All
Members
Companies
Blog
Forums
Podcast
Webinars
    User Log in  /  Sign up
  • Forums
    Newest Posts Trending Discussions Followed Forums Real Estate News & Current Events General Landlording & Rental Properties Buying & Selling Real Estate Deal Analysis See All
  • Education

    Read

    BiggerPockets Blog BPInsights: Expert Analysis Coronavirus Content & Resources Guides Glossary Reviews Member Blogs

    Watch

    Webinars Video Library Financial Independence Blueprint Intro to Real Estate: Rentals

    Listen

    BiggerPockets Real Estate Podcast BiggerPockets Money Podcast BiggerPockets Business Podcast Real Estate Rookie Podcast Daily Podcast (Audio Blog)

    Topics

    Business Operations Finance Finding Deals Property Management Property Types Strategy
  • Network

    Recommended Vendors

    Real Estate Agents Mortgage Lenders Companies Hard Money Lenders Contractors Investment Companies

    Search

    Members Events Jobs
  • Tools

    Calculators

    Rental Property Fix and Flip BRRRR Rehab Estimator
    Wholesaling Mortgage Payment 70% Rule Airbnb

    Services

    BPInsights: Property Insights Tenant Screening Property Management Lease Agreement Packages

    New Feature

    BPInsights (beta)

    Quickly analyze a property address or ZIP Code to compare your rent in your neighborhood.

    Analyze a property
  • Find Deals
    Real Estate Listings Find Foreclosures External Link Ads, Jobs, and Other
  • Bookstore

    Real Estate Books

    Profit Like The Pros Bidding to Buy See all books

    Featured Book

    BiggerPockets Wealth Magazine book cover
    BiggerPockets Wealth Magazine

    Written by financial journalists and data scientists, get 60+ pages of newsworthy content, expert-driven advice, and data-backed research written in a clear way to help you navigate your tough investment decisions in an ever-changing financial climate! Subscribe today and get the Oct/Nov issue delivered to your door!

    Get the Magazine
  • Pricing
Log In Sign up
User
Quick search links
Podcast Hard Money Lenders Books Washington
BlogArrowReal Estate Investing BasicsArrowHouse Hacking: A Beginners Guide to Hack Your Housing and Live for Free
Real Estate Investing Basics

House Hacking: A Beginners Guide to Hack Your Housing and Live for Free

Brandon Turner
Expertise: Landlording & Rental Properties, Personal Development, Real Estate News & Commentary, Business Management, Flipping Houses, Mortgages & Creative Financing, Real Estate Deal Analysis & Advice, Real Estate Wholesaling, Personal Finance, Real Estate Marketing, AskBP, Real Estate Investing Basics
593 Articles Written
Close up of woman hands making frame gesture with sunlight outdoors


Yes, house hacking is a thing. Are you surprised?

The internet is full of “life hacks.” I’m sure you’ve seen them, with clever tricks like storing your pancake mix in old ketchup bottles or dipping your Oreos with a fork through the frosting. Sure, those are fun little tricks—but how much do they really improve your life?

House hacking, on the other hand, is epic, life-changing stuff. When properly implemented, this can have a dramatic effect on your wallet and the financial destiny of your family.

I’m talking about hacking your housing and living for free. I'm talking about building wealth automatically and getting paid to do it. I'm talking about buying an owner-occupied multifamily property and having other people pay your mortgage.

Wait, what?

You heard me—it’s often called an “owner-occupied multifamily property,” but you probably have heard other names for it like “duplex,” “triplex,” or “fourplex.” These are properties that have more than one unit but don’t quite fit the “apartment complex” category. There is a good chance you’ve even rented a unit in one of these places in the past or know someone who has.

They exist in every market, in every neighborhood, and at every price point—and by purchasing a small multifamily property, living in one unit, and renting the other units out, you can live for free and even make money on top of it.

House Hacking: How to Buy a House and Live for Free

When I bought my first house, I took a hammer and put a giant hole in a wall—just because I could.

You see, buying a home was exciting because it was mine. I could do what I wanted, when I wanted to, and no landlord was going to tell me "no." For me, owning a home is one of the greatest feelings there is.

However, buying a home is not for everyone.

If you’re flat broke, up to your eyelids in debt, switching jobs every 2.5 weeks, and can’t seem to avoid calling those late-night informercials for crap you can’t afford, then maybe it’s best to get your life and budget in order first. Buying a home is not a light-hearted, flippant decision.

