacking?
House hacking is a relatively new term for an old-school goal: Finding a way to earn income from a property you own while you also reside there.
Generally, house hacking is defined as renting out parts of your home (one or two rooms, a basement apartment, or one side of a duplex, for example), and using your tenants’ payments to help cover your mortgage and other expenses. But whether you’re a first-time homebuyer, an aspiring real estate investor — literally trying to get a foot in the door of a high-priced housing market — or a longtime homeowner hoping to earn some passive income, there are multiple house-hacking methods to consider.
You’re really only limited by the amount of time and effort you want to put in … and, of course, the homeowners association (HOA) rules and zoning laws in your area. Read on for a look at some of the benefits and challenges of house hacking, and some ways you might put an income-generating home-sharing strategy into action.
Key Points
• House hacking involves renting parts of a home to cover expenses and build equity.
• For first-time homebuyers, house hacking can significantly reduce or cover mortgage payments.
• Retirees can enhance financial security through passive income and reduced living costs from house hacking.
• A challenge of house hacking is maintaining a balance between personal life and managing tenants.
• The live-in flip strategy involves buying, renovating, and living in a property to sell for profit.
How House Hacking Works
In its most basic form, house hacking isn’t that different from sharing an apartment with one or several roommates, with everyone paying their portion of the rent to a landlord or management firm. Except in this scenario, you’re the landlord. You own the house, condo unit, or multi-family building, and you also live there. And you’re using your property as a tool to earn money to make your monthly mortgage loan payments and cover other costs; pay down student loans and other debts; or grow your savings.
Benefits of House Hacking
Millennials and Gen Zers often use a house hack as a way to cut the costs of homeownership. And for those interested in real estate investing, it may also be a step toward building a portfolio of properties. But it could also be an opportunity for boomers who own a home to create a passive income stream in retirement (and maybe enjoy a little company while they’re at it). These are are some of the benefits a house-hacking strategy, done right, can offer:
Reducing Expenses While Building Equity
Housing prices can be daunting, especially for first-time homebuyers who often are just starting out on their own. For those on a tight budget, house hacking may make homeownership more affordable by reducing the burden of monthly payments, and possibly helping to cover other costs, such as insurance, HOA fees, and maintenance. Meanwhile, successful house hackers can look forward to building equity — in a starter home that leads to something bigger or better, or maybe the forever home they hope to live in with their future family someday.
Accessing the Tax Benefits of Homeownership
How does homeownership affect your taxes? If you itemize on your tax return, you may be able to deduct several expenses, including your mortgage interest, property taxes, certain home improvements, and some of the costs of purchasing a home. It’s important to remember, though, that you’ll also have to include the income from your tenants’ rent payments on your return. Talk with a tax professional about your new benefits and obligations.
Testing Out a Rental Property Career
Want to get a feel for what life as a landlord might be like? Living on-site with your tenants can give you an up-close-and-personal look at what property management involves, from dealing with late payments to making sure appliances and fixtures are working.
Building Wealth
Single- and multi-family homes don’t always appreciate with time, but if you take care of your property, and choose the location carefully, you may see an increase in your property’s value, which can add to your equity and your net worth. (You also may be able to charge higher rental prices over time, which could further help you grow your wealth.)
House-Hacking Strategies for Beginners
If you think house hacking might be something you want to try, you’re probably wondering how to get started. It can be a good idea to do some research first, to determine what is and isn’t allowed in your community, city, or county. And, of course, you’ll want to choose a hack that fits with your priorities.
Here are some tips on how to house hack that could be especially useful for beginners:
Renting Out Extra Rooms
If you already own a home, or plan to purchase one soon, renting out extra rooms may be the easiest way to dip your toe into house hacking. You can get help with your mortgage payments and perhaps other costs, including utilities. And if the experiment doesn’t work out, you can always find a new housemate or, if you can afford it, opt for going it alone.
Offering Short-Term Rentals
Not sure you want to commit to a long-term lease? You may want to consider offering a spare room on a short-term rental platform. Your rental income may not be as stable, and the cleaning and guest prep associated with turnover may be challenging, but you’ll get more me-time alone in your home with this option. (Just make sure you aren’t breaking any HOA or other rules.)
