House hacking is buying a small multifamily property (2–4 units), living in one unit, and renting the others. Done correctly, rental income covers your mortgage — you live for free or near-free while building equity. It's the most accessible path to real estate investing for people without significant capital.
The financing advantage of house hacking
| Property type | Down payment (investment) | Down payment (owner-occupied) |
|---|---|---|
| Single family | 20–25% | 3–5% (conventional) |
| 2–4 unit (duplex, triplex, quad) | 20–25% | 3.5% FHA / 5% conventional |
FHA loans allow 3.5% down on 2–4 unit properties if you live in one unit. On a $400,000 duplex: $14,000 down vs $80,000–$100,000 as a pure investment. You're getting investment financing at homeowner prices.
The cash flow math
Example: $420,000 duplex in a mid-tier market. 5% down ($21,000) at 6.8% on $399,000 loan:
- Monthly mortgage PITI: ~$3,100
- One unit market rent: $1,500/month
- Your effective housing cost: $1,600/month
- Equivalent apartment rent in same area: $1,800–$2,200/month
You're paying less than market rent while building equity and owning an appreciating asset. In higher-rent markets: rental income may exceed the mortgage entirely.
FHA house hacking requirements
- Must occupy one unit as primary residence for at least 1 year
- Credit score: 580+ for 3.5% down; 500–579 for 10% down
- Mortgage Insurance Premium (MIP): 1.75% upfront + 0.55%/year
- Property must be in livable condition (FHA minimum property standards)
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