However, I also don’t believe buying a house needs to be a task only for old, boring people. If you have decent credit, a stable job, and a small amount of savings, you can enter the world of homeownership. And if you’re smart about it, you can enter the world of real estate investing at the same time and start hacking your living expenses.

Why Small Multifamily Property Is Perfect for House Hacking

By purchasing a great small multifamily deal, the rent that your tenants pay each month can cover all of the expenses for the property (and more). For example, if you buy a fourplex, live in one unit, and rent each of the other units out for $500 a month, you could be making $1,500 per month in income.

If your loan, taxes, insurance, utilities, and other expenses come to just $1,200, you could get paid $300 a month just to live in the home. Even better, when it comes time to move out into your future home, you can rent that fourth unit out for even more income.

However, I’m getting ahead of myself a bit. Let me explain first how to buy a small multifamily property.

Where to Find Small Multifamily Properties

Trust me: These properties are everywhere.

The easiest way to find them is by speaking with a real estate agent. An easy way to do this is by visiting the BiggerPockets agent directory, finding an agent in your market, and simply starting up a conversation. The best part about working with agents is that it’s totally free for you! The seller of the property typically pays for the agent, which means you can ask a thousand questions and get a thousand answers without needing to pull out your debit card.

Use this to your advantage!

Related: 5 Reasons the Fourplex Is the Perfect House Hack

Keep in mind, however, that you are only looking for properties that have two, three, or four units. Once you hit five units or more, the entire world of real estate changes into something you don't want to mess with if you're a newbie—commercial real estate. So, for now, focus on the duplexes, triplexes, and fourplexes.

If you want to just start looking, you can also use sites like Realtor.com, Zillow.com, Trulia.com, or the BiggerPockets Real Estate Marketplace (which features properties specifically for investors). With each of these sites, you have the ability to limit your searches to only multifamily properties. Start looking at the cheapest properties in your area, and try to find neighborhoods that you would want to live in.

Don’t be scared of homes that are a little “ugly” or have been foreclosed on. Although they may require a few weekends of painting with your buddies, you can often get substantial discounts because everyone else is scared away. In fact, my favorite feature in any property I am considering is the smell. The worse, the better.

Why? Because smell is the easiest and cheapest thing to fix (usually just by installing new carpet and re-painting) but drives 99 percent of home buyers from even considering the deal.

Small house exterior. View of entrance porch with stairs and walkway

What Makes a Killer House Hack Deal?

If there is only one lesson you learn from this post, it should be this: Find a killer deal. 

You see, if you are trying to “hack” your housing, not just any deal will work. In fact, I’d wager that 90 percent of the small multifamily properties out there are not going to give you the results you are looking for—which is cash flow.

Cash flow is the extra income left in your bank account each month after all the bills have been paid. If you can get your rental units to pay all the expenses and there is money left over, that money is yours. The trick, therefore, is finding properties that provide this cash flow.

The best trick I know for quickly estimating if a property is going to provide cash flow or not is known as the 50 percent rule of thumb. Essentially, this rule of thumb goes like this:

Take the total income of a property and divide it in half. Those are your expenses. Now take out your loan payment. The remaining money is your estimated cash flow.

Let’s do a real life example of this:

You find a fourplex for sale for $200,000, where each unit would rent out for $800 per month. If you rented three of the units out, the total income would be $2,400 per month. Divide that in half, and you are left with $1,200 per month to pay the mortgage. A loan on $150,000 (because you don’t pay full price, and then you put down something for a down payment) at 4% for 30 years is about $700 per month, which means you could get paid $500 per month to live for free. This would be a killer deal.

Want more articles like this?

Create an account today to get BiggerPocket's best blog articles delivered to your inbox

Sign up for free

Keep in mind, however, that this rule is just a rule of thumb—so make sure you use this as a quick-and-dirty way to filter lots of properties. Then, when you find some great potential properties, look at all the expenses for the property and figure out what all the costs truly are. To learn more about the analyzing properties using the 50 percent rule, check out this post and YouTube clip.

How to Fund Your House Hack Property Purchase

Maybe you have lots of cash and can simply write a check for a home. In that case, awesome!

However, chances are you are probably not able to pay the hundreds of thousands of dollars needed and are going to need to get a loan (mortgage) from a bank. With any loan, you are going to need to supply a certain amount of money to get the loan, known as the down payment.

While the “no down payments” mortgages have mostly gone by the wayside, there are still options for purchasing properties with low down payments, ranging from 3.5 percent down for FHA loans (offered at most banks) to 20 percent down for conventional mortgages. There are even loan programs created specifically for house hackers.

