House Hacking 101

Key Takeaways

• Eliminate Housing Costs: By renting out units in a property you live in, tenants pay your mortgage.
• Low Down Payment: Use FHA loans (3.5% down) to enter the real estate market without needing $50k cash.
• Landlord Experience: Learn the ropes of property management while you live on-site.
• Exit Strategy: Move out after a year, keep it as a pure rental, and repeat.

Introduction

Housing is usually 30-40% of a person's budget. It is the single largest drag on your ability to save. What if you could delete that line item? Or, better yet, what if your house paid you to live there?

House Hacking involves buying a multi-unit property (duplex, triplex, fourplex), living in one unit, and renting out the others. It is the most powerful accelerator for net worth available to the average person.

Deep Dive: Live for Free?

The Math of Free Living

Let's look at a realistic scenario for a Triplex (3 Units):

• Purchase Price: $450,000
• Total Mortgage (PITI): $3,000/month
• Rent from Unit 2: $1,400
• Rent from Unit 3: $1,400
• Your "Rent": $200/month

You are now living in a property you own for $200. You are saving $1,500+ compared to renting an apartment. Plus, you are getting tax benefits (depreciation) and loan paydown.

FHA Loans: The Secret Weapon

"But I don't have 20% down!" You don't need it. In the US, you can buy a multi-family property (up to 4 units) with as little as 3.5% down using an FHA loan, provided you live in one of the units for at least one year.

• Down payment on $400k: Just $14,000. This is achievable for most determined savers.

The Risks and Realities

It's not all passive income and roses.

1. Tenants: You are a landlord. Toilets break. People are loud at 2 AM. You share walls with your customers.
2. Vacancy: If units are empty, you pay the full mortgage. You must have cash reserves.
3. Maintenance: You are responsible for the roof, the boiler, and the driveway.

Summary

It requires work. It requires sacrifice (you might live in a worse neighborhood to start). But if you do this from age 25 to 30, you will likely be financially free for the rest of your life.