DRG Real Estate Blog

So, what the heck is house hacking? House hacking is a real estate investment strategy in which you own a multi-unit property (such as a duplex, triplex or fourplex) and live in one of the units as your primary residence. The occupants of the other units pay your mortgage and living expenses through the rent they pay you. You can also house hack a single-family home by renting out a bedroom, basement or outbuilding. The strategy is simple, and the rewards can be great. For the smart strategist, house hacking can be a gateway to a long and successful future in real estate investing.

Here are some of the benefits of house hacking:

Financial Stability

The most obvious benefit of house hacking is the financial reward of living rent- or mortgage-free in a building you own as you offset living costs with the rent you collect from tenants. It can also be a way to purchase real estate in an expensive area that you might otherwise not be able to afford. You can also benefit from tax incentives associated with home ownership and lowering your taxable income.

Financing Options

FHA loans are a great way to finance a house hack. Instead of the hefty 20% downpayment for traditional financing, the federal agency offers loans for as little as 3.5% down if you occupy the property for at least 12 months. Mortgage limits and requirements vary by where you live, so be sure to check their website for more information.

Landlording Training

If your goal is to have multiple properties in your portfolio, it helps to get to know the ins and outs of being a landlord in a building where you currently reside. If you plan on managing the properties including handling all repairs, it’s incredibly convenient to be onsite when issues occur. Other skills to perfect include finding tenants, negotiating leases, working with contractors, and managing rent payments.

Future Purchases

Lenders are more willing to offer you good financing and larger loans if you’ve proven you can successfully own and manage another property. House hacking is a great way to get your foot in the door and prove yourself to lenders. It’s also a good way to get your feet wet as you begin to build up your knowledge of area neighborhoods, maintenance challenges, tenant relationships, and all the skills you must hone if you plan to commit to your smart and rewarding investment in multi-family properties.