The best way to determine what the best loan is for your deal? Speak with a qualified mortgage professional at your local bank or credit union. Just like with real estate agents, these mortgage pros are free to use and talk with (they get paid from fees from the loan—you should never need to pay up front), so don’t be afraid to pick up the phone and start fielding your options.

Related: House Hackers: Want Great Tenants? Screen Like This

Managing Your House Hack Without Going Insane

After closing on the purchase of your small multifamily property, you are now a landlord! At this point, it is imperative to learn how to be a landlord—and start running your business like a business, not a hobby. Read a few books on being a good landlord, make friends with local investors that you respect, read blogs that talk about landlording, and don’t stop learning.

Being a landlord is not as difficult as the horror stories you may have heard—if you follow some very simple guidelines:

  • Screen your tenants like you would a job applicant. Keep your emotions out of it and look at the facts. For an exhaustive guide on the best way to find awesome tenants, check out The Ultimate Guide to Tenant Screening.
  • Have a written policy to refer to. Stick to your policy when dealing with tenants.
  • Outsource things you don’t want to do. If you don’t want to fix toilets, don’t fix toilets. Find handymen, property managers, or others who can handle the aspects of the job you don’t want to do. If you found a great deal when you bought your property (which you should have!), the cash flow can pay for these things.
  • Never rent to family or friends. Trust me—it never ends well.
  • Treat your business like a business, not a hobby. Set up processes and systems to handle the problems that will arise.

Being a landlord is not always the most fun activity, but by following these simple guidelines, the process can be much easier and your problems minimized. There are over 20 million landlords in America, so you are not alone in your journey. If you run into any problems, just ask those who have come before for help (Pro Tip: BiggerPockets Forums are a GREAT place to ask for help), and you’ll find most seasoned landlords are more than willing to assist.

What’s Next?

I truly believe that purchasing a small multifamily property can change your life, free up your finances, and start you down a path toward building wealth through one of the most powerful channels there is: real estate. This article is the start of a conversation, and I hope you continue this conversation after reading.

For more articles on house hacking, check out:

  • 3 House Hacking Mistakes I Made (& How I Could’ve Prevented Them)
  • An Intro to House Hacking: Here’s How I Get Paid to Live for Free
  • How I’m Living Rent-Free in the Most Expensive City in America (Using House Hacking!)
  • The 7 Drawbacks of House Hacking (& How to Overcome Them!)

Is this a strategy you’re pursuing? Do you have any questions for me?

Let’s chat in the comment section below. 

By Brandon Turner
Brandon Turner is an active real estate investor, entrepreneur, writer, and co-host of the BiggerPockets Podcast. He is a nationally recognized leader in the real estate education space and has taught millions of people how to find, finance, and manage real estate investments. Brandon began buying rental properties and flipping houses at age 21, discovering he didn’t need to work 40 years at a corporate job to have “the good life.” Today, Brandon is the managing member at Open Door Capital. With nearly 300 units across four states under his belt, he continues to invest in real estate while also showing others the power and impact of financial freedom.
Read more
166 Replies
    Justin Miest from Cannon Falls, Minnesota
    Replied almost 3 years ago
    Great article! I’ve been listening to all the podcasts as fast as I can and am hoping to use this method as soon as possible to get into real estate!

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Daniel Callahan from Milwaukee, WI
    Replied almost 3 years ago
    You’re my hero B. I cant wait until i really get the ball rolling and hopefully be able to thank you in person for contributing to my success in this game. The amount of info you give out for free is so humbling and admirable. I did however pay for two of your books that should be arriving tomorrow so I cant wait to dive into those! Keep it up man! Love what you’re doing.

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Megan Thomas from Missouri
    Replied over 2 years ago
    Hi Brandon, great post! I appreciate this especially because it’s exactly what I’m in the process of doing now. This will be my third property, the other two of which are rentals now. This one is different for me since it’s a multifamily (fourplex) and I will be living in it as well. The problem or question I am running into is how to act as a business without actually opening one. Can I name myself like a business, come up with a business card, logo, email, phone number, etc as I’ve seen recommended a lot on here? Would I have to open an LLC for that? Any advice would be greatly appreciated! Thank you.

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Cyndi Bass
    Replied over 2 years ago
    Hope someone still checks this post:) Question: option to buy 4 condos in large complex. Does this change me to commercial secondary to being in large complex?

