The Ultimate Guide to House Hacking

How I Got Started

If you’ve looked around my website, you already know a little about me, so today I’d like to focus on diving deeper into how my journey actually began. Since a young age, I’ve been interested in real estate. From looking at houses online to watching my mom practice her interior design degree around our house. She would renovate and paint rooms and I just thought the whole process of making houses look nicer was really cool.

When Liz and I got married, as with most young couples, we had no money and decided to start saving. Our initial goal was to save enough money to buy a house in cash and live rent free. So we lived on my salary and saved all of Liz’s earnings to set aside for our first home purchase. 

Lots of Research

As we began saving, I began researching and went back to my first love: real estate. I listened to podcasts and heard them tossing around the term “house hacking” which is where you buy a multi-unit, live in one unit and rent out the others essentially living for free. Well, wasn’t that our plan all along? 

This house hacking idea seemed like it could expedite our goal of living for free. So, even though my wife and I had agreed that our goal was to buy a house for cash, only a few months later I was suggesting that we should scrap that plan and buy a duplex where we could live on one side and rent out the other instead. Amazingly, she approved. 

As I continued with my research, I found out with house hacking, you could buy a quad (or a 4-unit) and still get a traditional loan (I wouldn’t need a business loan) under my personal name.

A traditional loan refers to:

  1. An FHA loan – 3.5% down payment
  2. Conventional Loan – as low as 5% down if you’re going to live in the house or 20% if you’re NOT going to live in the house.

In the eyes of the regulations for the government, an individual can do a normal loan for a property with up to four units.

Again, I approached my wife and suggested that maybe we should buy a triplex or 4-plex and not just live for free, but MAKE money and live. I know… I put her through the ringer with all my ideas and changing plans, but she was totally awesome (still is) and was completely supportive of this new plan.

I began looking into it further, we continued saving money, and we eventually found a triplex. Now, a lot of people want to get into house hacking, but how do you actually find the right complex for the correct cash flow? Great question!

How to find the right property for house hacking

I’ll admit, finding the right property can be a bit more complicated. My process included:

  • Look at every day.

I made it a habit to look at Zillow at least once every day to see any new listings. During that time, houses were moving pretty quickly on and off the market in Lancaster. If we found something, we were going to have to move fast.

  • Take a walk.

Liz and I took walks in a few different areas of Lancaster to see what the neighborhoods were like. We were able to hone in on the location we were very interested in actually living and focused our attention on any houses that came on the market before they were ever listed.

  • Pray hard.

I’ll be honest, I was praying pretty hard that we would find something and shortly after, I was looking on Zillow and saw a triplex that said “Coming Soon.” It wasn’t even on the market yet.

I jumped in my car that very hour and drove to the house. When I arrived, the owner was there so I got out to meet him and said, “I’d really like to buy your house.” So, he gave me a tour of the house right then and when I was finished with my walk-through, I told him not to sell it to anyone else because I really wanted it. Since he was flipping it, it sounded like a good deal to him, too. And that’s how we got our first multi-unit property.

Now, not everyone is going to have an experience like mine; but my aim isn’t to replicate my experience but simply share relevant pieces of information so you can have your own house hacking adventure.

Things to keep in mind for your first house hacking property

  1. Look for a 4-plex or under so you can do an FHA personal loan, and only put down 3.5% to acquire the property.
  2. You need to find a house with a vacant unit in it so you can move in and rent out the other.
  3. You must live on the property for at least one year if you’re going to go with an FHA loan. 
  4. If you get a house that is fully rented, you won’t be able to move into it unless you kick someone out. The question is, do you really want to start out your journey by potentially incurring someone’s wrath and dealing with any messes they choose to leave behind? It’s better to not volunteer for that headache if you don’t have to.
  5. Make sure you run the numbers before signing a contract. You want to calculate what you need to charge your tenant(s) to make sure it covers more than what you’re paying on your mortgage. 

Our first house hack

That first triplex we got because I drove there and met the owner, well, we got the house under contract and I made sure to run the numbers on the house to make sure that renting out the other two units would cover the whole mortgage. 

The way it worked out, with taxes and everything, I paid $2,182 per month and we collected a total of $2,350 per month. Now, while I didn’t actually make money because of the expenses and fixing stuff, we were technically making money to live in one of the units. We were now successfully house hacking!

Life goes on

As Liz and I lived there, we fixed it up really nice and it was a great starter home. But, it was still only a one-bedroom and we wanted some extra room to grow. 

I wanted to buy something bigger but someone told me, “Now that you already own one, there’s no way you’ll be able to buy a second one.” Whenever people tell me things are impossible, I like to be a punk and try anyway. So, I started researching again. I wanted to see if it was possible. 

Now, it turns out that at that exact time, within a couple of days, the Trump administration had passed the new “Opportunity Zones.” This is where the legislation deemed different areas in every state “opportunity zones.” If you purchased the property in one of those zones, you could get tax benefits.

What is an opportunity zone?

The government combed through each state and designated areas in which they wanted to create new investments. This is huge for house hacking. These would be places that need a bit more help, or are “economically distressed.” The goal was to encourage people/investors to purchase properties and fix them up, helping make the streets a little bit nicer. Virtually every county in America has Opportunity Zones. 