Trying a Live-In Flip
Forget about finding suitable housemates: With this strategy, you can go it alone (or team up with a like-minded weekend warrior) to buy and renovate a property with the idea of selling it for a profit in a few months. In the meantime, you can live in the place yourself — as long as it’s deemed habitable. Keep in mind, though, that you’ll be paying the mortgage during that time, while also dealing with repairs and other expenses. So unless you have enough money stashed away, or a few co-investors, the upfront costs may be problematic.
Buying a Multifamily Home
By purchasing a multifamily property, you may be able to maintain a little more personal privacy while also reaping the benefits of bigger rent payments. Anything larger than a duplex might be an ambitious undertaking for a beginner, though — unless you’re willing to go full-on landlord, and set rules, manage repairs, collect rent, and deal with potential disputes with or between your neighbors.
Financial Considerations When House Hacking
If you’re preparing to purchase a property with a plan to house hack, there are several financial considerations to keep in mind.
Researching Your Best Financing Options
As an owner-occupant, you may qualify for a few different types of mortgages, including a conventional loan from a private lender or a government-backed FHA or VA loan. Taking the time to compare loan types and lenders can be an important part of going through the mortgage process and getting the interest rate and loan term that best suit your needs.
For example, if you plan to expand your real estate portfolio using the BRRRR method (buy, rehab, rent, refinance, and repeat), having a good relationship with your lender can help you move on to the next property with fewer worries.
Finding the Best Property for Your Budget
Even if you’re buying a home you expect to live in for a while, it can still be helpful to look at your purchase as a business decision. That means considering the location, the condition of the property, the rental potential, what you might charge, if you want a separate entrance for a tenant, etc. Also, as a beginner, you may want to get some professional advice from a real estate agent or an experienced real estate investor.
Deciding If Your Choices Make Financial Sense
Whether you’re looking at sharing a single-family home with one housemate or a building with several tenants, don’t forget to run the numbers to be sure the arrangement makes financial sense. Add up all your costs vs. what you hope to take in. Will the net amount help you achieve your financial goals?
Recommended: Understanding Mortgage Basics
Risks and Challenges of House Hacking
It’s not hard to imagine where this could all go wrong. House hacking is not without risk. Being a landlord for just one housemate (even a friend) turns out to be more than some people are willing or able to deal with. Some potential pitfalls include:
Maintaining Work-Life Balance
House hacking can blur the lines between what is your home and what is your business/investment. It’s not unlike working from home every day — except your tenants may be even more demanding than your family or your boss. As a live-in landlord, you may find it more difficult to go on vacation, have a pet, throw a party, or take a new job on short notice.
Tenant Troubles
Depending on how much of your space will be shared, the lack of privacy could get old. And even with careful vetting, personality differences (noise, cleanliness, tenant disputes) may become a problem.
Occupancy Instability
If you’re relying on the extra rental income to manage your mortgage payments, keeping your extra room, basement apartment, or multiple units occupied could make or break your ability to hold on to your home. When you budget for income with a long-term tenant, it’s wise to assume your property won’t be rented 100% of the time.
Increased Wear and Tear
With multiple occupants, with or without pets or children, your property might show more wear and tear than a standard owner-occupied home in the neighborhood. This could mean higher maintenance and repair costs than you expected, or it could lower the resale value if you decide to move on.
Recommended: Home Mortgage Calculator
The Takeaway
If all goes well, house hacking can provide an effective way to help pay off your mortgage, build equity, expand your real estate portfolio, and grow your net worth. But making it work can take patience and planning. Beginners may want to start with small steps — renting to just one or two housemates or tenants, for example, and becoming familiar with the appropriate financing options for your needs — before building up to a bigger investment.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
What financial factors should I consider when house hacking?
If you plan to purchase a home or building, it’s a good idea to be sure the loan type and terms fit both your short- and long-term goals, that the property costs will fit with your budget, and that the amount you expect to net from your rentals makes sense for the time and effort you’ll put in and the risk you’re taking.
Are there risks involved with house hacking?
Yes, there are both personal and financial risks involved with house hacking.
Can I house hack with a mortgage?
Absolutely. Using the income from your house hack to help pay down your mortgage is typically one of the primary goals of investors who choose to use this strategy.
Photo credit: iStock/andresr
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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SOHL-Q125-063
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