RealInvestorX
Deal analysis by strategy
How to analyze a house hack: your net housing cost
The only question a house hack has to answer is whether living there costs you less than renting would. The rest of the deal math is a check on how fragile that answer is.
Illustrative inputs for learning, not market data or a forecast. Replace every number with figures from your own deal.
The number to compute
Net housing cost = principal and interest + taxes and insurance + repairs - rent collected from the other units. Example: a 3-unit property at $480,000 with 5% down at 6.75%. Principal and interest is $2,958 a month and total ownership cost is $4,058.
The two other units rent for $1,500 each. After 5% vacancy you collect $2,850, so your net housing cost is $1,208 a month, against $2,200 in rent today: a difference of $992 a month.
Stress it before you trust it
- Vacancy at 25% instead of 5%: rent collected falls to $2,250 and your net cost rises to $1,808.
- Rate one point higher (7.75%): principal and interest becomes $3,267, net cost $1,517.
- No rent at all for a month: you carry the full $4,058. Hold at least that much in reserve.
Checklist
- Rent for the other units from actual comparable rentals, not the seller's numbers.
- Your loan's occupancy rules and minimum down payment for the unit count, confirmed with a lender; they change with loan type and property size.
- What happens in a year when you move out: run the same deal as a pure rental in the deal calculator and check it still works.
- Insurance quoted for a multi-unit property, which usually differs from a single-family policy.
- Whether you are comfortable being the landlord next door: repairs and tenant calls reach you first.
Common mistakes
- Comparing against the rent of your current place instead of the rent for the unit you would occupy.
- Skipping the repairs allowance because the building looks fine.
- Ignoring that your unit earns nothing; its rent is the saving you only realize while you live there.
Frequently asked questions
What is house hacking?
Living in one unit of a multi-unit property and renting the others so the tenants' rent offsets your housing cost.
Is a house hack the same as a rental?
It is analyzed differently while you live there, by net housing cost, but you should also test it as a rental for when you move out.
Which loan can I use?
That depends on the lender, property type and your occupancy plans. Confirm down payment and occupancy requirements with a lender before you rely on a low down payment.