If you go to Opportunity Now and click on “Explore Your Community’s Opportunity Zones,” you’ll see a map with areas highlighted in pink. It shows you the streets in which you could invest and get “preferential tax treatment.”

Well, I found a loophole in the new law which meant I could buy a second property with the same regulations that I had for the first. Usually, once you buy the first unit, the regulations change if you want to buy multiple properties UNLESS you’re making a lot of money. Well… we weren’t. We did have a double income, though, so we were able to save some money but it turned out to be a wash.

That technicality allowed us to buy a duplex in an Opportunity Zone in Lancaster City with the same regulations as before. This property had a bigger space for us — the upper floor was 3 bedrooms, 1 bathroom and the lower floor was 1 bedroom, 1 bathroom. We were able to buy this second unit for 5% down and acquired that property while still owning our triplex.

Now the crazy thing is before we bought our property, the government learned about this loophole in the law and said that kind of transaction wasn’t allowed. They chose to honor those few who were already under contract. There was a two-month opening when I was looking for a property, God allowed me to find a loophole, and then the window closed.

Liz and I have been able to house hack twice now. We are now collecting over $3,000 on the property every month and are only paying $2,182 on the mortgage.

What is House Hacking?

House hacking is a concept where you buy a property with at least two separate units (and up to four units) and, while you live in one, you rent out the others. The purpose is to charge enough rent to cover the entire mortgage payment enabling you to live rent-free. 

Things to Consider:

  • You must actually live in the house for at least one year.
  • Find a place with a vacant unit so you don’t have to start your venture off as the “bad guy” for immediately evicting someone.
  • Crunch the numbers beforehand so the rent covers everything. You should, at the least, be able to live rent-free… or, even better, make money.
  • You can get some special bonuses when you buy a home in an Opportunity Zone, like deferred taxes or tax write-offs. But don’t take my word for it… check the law out for yourself.

How You Can Start House Hacking:

  1. Read the book Rich Dad, Poor Dad. This gives you a very high-level idea about money and buying assets and not liabilities.
  1. Listen to the Bigger Pockets Podcast. It’s a real estate show with a lot of value. Their niche is ‘real estate for newbies.’ They have a great podcast with tons of episodes on how to get started in real estate and have 30+ episodes on house hacking alone.
  1. Call someone who has successfully house hacked. Regardless of where you live, if you Google search “real estate investors near me,” you’ll find Facebook groups of investors. You can join the group, introduce yourself, and ask if anyone would be willing to answer your questions about house hacking.
  1. Familiarize yourself with other one-to-four unit houses that have sold in your area. If you go to and filter “sold multi-units.” Look at what other units are selling for noting the condition, from ‘needs lots of work’ to ‘really nice.’ Figure out what the going prices are for your area specifically so you can gauge whether what you’re looking at is a good deal. Remember, it’s not about what a seller is asking for… it’s about what people are willing to pay.
  1. Figure out what you want. Determine what’s best for your life and what your goals are. House hacking can look completely different from one person to the next. Sometimes the best move is buying a duplex if you don’t have much time to spend. If you have the time to give, buying a 4-plex could be the best decision for you. 
  1. Start making offers. Just consider your goals and start.

Tips & Tricks

  1. When you’re making an offer, go for the FHA loan and only put 3.5% as a down payment. 

My goal was to invest as little money out-of-pocket as possible to acquire the property. The alternate point of view on this is to put 20% down so you’re not over-leveraged, but you need to figure out what your own goals are and make the decisions that are right for you.

  1. When you make an offer on a multi-unit, ask for “Seller’s Assist” on the contract.

A “Seller’s Assist” means the seller will take money off the purchase price to help you with the down payment. I did this on my house and I was able to buy my $300,000 triplex for 3.5% down which comes to about $18,500, including realtor fees and closing costs. My “Seller’s Assist” dropped my cost by about $6,000 so I ended up only paying $12,000 as a down payment. 

  1. Look for a multi-unit with at least one vacant unit that you can move into right away.

Don’t start off as the mean landlord that kicks people out if at all possible.

  1. Decide your end goal before you begin searching.

Depending on your life situation, the best counsel may be to buy a duplex so you have less to manage. If, however, you have the flexibility, get a 4-plex. It’s more work, but you’d be able to manage and the rewards would be much greater.

  1. There are ways to easily manage properties yourself.

Dealing with bad tenants comes with the territory, but it’s really not that difficult to manage. There is a free management software I’ve used (called Cozy) that allows you to collect payment and write messages to your tenants. A software platform like this can be helpful for house hacking or for traditional landlords. For the first few years, I did all the work myself and was putting in about four hours a month managing five units.

There is another free tool available on Zillow. When you find yourself with a vacancy,  you can list it on Zillow for free. Anyone who is interested in viewing the unit has to submit an application first (costing them $25) which details their employment status, credit score, and criminal history. You are vetting a new tenant for free. This system has cut back on a lot of potential problems for me. 

  1. Treat everyone exactly the same.

It doesn’t matter who your tenants are. Never show preferential treatment. If someone tells you they aren’t getting paid for another week and the rent check will be late, tell them that’s fine… but they’ll still need to pay the late fee. You have other tenants so you must be fair, even when house hacking. There needs to be a little bit of a sting for certain behaviors. If you’re too nice, they’ll start taking advantage of you.


Share this post

Share on facebook
Share on twitter
Share on linkedin
Share on pinterest
Share on email