The Beginner’s Guide to House Hacking a Duplex - No BS Investing
Posted 267 views June 3, 2022, 10:00 - Elisabeth in Investing

The Beginner’s Guide to House Hacking a Duplex

According to the U.S. Department of Labor, the average household spends $20,091 a year on housing. With so much money being spent on rent or house payments, it can be difficult to generate wealth. 

Luckily, it’s possible to eliminate your biggest living expense (and you don’t have to break the bank either). One strategy is house hacking a duplex. Granted, it takes a lot of work, but the savings (and extra income!) can be worth it. Below is a complete guide to duplex house hacking.

Key Takeaways:

  • A duplex is a residential property with two units. 
  • House hacking is a creative strategy of investing in a multi-family home (e.g., two, three, or four unit buildings). You live for free in one part of the house and rent out another part. 
  • The biggest benefits with house hacking are the savings and building equity in a home. 
  • An average duplex costs between $120,000 to $1,000,00. 
  • The top considerations when reviewing properties should be location, size, shape, and cost.
  • An FHA loan means that you only need to cover 3-5% of the price of the duplex. You just need to live in one part of the duplex for at least one year.
  • Treat house hacking as a business. Set clear expectations with your renters to ensure on-time monthly payments. 

What is a duplex?

Traditionally built for two families to live in, a duplex is a residential property with two units. Units might be side-by-side or one unit might be on top of the other. 

Duplexes come in all shapes and layouts, but they typically have two-to-four bedrooms per unit and between seven to 14 rooms total. A duplex often includes a connected driveway and a shared backyard and front yard. 

What is house hacking?

House hacking is a creative strategy to increase your income by investing in a multi-family home (e.g., two, three, or four unit buildings). You live for free in one part of the house and rent out another part. 

House hacking a duplex means that you move into one unit and rent out the other. Your renters’ monthly payments cover the mortgage. Potentially, you save money AND generate extra income to eventually reach financial freedom. 

House hacking a duplex is the focus of this article, but here are a few additional ways to house hack:

  • Live in one area of your house and rent out the rest.
  • Airbnb rooms in your house.
  • Live in an RV and rent out your primary residence. 

House hacking isn’t limited to a duplex. A triplex, fourplex, and even quadruplex are other options. However, a duplex is a great way to start house hacking as a newbie real estate investor. 

As with any investment, pros and cons exist for house hacking. 

PROS OF HOUSEHACKING

  • Offset housing expenses by renting out part of the home.
  • Decrease your taxable income through mortgage interest deductions.
  • Place 3-5% down rather than 20-25% through specific housing loans. 
  • Potentially live in a nice area that you couldn’t afford otherwise.
  • Build wealth since you’re saving money. 

CONS OF HOUSEHACKING

  • Deal with any problems, especially if the units need renovations. 
  • Lack of privacy if you live right beside or with your tenants. 
  • Potentially chase tenants for monthly rent payments. 
  • Pay high insurance costs such as home insurance. 

How much can you make house hacking?

The biggest benefits with house hacking are the savings and building equity in a home. 

As an example of how much you could save and generate wealth, say that you buy a duplex for $120,000. You finance it through an FHA loan and only have to pay 3.5% in a down payment. 

After the principal, taxes, interest, and insurance, your mortgage payment equals $1,100. You charge $1300 in rent. That means you have $200 leftover each month. Granted, some of this money will need to cover maintenance and repairs, but you still aren’t having to pay anything on your own housing!

Money that would have been used on housing can be used to invest and build wealth.  

How much does a duplex cost to buy?

An average duplex costs between $120,000 to $1,000,00. But the upfront purchase price isn’t the only expense. Consider other costs such as:

  • Potential renovations
  • Property taxes
  • Property management
  • Utility expenses
  • Home insurance

To determine the right price for you, determine how much you can spend on a down payment. If you’re looking at a $200,000 duplex, for example, you might qualify for an FHA loan that only requires that you put down 3.5%. That means you’ll need $7,000. 

Related: Should You Invest Money in the Stock Market or Pay Off Debt?

How to house hack a duplex

First, decide if house hacking a duplex is right for you. It’s a lifestyle change so you have to be comfortable with that part of it. Sacrifice is part of house hacking. 

If you decide that lower comfort levels (e.g., sharing a wall with someone) now is worth higher profitability later, here’s a high-level overview of the steps to house hack a duplex. 

Step 1: Find and research a property

Find properties through places like a real estate agent, Zillow, and You can even reach out to the owner via direct mail if you find a property you like!

The top considerations when reviewing properties should be:

  • Location. Choose a safe neighborhood where people are moving. Mashvisor is a great resource to check a duplex’s location potential. 
  • Size. Look at the most bedrooms per dollar. 
  • Shape. Will the property need a lot of current or future repairs? If so, can you do them yourself or will you need to pay someone? A duplex in need of major repairs might cut into your bottom line. 
  • Cost. Don’t just look at the purchase price. Crunch the numbers for property taxes, insurance, interest, utilities, etc.  

Ensure that you get an inspection of the duplex to avoid any costly oversights.  

Step 2: Finance with an FHA loan

An FHA loan means that you only need to cover 3-5% of the price of the duplex. The loan covers the rest. However, a bank only gives you an FHA loan for a residential property. 

A residential property is defined as a home with one to four units. The loan states that you will live in the property for at least one year. You’re then free to move and rent out the other unit. You only qualify for the loan once though. 

Other low down-payment financing options include VA loan, the Homestyle Renovation loan by Fannie Mae, and a 203k loan. 

Step 3: Close the deal & manage your renters 

Once you close the deal, you’re ready to make renovations (e.g., new counter tops, roof repairs) or maybe even move in. To find tenants, use sites such as Zillow or Realtor.com. 

In a duplex, you’ll be living right beside or above/below your renters. You might face 3:00am calls about a broken toilet or late payments on rent. But treat it like a business. Create a clear lease between the tenant and you as the owner. Maintain your property and ensure that your renters follow through on payments.  

House hack to save money and earn more money

House hacking isn’t easy. But it can be lucrative. According to Craig Curelop, a professional house hacker and real estate investor, “The best part about house hacking is that you are not actually paying the loan: Your tenants are! Not only are you living for free, and maybe even cash flowing, you own more and more of your house each month.” 

Learn more about house hacking in his book, The House Hacking Strategy: How to Use Your Home to Achieve Financial Freedom. You’ll discover the ins and outs of house hacking as a beginner and how to build wealth with this strategy. 

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Elisabeth O. is an MBA graduate with a specialization in International Finance & Investments and over six years of financial writing experience. She is passionate about long-term investing to build wealth, avoids day trading and speculations, and loves a good Warren Buffet quote.