House hacking

What house hacking is

Buy a 2-, 3-, or 4-unit property as an owner-occupant. Live in one unit. Rent the others. The rental income covers most or all of your mortgage.

Why it works financially

Owner-occupied loans (FHA 3.5% down, VA 0% down, conventional 5% down) are dramatically cheaper than investment loans (typically 20-25% down). House hacking gives you the cheap loan AND the rental income.

The math (simplified)

A $400K duplex with $50K total down payment. Mortgage payment ~$2,500/mo. One unit rents for $1,800. Your real housing cost: $700/mo, in a property you own.

What to know

• Lenders count 75% of projected rents toward your qualifying income.
• After 1 year of owner-occupancy, you can typically move out and keep it as a rental.
• Property management for a small multifamily is doable yourself, especially when you live there.
• 4-unit is the max for owner-occupant financing — at 5 units it becomes commercial.

Risks

• Bad tenants. Screen rigorously.
• Major repair surprise. Reserve 1% of property value per year.
• Vacancy. Budget for 1 month/year of empty.