House Hacking: Live Free, Build Wealth with 3.5% Down

House Hacking: The Math That Works

House hacking lets you buy a multifamily property with just 3.5% down (FHA financing), live in one unit, and have tenants pay your entire mortgage. You build wealth while living for free.

The simple framework:

1. Buy duplex/triplex/fourplex with 3.5% down (FHA)
2. Live in one unit
3. Rent out remaining units
4. Tenants' rent covers your mortgage
5. You build equity while living rent-free

Duplex Example: $300,000 Property

The result: You live for $500/month instead of $1,200/month renting, PLUS you build $12,000+ in equity annually.

Why House Hacking Works

Key benefits:

• Low entry cost: 3.5% down vs 20% traditional
• Leverage: Tenants pay principal = your equity
• Learning: Live in property, see operations firsthand
• Savings: Cut housing costs by 50%+ immediately

Three House Hacking Levels

As you increase units, your housing cost decreases. At the fourplex level, the property covers your housing AND generates profit.

Fourplex Financial Example

$480,000 fourplex with FHA financing:

Monthly Income: $4,175

• Unit 2: $1,350
• Unit 3: $1,400
• Unit 4: $1,425

Monthly Expenses: $3,852

• Mortgage: $3,100
• Property management (8%): $334
• Maintenance & vacancy reserves: $418

Monthly Result: +$323 profit Annual Result: +$3,876 + equity building

The owner lives for FREE and makes $323/month.

FHA House Hacking Rules

Occupancy requirement: You must live in one unit as your primary residence for at least 1 year. Move in within 60 days of closing.

Self-sufficiency test (3-4 units): FHA uses 75% of expected rental income in debt-to-income calculations. Property must be able to support itself mathematically.

Reserve requirement (3-4 units): You need 3 months of PITI in savings after closing. Example: $3,100/month PITI = $9,300 required in reserves.

FHA Eligibility: Properties must meet FHA appraisal standards and you must occupy one unit as your primary residence for at least one year.

These rules ensure you buy sustainable properties and have financial cushion for vacancies.

The Comparison: House Hacking vs Renting for 10 Years

House hacking turns your housing expense into an investment.

Is House Hacking Right for You?

House hacking works if you:

• Want to invest with minimal down payment (3.5% vs 20%)
• Are willing to live with tenants for 1–3 years
• Want to learn landlording in a low-risk environment
• Need to reduce housing costs while building wealth
• Can handle minor property management tasks

It's NOT for you if:

• You need complete privacy or solitude
• You're uncomfortable with tenant interactions
• Your income is unstable (you need financial cushion)

Related Questions Investors Ask

• What is house hacking and how does it work?
• Can I buy a duplex with FHA financing?
• How much money do I need to house hack?
• What are the FHA occupancy and reserve requirements?
• Which Capital Region neighborhoods are best for house hacking?