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Timothy Brown Real Estate Agent from Los Angeles, CA
    Replied about 1 year ago
    Looking forward to hearing about investiment strategies for Coastal/High Cost of Living Cities. This math just doesnt work in most California Locales.

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Emmett Rodulfo Real Estate Agent from Redondo Beach, CA
    Replied about 1 year ago
    Awesome post. The post was quick and detailed

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Kevin Smith from Colorado
    Replied 9 months ago
    Thank you for the insights, Brandon. I just completed my first house hack and learned so much. On to the second and will do much better this time!

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Edgar Avilez New to Real Estate from Ventura County
    Replied 8 months ago
    A little late to the party, but this is awesome! Huge fan of house hacking and can't wait to get into it and start my real estate journey. Craig Curelop is a champ and inspiration. Thanks for all that you guys do. Cheers!! Best, Edgar Avilez

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Aidan McGee Rental Property Investor from Madison, Wi
    Replied 8 months ago
    This is an awesome article and method. I cannot wait to get into my first house hack at the end of the year!

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Janet Moreno
    Replied 4 months ago
    This is invaluable information as i am hoping to do some house hacking in the near future. You discouraged as a newbie purchasing anything beyond a fourplex. I have some experience on residential as i have 2 and land but this would be a larger endeavor. I have an opportunity for a 4plex apartment building with an existing 3 bedroom home on same property. What would be the negatives of purchasing beyond a fourplex. Would appreciate your input. Thank you

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Abel Santos Rental Property Investor from Philadelphia, PA
    Replied 2 months ago
    Still curious as to why there isn't a house hacking calculator made within the platform You would think that BP would integrate the excel calculator from purchasing the House Hacking book. It would definitely look nicer and be helpful to add the property details and other features that the website offers.

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
    Robin Custodio New to Real Estate from Phoenix, AZ
    Replied 26 days ago
    Such an interesting article! I have been living in apartments for the past 2 years since moving out and will no longer be living in apartments. My next place will be a real estate investment where I can rent out other rooms.

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
Rotate Log in or sign up to comment

Related Blog Posts

Real Estate Investing Basics Jan 19, 2021

Finding the Right Real Estate Broker: A Key Tool for Investing Success

By Mark Ainley

Your broker is one of the most important members of your team. Make sure you find one who specializes in working with real estate investors.

Read more →

Real Estate Investing Basics Jan 18, 2021

5 Strategies for Investing in Real Estate Mortgage Notes

By Scott Smith

For those who are already familiar with mortgage notes, let’s take a look at five different ways you can use them to make some cash.

Read more →

Real Estate Investing Basics Jan 16, 2021

The No. 1 Way to Find a Partner for Your Real Estate Investments

By Ashley Kehr

As a real estate investor looking for an experienced partner, you can’t focus on what you need. Flip the script. What value do you have to offer them?

Read more →

Real Estate Investing Basics Jan 13, 2021

Investor Spotlight: From Accidental House Hack to Financial Freedom Featuring Whitney Hutten

By BiggerPockets

Whitney Hutten’s first deal could’ve gone sideways. But she saved it, pressed on, and transitioned into a full-time investor who now has 60 deals under her belt.

Read more →
Log in Sign up

Log in

Forgot password?

If you signed up for BiggerPockets via Facebook, you can log in with just one click!

Log in with Facebook

Or
btn_google_dark_normal_ios Created with Sketch. Continue with Google

Let's get started

We just need a few details to get you set up and ready to go!

Use your real name

Use at least 8 characters. Using a phrase of random words (like: paper Dog team blue) is secure and easy to remember.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.

Or
btn_google_dark_normal_ios Created with Sketch. Continue with Google

Why create an account?

Receive a free digital download of The Ultimate Beginner's Guide to Real Estate Investing.

Connect with 1,000,000+ real estate investors!

Find local real estate meetups and events in your area.

Start analyzing real estate properties, we do the math for you.

It's free!

Explore

  • Membership
  • Community
  • Education
  • Marketplace
  • Tools
  • FilePlace
  • REI Resources
  • Perks
  • Glossary
  • Reviews
  • iOS App
  • Android App

Company

  • About Us
  • Press
  • Advertising
  • Careers
  • Stats
  • Contact Us

Important

  • Editorial Guidelines
  • Terms of Use
  • Rules
  • Privacy
  • FAQ

Social

  • Facebook
  • Twitter
  • YouTube
  • Instagram
© 2004-2021 BiggerPockets, LLC. All Rights Reserved.