House Hacking Calculator — Live for Free

Owner-occupied financing is dramatically cheaper than investment financing, and house hacking is the legitimate route to it.

FHA allows 3.5% down on one to four units with a credit score of 580 or above, provided you occupy one unit and move in within sixty days. Conventional owner-occupied loans reach as low as 3% to 5% on multi-unit properties for qualifying buyers, and VA loans allow zero down for eligible veterans on up to four units.

An investment loan on the same building would want 20% to 25% down and carry a rate roughly half a point to a point higher.

On a $400,000 duplex that is $14,000 against $100,000 — the difference between buying now and buying in six years.

There is also a rental-income allowance in qualifying. Lenders will typically count 75% of documented market rent from the units you will not occupy toward your income, which raises the price you can qualify for. The 25% haircut is the lender's own vacancy allowance, and it is a reasonable guide for yours.

The occupancy requirement is genuine and enforced. You must actually live there, usually for at least a year, and misrepresenting occupancy is mortgage fraud rather than a technicality.

Vacancy is the first and the most consequential. A duplex owner with one rented unit has a 100% vacancy rate the moment that tenant leaves. There is no diversification — the income is binary. An 8% allowance is roughly one month a year, which is realistic for a well-run property and optimistic for a first-time landlord.

Turnover cost is the second. Between tenants you have cleaning, repainting, minor repairs and the advertising period. Budget a month of rent per turnover as a working figure.

Capital expenditure is the third. Roofs, heating systems and water heaters fail on their own schedule, and a multi-unit property has more of them. Setting aside $200 to $400 a unit per year is not conservatism, it is arithmetic.

Then the things unique to living on site. Your tenant knows where you live and will knock at inconvenient hours. Setting boundaries is genuinely harder than managing at a distance, and enforcing late rent with someone you see daily is uncomfortable in a way spreadsheets do not capture.

Finally, an owner-occupied multi-unit property is harder to sell than a single-family home. The buyer pool is smaller — investors want returns and families want a house — and that shows up in both time on market and price.

Small multifamily —

a duplex to quadplex. The cleanest version: separate units, separate entrances, real privacy, and FHA financing at 3.5% down. Hardest to find in most markets.

Room rental —

buy a single-family home and rent bedrooms. Highest income per square foot and lowest privacy; you share a kitchen. Works well with a specific tenant profile and badly otherwise.

Accessory dwelling unit —

a basement apartment, garage conversion or garden unit. Good privacy, and increasingly permitted as states liberalise ADU rules. Check the zoning before you buy, not after.

Short-term rental —

renting part of the property by the night. Much higher gross income, much higher effort, and the regulatory risk is real — cities change the rules with little notice.

Live-in flip —

renovate while living there and sell after two years to use the capital gains exclusion. A different strategy that shares the occupancy trick.

The strategy compounds because of what happens after the occupancy requirement ends.

Once you have lived there a year, you can move out, rent the unit you occupied, and the property becomes a fully tenanted investment — bought with a 3.5% down payment and financed at owner-occupied rates that continue for the life of the loan.

Then you can do it again. Buying a new owner-occupied property each year or two, converting the previous one to a rental, is how a number of small portfolios were built, and the constraint is qualifying for each successive mortgage rather than finding the down payment.

This is where the rental-income allowance compounds in your favour: each property you convert adds documented rental income to your file, which supports the next purchase.

The realistic caution is that it takes years, requires moving repeatedly, and depends on being able to qualify each time. Rising rates and tightening lending both slow it down considerably.