House Hacking to Live For Free and Start Real Estate Investing

House hacking can be your best option to get started investing in real estate and create a rental business. Many people who have excellent rental property businesses started by house hacking into their first investment property.

House hacking is basically renting another unit in the property that you own to someone else who will pay you monthly rent. Usually a duplex or a triplex are the most common ways to start house hacking. This way, you have extra units that others can live in while not living actually in your home in a spare bedroom.

For example: If you bought a triplex, you live in one unit and rent out the other two units. Each unit may rent for $800 each which is $1600 a month total in rent. With house hacking, usually your mortgage is equal to or less than what you can rent the other units for.

Mortgage and Expenses: $1500
Rents Collected Monthly $1600
Monthly Profit from Rents: $100

In this house hacking case, you would be making $100 a month to live in your own home!

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What is House Hacking?

House hacking is buying a property, a single-family home, a duplex, a triplex, etc., and renting out a portion of it.

It is getting a place for you to live in and then renting out a portion of that property to somebody else.

When you are investing in real estate, following these steps is the best way to start:

  1. Look to buy a home, instead of renting

    When you rent, you are doing all of the work for the landlord. When you buy a house, you get all of the equity, appreciation, and tax benefits.
  2. Buy a duplex, triplex, or fourplex to start House Hacking 

    You put in the same amount of work buying a single-family home as you would a duplex, triplex, or fourplex, but in the end you have a more substantial property.

Use House Hacking and Start Your Rental Business

It takes the same amount of work buying a four-plex as it does a single family home.

Four units and lower is seen by banks as a residential property allowing you to get a residential loan on the property.

  • Low down payment (FHA Loan is 3.5%)
  • Better interest rates
  • Better terms (30 year mortgage)
  • You buy a home to live in with rental units built into the property
  • The fear of buying an investment property is lessened
  • Hands on experiencing with managing a rental business
  • Your tenant pays your mortgage for you
  • You live rent free (and even make money)
  • You get a taste of the amazing benefits of a rental business

making money with rental properties

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Using FHA Loans to House Hacking Is A Low Money Down Investing

For the most part, you can only have one FHA loan at a time. The FHA loan is to get people into a home who could not normally buy one without the help of a third party. i.e. the government.

When you buy a property with an FHA loan is that you need to live in the place for a minimum of 1 year. Also, the loan interest rate is usually a bit higher than a conventional mortgage.

The best benefit is the 3.5% down payment instead of the normal 20% down payment. The problem is the required Private Mortgage Insurance (PMI) that is added onto the monthly mortgage payment. This is usually .3% to 1.5% of the loan amount per year.

This can be a lot of money each month out of your pocket to something that doesn't not directly benefit you in the long run. But it may be a necessary expense so you can own a property.

What you can do is refinance the property into a conventional 30 year mortgage without the PMI after you have 80% equity in the property. With the new mortgage, you will not be required to have the PMI any more.

Listen to the House Hacking Podcast Episode:

Once you have refinanced the property, you can get another FHA loan for another property.

There are not specifically other FHA type loans but there are other alternatives to having a lower down payment. Seller financing, Hard money lenders, friends and family, etc.

Benefits of House Hacking

Built-in Income

The best thing about a duplex or triplex is that you have built in income every month. If you buy a duplex, triplex, or fourplex, the company you borrow money from considers that a residential loan.

This means you get the same benefits as buying a single-family home, such as low fixed rates, but you have more units and your tenants will pay off your mortgage.

Once you buy a fourplex, you live rent free, mortgage free, and they put money in your pocket every month.

If you are getting started investing in real estate, I recommend that you look at a fourplex. If you already have a home of your own and you are living in it, that is even better.

Buy a fourplex, move into it, rent out your current home, and now you have four units you are renting.

You may not want to live in that fourplex forever, so live there for a year, or whatever time period the bank requires you to live there, get out of there and buy another house.

Once you move out, now you have five units to rent. If you move into another fourplex, you would have a total of nine units to rent out. It can continue to grow and grow.

Better Financing

When you house hack, you get better financing terms as owner occupied than you do as an investor. You get a better interest rate, better fees and costs, and better terms. In addition, you can use a smaller down payment.

