House Hacking
Buy a 2-4 unit, live in one, rent the rest.
Rental income from other units
Your monthly housing cost (after rental income)
$2,878
Total PITI is $4,357, of which $1,479 is covered by rental income, leaving you to pay $2,878/mo for your own unit. Compared to renting an equivalent unit at $1,700, you save $-14,140/year — and you’re building equity.
Total PITI
$4,357
P&I $3,303 + tax/ins/PMI
Effective rental income
$1,479
1 unit × $1,700 − vacancy/maint
Your monthly housing cost
$2,878
after rental income
Savings vs renting
$-1,178
vs paying $1,700 for similar
Why house hacking works
The financing edge: 2-4 unit properties qualify as residential (1-4 units) when you live in one. You get owner-occupied loan terms (3.5-5% down, ~6-7% rate) instead of investor terms (25% down, ~7-8% rate). On a $550k duplex this is a $130k+ down payment difference.
Rental income counts toward qualification: lenders typically credit ~75% of market rent from the other units toward your DTI, dramatically increasing how much house you can afford.
The standard playbook: live in unit 1 for 12 months (loan requirement), then move out and rent that unit too. Now you have a full-rental cash-flowing property you bought with 5% down.
The catches: being a landlord-neighbor (tenants WILL knock on your door at 11pm), shared walls/yards, eviction headaches, and 2-4 unit properties are harder to find in many markets.
Doesn’t model: tenant screening time, depreciation tax benefits (significant!), higher insurance for multi-unit, separate utility metering costs, the time cost of being a landlord. Talk to a CPA about Schedule E income/depreciation.