House hacking: using real estate to reduce your living costs

House hacking is the practice of buying a property and renting out part of it — a room, a basement unit, or a separate door in a duplex — so the rental income pays a significant portion of your mortgage. Done well, it can reduce your effective housing cost to zero or even negative, building equity while other people's rent covers your loan.

The main variants

• Single-family with a roommate: buy a house, rent a room. Simplest entry, limited income, shared space.
• Single-family with an ADU: buy a house with an accessory dwelling unit (casita, basement apartment, garage conversion). More privacy, more rent, more upfront complexity.
• Duplex, triplex, or fourplex: buy a 2–4 unit property. You live in one unit, rent the others. Qualifies for owner-occupied residential mortgages with low down payments.
• BRRRR method: Buy, Rehab, Rent, Refinance, Repeat. Advanced, requires construction knowledge and capital cycling.

Why it works

Owner-occupied loans have dramatically lower down payments (3.5–5%) than investment property loans (20–25%). By occupying a unit you qualify for the better loan, but the economics work out like owning a rental — rental income offsets most of your housing cost.

What can go wrong

• Bad tenants. A single eviction can cost thousands and destroy your return for the year.
• Vacancy. Rent doesn't come in every month guaranteed — budget for 1 month of vacancy per year.
• Maintenance. You're now a landlord. Toilets leak at 2 AM.
• Privacy. Living with roommates or tenants is an adjustment most people underestimate.

Who it's for

House hacking is best for people with moderate income who want to accelerate wealth-building, have the temperament to be a landlord, and live in markets where the math works. It's especially powerful for people under 35 in expensive cities — the difference between paying rent and being paid rent can add hundreds of thousands to net worth over a decade.