If you are a veteran, you can use a VA loan, which means you can put zero percent down. If you use an FHA loan, you can put 3.5 percent down.

You can have less of a down payment, because it is still a residential property. This means you can get four units with only 3.5 percent down.

Investing Starts Right Away

When you house hack, your money starts working for you right away. In addition, you start learning all of the ins and outs of property management, investing in real estate, finding properties, working with tenants, etc.

You can learn how to invest in real estate, because you already have a built in property.

Buying the Next Property is Easier

Once you have all of those units rented, it makes buying the next property that much easier. In buying that first fourplex, you already have your business started.

You won’t be as concerned about buying a property and getting it rented.

I look at all of my 30 plus properties as inventory. I don’t get emotionally attached to them. It is like a pack of gum I am selling in the store.

When you move out of your fourplex, it is just another piece of inventory for your rental property business.

The hardest thing for every investor is buying that first property. I say that from personal experience. After that first one, though, every single one I bought came so much easier.

Live For Free

Every tenant that lives in your property is going to be paying off your mortgage. You live for free and you earn passive income every month.

For example, if you buy a $200,000 fourplex and you rent out three units, your income would probably be about $2,000 a month.

Your mortgage will probably only be about $800 a month, but with taxes, insurance, and other fees it will probably be about $1,300 a month.

If you can rent the other three units for a total of $2,000, your passive income, after expenses, is $700 a month.

These are rough numbers, but if you need help analyzing numbers, talk to me. I have a coaching business you can find by going to

Tenants are Paying for Your Property

When you house hack, your tenants are paying for your property. If you only put 3.5 percent down, your tenants pay the rest. On a $200,000 property, that is only $7,000.

The rest of the principal is being paid by the tenant. If you get an FHA loan, you will be paying private mortgage insurance (PMI).

That is no problem. After a year, refinance it, pull some money out of it, and get rid of the PMI. Now you have a lower mortgage payment and you have more money every month.

Built-in Property to Rent Out

When you are ready to move out of the fourplex, you have a built-in property to rent out.

House hacking is a great way to get started investing in real estate.

Know Your Numbers

You want to make sure you are going to be making money every single month from the property you buy.

Get Pre-Qualified

The first step is to know what your mortgage payment is going to be before you buy the property. Call your bank and ask to get pre-qualified for a loan.

Tell them how much you would like to borrow and they will give you the interest rate and monthly mortgage payment.

Find and Calculate the Property Taxes

This step is so simple and so important. Talk to a realtor or go to, and you will be able to find out how much the taxes are on the property.

Determine the Insurance Cost

Call an insurance agent and find out how much insurance will cost on the property you are looking at buying.

Tell them which property you are looking at and once you get the number, divide it by 12 to find out how much it will cost per month.

Calculate Your Monthly Income and Expenses

To calculate the monthly profit on your house hacking property, you need to know your income and expenses. With those numbers in mind, you can calculate the passive income you will make on the house hack.

My passive income calculator you can use to enter all of these numbers. It will walk you through what to enter like mortgage, taxes, and other expenses and it will give you how much money you will be making every single month.

Use my investment property calculator to find the amount of passive income you will make from the property.

One more thing that is great about house hacking a fourplex, is you are going to be selecting the tenants.

You get to choose. You don’t need to pick college students if you don’t want to. You can hand pick who is going to be living next to you.

There are so many great benefits of house hacking, and I encourage you to think about that when you purchase your next property.

Creative Ways to House Hack

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Rent Out Your Basement

If you have a single-family home with a basement or upper level that is finished and you can add a separate entrance, rent it out.

Buy a Duplex

Duplexes can be top and bottom or side by side.

PRO TIP: Side by Side Is Better

I tend to stay away from the type that are top and bottom, because it is going to be about the same amount as one that is side by side, and nobody likes to live with someone on top of them.

It will be more difficult to rent out.

You can live on one side and rent the other.

For example, if you buy one that is $150,000 and the mortgage and expenses are $800 to $900 a month, you can probably rent one side for $1,000.

Not only does that pay your mortgage, but you live rent free and make a little bit of money every month.

