🏠 Real Estate · Lesson 2 of 8 · 10 min
House Hacking
🏘️ In most cities, you can legally buy a small apartment building, move into one unit, rent out the rest, and have your neighbors pay your mortgage while you build equity. The bank knows. The IRS knows. It's completely legal. Almost nobody does it.
💡 Key idea
Cut or erase your housing cost and build equity using an FHA loan with as little as 3.5% down.
🧠 Why it matters
Buy a multifamily property, live in one unit, rent the others. Tenants cover most or all of your mortgage. FHA (580+ credit score) lets you buy a 2–4 unit property with 3.5% down, but it adds mortgage insurance (1.75% upfront plus 0.55% a year for the life of the loan), requires you to live there at least a year, and 3–4 unit buildings must pass FHA's self-sufficiency test (75% of market rents must cover the whole payment). Whether tenants cover ALL of your mortgage depends on local rents vs. today's rates.
🌍 In the real world
🎯 An investor buys a fourplex with an FHA loan, lives in one unit, and rents the other three. The tenants' rent covers the mortgage PLUS a few hundred dollars extra per month.
📌 Takeaways
- Live in one, rent the others
- FHA: 3.5% down (580+ score), but mortgage insurance applies
- Tenants pay your mortgage
📖 Terms in this lesson
House hacking: Living in one part of a property and renting out the rest so tenants cover your mortgage.
✅ Test yourself
FHA down payment for house hacking?
- 20%
- 10%
- 3.5%
- 0%
Answer: C · 3.5%
FHA loans need just 3.5% down with a 580+ credit score — and you must live in the property yourself.
What IS house hacking?
- Living free by renting out part of your home
- Flipping houses fast
- Hacking listing websites
- Buying foreclosures
Answer: A · Living free by renting out part of your home
You buy a multi-unit home, live in one unit, and rent the others — the rent covers your mortgage.
Main benefit of house hacking?
- Tax evasion
- Tenants cover your housing cost
- Free renovations
- Guaranteed appreciation
Answer: B · Tenants cover your housing cost
Your tenants' rent pays your mortgage, slashing or erasing your own housing cost while you build equity.
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