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House Hacking

Buy a 2-4 unit, live in one, rent the rest.

Enter the price, your loan, and the rent the other units would bring in. We’ll show how much of your mortgage the tenants cover, what living there costs you each month, and how that compares with renting.

  1. Live in one unit, rent the others

    A building with 2 to 4 units counts as your home if you live in one of them. That lets you use home-buyer loans (as little as 3.5% down with FHA or 5% conventional) instead of investor loans, which usually need 25% down.

  2. Your full monthly payment

    Each month you pay the loan plus property tax and insurance, together called . With a small down payment you also pay mortgage insurance: on an FHA loan or on a conventional one.

  3. Tenants’ rent offsets it

    We subtract the rent from the other units, after setting some aside for empty months and repairs. What’s left is your real cost to live there, which we compare with renting a similar unit yourself.
The defaults describe a typical duplex. Check the rent per unit against similar units listed nearby, since it decides how much of your payment the tenants cover. House hacking strategy walks through financing, the move-out plan, and the catches.
Number of units
You live in 1, rent 1Loan type
The property and your loan

The price, your down payment, and the mortgage. Property tax and insurance are for the whole building.

$
% of price
%
yr
$/ yr
$/ yr
% / yr
Rent from the other units

What tenants in the units you don't live in would pay, minus a cushion for empty months and repairs.

$/ mo
%
% of rent

Your monthly housing cost (after rental income)

$2,853

Your full payment () is $4,332. Rental income covers $1,479 of it, leaving you to pay $2,853/mo for your own unit.

Full monthly payment

$4,332

loan $3,360 + tax, insurance, MIP

Rent you keep

$1,479

1 unit × $1,700, minus vacancy and repairs

Your monthly housing cost

$2,853

payment minus the rent you keep

Extra cost vs renting

$1,153

vs paying $1,700 for a similar unit

What this means

After a cushion for empty months and repairs, the 1 rented unit would cover about 34% of your $4,332 monthly payment. That costs about $13,834 a year more than renting a similar unit for $1,700. Part of that extra goes to paying down your loan, which builds equity, but it’s still more cash out each month. Living there also means you put down $27,500 instead of the $137,500 (25%) an investor would usually need for the same building.

This covers monthly cash only. It doesn’t include property management (you manage it yourself), utilities you pay as the owner, or your time as a landlord. Lenders usually count about 75% of the other units’ market rent toward your income when you apply.

Why house hacking works

A 2 to 4 unit property counts as residential when you live in one unit. You get owner-occupied terms (3.5% to 5% down, no investor rate premium) instead of investor terms (25% down and a rate about 0.5% to 0.75% higher, plus extra ).

The rent also helps you qualify. Lenders typically count about 75% of the market rent from the other units as income when figuring your , which raises how much you can borrow.

The usual plan is to live in one unit for 12 months (a loan requirement), then move out and rent that unit too. You then own a fully rented property you bought with a home-buyer down payment.

The downside is living next to your tenants as their landlord. They will knock on your door at 11pm, you share walls and yards, and evictions are stressful. In many markets 2 to 4 unit properties are also harder to find.

Not included: tenant screening time, tax benefits on the rented units (can be large), higher insurance for multi-unit buildings, separate utility metering costs, and the time cost of being a landlord. Rental income and depreciation go on Schedule E, which a CPA can help with.

Results are estimates based on your inputs and the assumptions on this page, not quotes or advice. A lender, servicer, or tax advisor will give you different numbers. Disclaimer

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Terms used on this page

House hacking mixes home-buying and landlord terms. Each one used on this page is defined below.

House hacking
Buying a small multi-unit property (2 to 4 units), living in one unit, and renting the others so the tenants’ rent pays down your mortgage.
Owner-occupied
A home you live in yourself. Owner-occupied loans have lower down payments and rates than investment-property loans, which is the core advantage of house hacking.
PITI
Principal, interest, taxes, and insurance: the full monthly mortgage payment. Mortgage insurance gets added when it applies. More
FHA loan
A government-insured mortgage that allows 3.5% down with a credit score of 580 or more, including on 2 to 4 unit homes you live in. More
MIP (FHA mortgage insurance)
FHA’s mortgage insurance: a 1.75% upfront fee usually added to the loan, plus a yearly charge that lasts for the life of the loan when you put down less than 10%. More
PMI (private mortgage insurance)
Mortgage insurance on conventional loans with under 20% down. It protects the lender and can be removed once you owe 80% of the home’s value. More
Vacancy
The share of the time a rental unit sits empty between tenants. One empty month is about 8% of a year’s rent.
Capex (capital expenditures)
Large, infrequent replacements like a roof, heating system, or water heater. Landlords set aside part of the rent each month to pay for them.
Self-sufficiency test
An FHA rule for 3 and 4 unit homes: 75% of the property’s total projected rent, including a fair rent for your unit, must cover the full monthly payment.

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