House Hacking With A Triplex

If you have a triplex, which is three units, you can rent out two units and live in one.

Rent a Spare Bedroom

If you have a single family home and you have a spare bedroom, you can rent it out. If there is a college or a medical school close, where students come in and out for a month or two at a time, this is a great idea.

Airbnb is a great way to earn extra income by renting out a room.

Get creative on how you can use your property, or a future property, to rent out to somebody else to make money. Think about how one room, or your basement, or your attic can be used to start a rental property business.

Once you get a taste of how passive income works in your favor, it is so much easier to buy your next property.

Funding Your Property

I get questions from students all the time about how to get funding for their rental property businesses. To get funding, it is easier to talk to your local banks and credit unions than it is to find an investor.

PRO TIP: Mortgage Broker Search

Search online for a mortgage broker in the state you live in. The broker is going to be licensed for your entire state and they can resell a mortgage from any bank in that state.

This way you get the best rate in the state.

In the second podcast I aired,, I talked all about how to get funding for your real estate rental property business. Go there to learn everything about the ways you can get funding for your properties.

As I mentioned earlier, if you get an FHA loan, you will need to pay PMI. This is something you can get out of after you have 80 percent equity in your property. To get around it, get your property and make sure your numbers work even with your PMI.

A year later, refinance the property, pull your money out, get rid of the PMI and your mortgage payment gets lower.

PRO TIP: Learn the BRRRR Strategy

Go to, where I talk all about the BRRRR Method, which is Buy, Rehab, Rent, Refinance, Repeat. This is the way I bought my first property in 2006.

Steps to Buy Your First Property

I want to help you become wealthy, so you have more time and live the life you want. I encourage you to get rid of your consumer debt and, at the same time, look for your first property.

  1. Get rid of credit card debt
  2. Commit to buying a duplex, tri-plex, or a four-plex
  3. Start building your business to be ready for a good deal
  4. Talk with property mangers about the area
  5. Talk and work with realtors and wholesalers
  6. Do your homework on the area you are going to invest
  7. Work with a mortgage broker to get pre-qualified for a mortgage
  8. Move forward with starting your business

Get rid of credit card debt

Bad debt will kill your investing business and your financial future. Bad debt is taking money out of your pocket each month so knock out that debt and get your finances on the right track.

Good debt is great because it puts money into your pocket. When house hacking, you will you need to get a mortgage which is good debt. It is good debt because it puts money into your pocket each month.

Commit to the Idea of Buying a Duplex, Triplex, or Fourplex

If you can do it, jump right into buying a fourplex. It is just as much work as buying a single-family home. You will be able to pick the people who will live there.

Call Two or Three Realtors

Have two or three realtors look for properties for you in good areas. I usually have at least four or five realtors looking for me when I am ready to buy a property.

I also have wholesalers looking for properties for me. Just today I got an email from a wholesaler about a duplex. Have many people looking for deals for you. Start talking to, and emailing, people.

Call a Mortgage Broker

Get pre-qualified for a loan, so you are ready to go when the right property comes up and you can prove you have the funds available.

Do your homework on the area you are going to invest

Start studying your market and know everything there is to know about it. You won’t know what a good deal is if you are not familiar with your market.

Build Your Business

If you are going to use a property manager, get one set up so they are ready to go when you buy your property.

PRO TIP: Double Check Your Numbers

Make sure all of your numbers work. Even if you will manage your business yourself, add in the property manager expense beforehand.

The last thing you want is to need a property manager later and to not have accounted for that expense. This could be as easy as 10 percent of the rent.

Move Forward with House Hacking

Don’t just think this is a great idea and then stop. I want you to get out there, start looking at properties, and follow through.

Make this a goal for yourself. If you need an accountability partner, get one. In ten years you are going to look back and see how much better your life is because you have the rental properties.

Stop working for someone else and start working for yourself. If you are ever going to buy a house and if you have any desire to start investing, house hacking may be for you. This is the best way to buy your first property.

Learn House Hacking Here:

I will get you started learning about passive income, real estate, how to find tenants, how to find properties, and much more.

In addition, you will be subscribed to my newsletter, which includes information not found on my website or podcast.

Get out there, start investing, and change your lives for the better!


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