What is House Hacking? | Kickstart your path to Financial Freedom

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An awesome way to dip your toes into real estate is to harness the power of House Hacking. The idea is to generate rental income from your personal residence to help lower your monthly living expenses or even live for FREE! If done properly, the cash flow you receive can cover your entire mortgage bill.

I am always asked, “What’s the best way to get started in real estate investing?” Well, if I only had one choice, it would 100% be a house hack. This is especially true if you don’t have much capital to invest. House Hacking is possible in virtually any market you plan to live in.

Learn how to build your wealth, lower your expenses, be frugal and gain the necessary experience you need to start your path to financial freedom.

1. What makes House Hacking So Great?

Everyone should house hack if they are serious about their financial independence and freedom. It can exponentially increase your wealth and reduce your living expenses at the same time. Explore the benefits below to help you understand why.

Little to No Money Down

little to no money down payment

Banks typically require a 20% down payment for investment properties. To the newbie investor, this is an unrealistic option and causes many aspiring landlords to give up or never get started. However, financing a primary residence (owner-occupied) for a house hack can offer lucrative terms.

FHA loans allow the borrower to put down as little as 3.5%, while USDA (United States Department of Agriculture) and VA (Veterans Affairs) loans offer 0% down if you qualify. Down payment equity is the reason why many investors never get started. Using your personal residence will help kickstart your investing career.

Cash Flow

Let’s be honest, we could all use a little extra money every month. Depending on the property you own, you can be renting the spare bedrooms/units for additional income. Save the leftover cash each month to purchase your next investment property in the future.

Experience Being a Landlord

House hacking will give you the hands on experience of being a landlord. This is important because it will give you a taste of what landlording is like, and if you want to continue pursuing real estate as an investment path. You will gain this experience without the risks of going out and purchasing a rental property. 

Learn how to: 

  • Advertise your units/rooms for rent
  • Accept and screen applicants
  • Perform background checks
  • Write leases
  • Bookkeeping
  • Handle vacancies

Lower Expenses

house hacking savings

The number one living expense is your mortgage and your tenants or roommates are going to pay it for you! 

How much more free time could you gain by not having to pay 1000$ every month to the bank? 

How much money could you stash away each year to put towards the next investment? 

These are the questions you need to ask yourself. House hacking also enables you additional tax write-offs such as mortgage interest. It’s not just about earning rent money.

Pick Your Strategy

There is no perfect strategy when it comes to house hacking. Whichever option works best and is in your comfort level should be the one you choose. It’s all about living frugal, earning additional income and gaining valuable experience in real estate investing. 

The path to a better life can and should start with determining the strategy that will work best for you. Make more and spend less.

Single family (by the room)

single family investment property

A single family home will work best if you will be living alone and don’t mind having roommates. You will be sharing personal areas of your home such as the kitchen and bathrooms.

Not everyone is going to be comfortable with this option so you will have to decide for yourself. If you live in a single family home, list the spare bedrooms for rent on Craigslist and roomates.com.

Multifamily (by the unit)

multi family rental property

A multi-family home (my personal favorite) is typically going to be a 2-4 unit structure that can still be purchased with a residential mortgage lender. Anything more than 4 units will not qualify for the 0%, 3.5% and 5% down payment options.

Duplexes, triplexes, and quads often provide better returns than renting out the rooms in a single family. It’s not uncommon to find a duplex that pays for itself with only one of the units being tenant occupied while you are living in the other. You can list these additional units for rent on Craigslist, Zillow and apartments.com to name a few.

Short Term Rental (AirBnB)

airbnb short term rental

AirBnb is a short term rental listing service. You can list a bedroom, unit or entire home for rent on their website. Many people who travel prefer to use Airbnb over hotels because it typically saves them money or the hotel in the area is fully occupied. You can even cater your property to a certain demographic on Airbnb, giving you a competitive advantage.

Target larger families who need more than one room, or someone who wants the comforts of having a kitchen to make home cooked meals while traveling.

Airbnb’s will require more work, and is not as passive as simply having one tenant pay you once each month. Nightly rentals have much higher turnover obviously and will also require more hands on work and management. It’s a far less passive strategy.

What Makes a “Good” House Hack

If you don’t already own your house or you are looking to purchase one in the near future, there are a few things to consider before picking one out. Price and location can make or break a deal before it even gets started.


If financial freedom is the end goal, finding the best value should be a priority during your deal search. Just because you will be getting additional income from rents each month, doesn’t mean you should purchase the biggest and most expensive property in your budget. In fact, you should have the complete opposite mindset.

You want to find as much value as possible. Using the 1% rule can help you quickly screen properties.

1% Rule: If you were to rent out a home, the monthly income equals 1% of Purchase price or more.

Depending on the market, it may not always be feasible to reach that 1% mark and that’s okay. It’s more of a guideline than an actual rule. The ideal scenario is to have your entire mortgage paid for by the income you receive from the tenants living with you.

When you are searching for a deal, you can ask your lender what the estimated monthly expenses would be for the mortgage, insurance and property taxes. You will use this info to determine whether a certain property is a good deal or not.


House hacking property location

The location of your property is very important to determine how effective your house hack will be in lowering your living expenses. The location obviously affects what kind of home prices you will be looking at in the area. But it can also determine a few other important factors.

Depending on the market, there may or may not be multi-family properties. Or all of the duplexes might be located in C and D class neighborhoods that you don’t want to reside in.

Another thing to consider is the city and HOA restrictions. Many cities and municipalities don’t allow short term rentals (Airbnb). And if your property has a homeowners association, it’s not uncommon for an HOA to forbid renting during the first year of ownership or allow it at all.

You need to perform your due diligence before jumping into any deal. Just because the numbers work, doesn’t mean you should purchase a home without doing your homework.

You don’t want to be stuck with a home costing you more than anticipated because you’re not allowed to rent it out, totally defeating the purpose of house hacking in the first place. This would be very detrimental to your goal of attaining financial freedom.

House Hacking Case Study

Let’s say you purchase a 3/2 house in a B class neighborhood for $150,000. This is about the average price for a typical home in my area (Martin County, FL) Since this is going to be your primary residence, you can use an FHA loan to purchase the home. This will allow you to put only 3.5% down to move into the property ($5,250 not including closing costs.) 

Here is an example breakdown of the monthly expenses ($150,000 purchase price with 3.5% down at 4% APR):

  • Principal and Interest: $691
  • Property Taxes: $165
  • Home Insurance: $75
  • Mortgage insurance/PMI: $118

If you do the math, your monthly expenses will add up to $1049. Now in my local area, I constantly see rooms being advertised for rent for $500 on craigslist and roomates.com.

This means that if you were willing to rent out the other two bedrooms, the cost for you to live in that home on a month to month basis will only be $49 total not including utilities. Obviously these are just the raw numbers, and we aren’t taking maintenance and CapEx into consideration.

But I hope this can help paint the picture for you. Along with reducing and almost completely eliminating your living expenses, you will also benefit from all of the other wealth building powers that come to fruition when you own real estate. 


If financial freedom is your goal, then house hacking is a great first step in the right direction. It has low barriers of entry (only 3.5% down FHA loan) and helps reduce or eliminate your biggest living expenses. You’re going to benefit from the rental income you receive, the loan pay down each month, tax write offs, and maybe even some appreciation if you are lucky.

It’s basically a no brainer if your looking to grow your wealth, and you have limited capital available to invest.

It’s time to start hacking your way to financial independence!

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