If you are serious about getting into real estate investing, there is one strategy that stands above the rest: house hacking. This method allows you to buy a duplex, triplex, or fourplex, live in one unit, and rent out the others to cover your mortgage and expenses.
With house hacking, you can significantly reduce your housing costs, build equity, generate rental income, and gain real-world experience as a landlord. All while living in your own investment property.
For first-time investors, there is no better way to start. Let’s break down why house hacking is the smartest way to acquire your first investment property and set yourself up for long term wealth.
1. House Hacking Makes Financing Easier
One of the biggest challenges for new investors is securing financing, but house hacking makes it much more accessible than traditional real estate investments.
Helps with Financing
- Lenders prefer multifamily properties with multiple income streams. A single family home has just one tenant, while a duplex, triplex, or fourplex has multiple renters, making it a lower risk investment for banks.
- Rental income counts toward your loan qualification. Most lenders will allow 75% of the rental income from your additional units to be factored into your mortgage application, helping you qualify for a larger loan.
- You can use an FHA loan with a low down payment. Unlike conventional investment property loans that require 20-25% down, an FHA loan allows you to buy a multifamily property with as little as 3.5% down and lower interest rates.
Example of House Hacking with an FHA Loan
- Triplex Purchase Price: $400,000
- Down Payment (3.5% FHA Loan): $14,000
- Rental Income from Two Units: $3,000 per month
- Mortgage Payment: $2,500 per month
With this setup, your tenants cover your entire mortgage payment, allowing you to live for free or even generate extra cash flow.
2. Reduce or Eliminate Your Housing Costs
The average person spends 30-50% of their income on housing expenses, whether that is rent or a mortgage. House hacking allows you to drastically cut or eliminate that cost, freeing up money to invest in other opportunities.
Comparison: Single Family Home vs. House Hacking a Duplex
Scenario 1: Buying a Single-Family Home
- Purchase Price: $350,000
- Loan Type: FHA, 5% down
- Monthly Mortgage Payment: $2,200
- Rental Income: $0
- Total Housing Expense: $2,200 per month
Scenario 2: House Hacking a Duplex
- Purchase Price: $350,000
- Loan Type: FHA, 3.5% down
- Rental Income from One Unit: $1,500 per month
- Total Housing Expense: $700 per month
By house hacking a duplex, you reduce your housing expense from $2,200 to just $700 per month. And if you buy a triplex or fourplex, you could live for free.
Instead of spending years paying off a mortgage without earning anything back, house hacking turns your primary residence into an income-producing asset.
3. House Hacking Helps You Build Wealth and Equity Faster
With a traditional home purchase, you pay the full mortgage and property expenses out of pocket, which limits how quickly you can build equity. With house hacking, your tenants help pay down your mortgage each month, accelerating your equity growth.
How House Hacking Builds Wealth Over Time
- Your tenants pay your mortgage, reducing your financial burden.
- You build equity as the property appreciates in value.
- You gain tax advantages, including deductions on mortgage interest, property depreciation, and expenses.
House hacking is not just a short term solution to reduce housing costs, it is a long term strategy to create generational wealth through real estate investing.
4. Gain Real-World Landlord and Property Management Experience
One of the biggest challenges for new investors is learning how to manage rental properties effectively. House hacking provides hands-on experience without the risks of managing a property from a distance.
Skills You Develop as a House Hacker
- Tenant screening and lease agreements
- Rent collection and financial management
- Handling maintenance and repairs
- Understanding landlord-tenant laws
Many investors jump into real estate without understanding the responsibilities of being a landlord. House hacking lets you learn on a small scale before expanding into larger multifamily properties.
5. House Hacking Can Work for Short Term Rentals Too
House hacking is not just limited to long-term tenants. Many investors maximize their rental income by offering short term rentals through Airbnb or other platforms.
Short-Term Rental vs. Long-Term Rental Income
- Long-Term Rental: $1,500 per month per unit
- Short-Term Rental: $120 per night per unit
- If booked 15 nights per month: $1,800 per unit
By converting one or more units into short-term rentals, you can increase your cash flow significantly while still keeping your primary residence in a high performing property.
Again, House Hacking is the BEST Way to Start Investing
House hacking is one of the most effective and accessible ways to start your journey as a real estate investor.
Key Benefits
- Lower your housing costs or live for free
- Use FHA financing to get started with a low down payment
- Build equity faster than with a single-family home
- Gain hands on experience managing rental properties
- Set yourself up for larger real estate investments in the future
If you are ready to start house hacking and secure your financial future, here’s what to do next:
- Start researching duplexes, triplexes, and fourplexes in your area.
- Get pre-approved for an FHA loan to understand your budget.
- Join a real estate investment group to connect with experienced investors.
- Take action and make your first house hack happen.
Its not just a strategy, it’s a proven pathway to financial freedom. The best time to start is now.
If you want to learn more about investing in real estate, check out this Complete Guide to Real Estate Investing.
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