First house hack? Compare it to your rent, not to a rental

First house hack? Compare it to your rent, not to a rental

Dan NelsonBusiness Member
Real Estate Broker · Chicago and Kansas City · Member since 2016 · 110 posts · 100 votes

Most first-time buyers I talk to run the numbers on a 2 to 4 unit building as if it were a pure rental. The deal looks thin, and they stay on the sidelines.

Here is the part nobody explains. If you live in one unit, the right comparison is what it costs you to live there versus what you pay in rent today.

A quick example with round numbers. On a $600,000 2 to 4 unit building you live in, a regular loan can go as low as 5% down, which is $30,000. Add up the mortgage, taxes, insurance and a monthly repair fund. Subtract the rent from the other units. What is left is your housing cost.

If that number is close to what you pay a landlord now, you get the same roof plus a building that your tenants are helping you pay off.

Two things we check before every offer:
1. Real rents for the other units, from current listings nearby, not the seller's sheet.
2. A repair fund set aside every month, because older buildings use one.

For those of you who bought your first small multifamily to live in: what number told you it was a yes?

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  • Realtor · Memphis, Shelby County · Member since 2026 · 150 posts · 50 votes
    1d

    Your comparison is the right one, because living in the property changes what a good outcome looks like. A small multifamily you occupy does not have to beat a pure rental on paper to be a strong first step, if it lowers your own housing cost while you build ownership experience.

    The key is to use honest inputs. I would start with the full monthly cost — mortgage, taxes, insurance, reserves, and a repair fund — then subtract realistic rents for the other units, based on current listings and comparable leases rather than a seller's worksheet. That net housing cost is the number to compare with what you pay in rent today.

    I would also test a vacancy in one of the other units and a larger repair in the first year. If the home still leaves you with a housing cost you can live with, the plan is much stronger than a version that only works when every unit is full and nothing breaks.

  • Aaron ZimmermanBusiness Member
    Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
    1d

    Two numbers: money I was scheduled to save when living there and cash flow upon move out

  • Matthew MorrowBusiness Member
    Investor · PA - NY - NJ · Member since 2019 · 829 posts · 288 votes
    1d

    @Dan Nelson agree with this. That's how my first one worked. We lived in it while we fixed it up, and on paper it wasn't much of a rental, but compared to paying someone else to live somewhere it made a lot of sense. The equity from that house is what got me into the next one. I'd only add a real repair fund to the math. Older buildings like to surprise people that first year.

    CORE Team | Realty ONE Group Supreme548 Reviews
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