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)
$2,853
Total PITI is $4,332, of which $1,479 is covered by rental income, leaving you to pay $2,853/mo for your own unit. Compared to renting an equivalent unit at $1,700, you save -$13,834/year, and you’re building equity.
Total PITI
$4,332
P&I $3,360 + tax/ins/MIP
Effective rental income
$1,479
1 unit × $1,700 − vacancy/maint
Your monthly housing cost
$2,853
after rental income
Savings vs renting
-$1,153
vs paying $1,700 for similar
Why house hacking works
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 that's roughly a $110,000 down payment difference at the same purchase price, before factoring in LLPA premiums on the investor side.
Rental income counts toward qualification: lenders typically credit ~75% of market rent from the other units toward your DTI, which raises how much house you can afford.
The usual sequence: 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 (can be large), 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.