What is house hacking?
House Hacking Definition
Concept: Buy a multi-unit property, live in one unit, rent out the others
Goal: Rental income covers most/all of your housing expenses
Benefits: Owner-occupied financing, forced savings, real estate education
Timeline: Live there 1+ years (loan requirement), then repeat or convert to rental
House hacking strategies
Strategy 1: Multi-Unit Properties
Property types: Duplex, triplex, fourplex (2-4 units max for owner-occupied loans)
You live in: One unit (often the best or worst unit)
You rent out: 1-3 other units to cover mortgage
Best for: Higher income areas, established rental markets
Strategy 2: Single-Family Roommates
Property types: 3-5 bedroom single-family home
You live in: Master bedroom/suite
You rent out: Individual bedrooms to roommates
Best for: College towns, young professional areas
Strategy 3: ADU/Basement Conversion
Property types: Single-family with basement/garage/ADU potential
You live in: Main house
You rent out: Converted basement, garage apartment, or ADU
Best for: High-rent areas, zoning allows ADUs
Financing your house hack
Owner-Occupied Loan Benefits
Down payment: 3-5% FHA/VA vs 20-25% investment property
Interest rates: 0.5-1% lower than investment property rates
PMI removal: Possible once you hit 20% equity
Commitment: Must live there at least 12 months
FHA Loan (Most Popular)
Down payment: 3.5%
Credit score: 580+ (3.5% down), 500+ (10% down)
Property limit: Up to 4 units
MIP: 0.85% annual + 1.75% upfront
VA Loan (Veterans)
Down payment: $0
Credit score: 620+ (most lenders)
Property limit: Up to 4 units
Funding fee: 2.15% (first-time), waived for disabled vets
Financial analysis example
Duplex House Hack Example
Property Details
- • Purchase price: $320,000
- • Down payment (5%): $16,000
- • Loan amount: $304,000
- • Rate: 7.5%, 30-year
- • P&I payment: $2,126/month
Monthly Cash Flow
- • Rental income: $1,400
- • Property tax: $400
- • Insurance: $150
- • Maintenance reserve: $200
- • Your net housing cost: $476
Result: Instead of paying $2,200/month rent, you pay $476 while building equity in a $320k asset.
Finding house hackable properties
Multi-Unit Property Search
✓ Look For
- • Separate entrances
- • Separate utilities/meters
- • Similar-sized units
- • Good rental comps nearby
- • Established tenant base
✗ Avoid
- • Shared utilities
- • Extensive deferred maintenance
- • Problematic existing tenants
- • Illegal conversions
- • Areas with declining rents
Single-Family House Hack Criteria
Bedrooms: 3+ bedrooms (4-5 optimal for room rental)
Bathrooms: 2+ baths minimum, 3+ preferred
Location: Near colleges, hospitals, downtown areas
Parking: Off-street parking for multiple cars
Layout: Private entrance to your suite if possible
Managing your house hack
Living with Tenants: Best Practices
Professional Boundaries
- • Written lease agreements
- • Regular rent collection
- • Scheduled property inspections
- • Document all maintenance requests
Personal Boundaries
- • Separate living spaces
- • Clear house rules
- • Emergency contact procedures
- • Respect for privacy (both ways)
Tenant screening for house hacks
Extra Important When You Live There
Income verification: 3x rent in gross monthly income
Credit check: 650+ score, no recent evictions
Background check: Criminal history, especially violent crimes
References: Previous landlords, employers, personal references
In-person interview: Trust your gut about personality fit
Tax implications
House Hacking Tax Strategy
Rental income: Report rental portions as business income
Expense allocation: Deduct percentage of expenses based on rental use
Depreciation: Depreciate rental portion of property value
Home office: May qualify if you manage the property from home
Professional advice: Consult CPA familiar with real estate
Exit strategies
Strategy 1: Convert to Full Rental
Move out after 1 year, rent your former unit
Benefits: Full rental income, tax depreciation, potential appreciation
Strategy 2: Sell and Repeat
Sell after 2 years, use equity for next house hack
Benefits: Primary residence capital gains exclusion, scaling opportunity
Strategy 3: Refinance and Scale
Cash-out refi to fund next investment
Benefits: Keep the asset, extract equity, build portfolio faster
Common house hacking mistakes
Treating tenants like friends
Maintain professional relationships. Personal friendships can complicate business decisions and rent collection.
Inadequate screening
Living with bad tenants is worse than regular landlording. Screen extra carefully since they'll be your neighbors.
Ignoring local laws
Some areas restrict the number of unrelated adults in single-family homes. Check zoning and occupancy laws.
Overpaying for the "perfect" house
The numbers must work. Don't pay extra because you "love" the house—it's an investment first, home second.
Frequently Asked Questions
Can I house hack with an FHA loan if I already used FHA?
You can only have one FHA loan at a time. You'd need to pay off the first FHA loan or use conventional financing for a second house hack.
What if I can't find tenants right away?
Budget for 6 months of full mortgage payments. Market aggressively, price competitively, and consider short-term tenants while searching for long-term ones.
How do I handle repairs when I live there?
Establish normal business hours for non-emergency repairs. Keep receipts and track time spent—you may be able to deduct some costs and time as management expenses.
Is house hacking worth it in expensive markets?
It's often the only way to break into real estate in high-cost areas. Even if cash flow is minimal, you're building equity and gaining experience with little money down.