The House Hacking Strategy


Your house may be a terrible investment, but I love the idea of house hacking. In fact, I knew people doing it way back in my college days. Half a century ago.

Of course, it wasn’t called “house hacking” in those ancient days. I’m not sure it even had a name. 

But some students, or maybe more accurately, their parents, would buy a place, have their kid live there, “manage” it and rent out the rooms to friends. Usually, at the end of four years, the kid would leave with a diploma and sell the house on.

What didn’t exist, at least to my knowledge, was any kind of manual or book or guide as to how to do this successfully. What worked and what didn’t. It was all pretty hit and miss.

Off to school

Those days are over and the internet is teeming with information. The problem now is not a lack of resources, but sorting the wheat from the chaff.

Craig is very much on the wheat side of things.

So when his request for a blurb to be featured on the cover of his upcoming book, The House Hacking Strategy, hit my inbox back in July I was honored. And mercenary enough to note that my name and comment on the cover of what was sure to be a successful book held the potential for personal benefit.

But between my travel schedule, being in Europe, Chautauqua and the onslaught of new emails following his; I missed my shot. It wasn’t until a few weeks ago, when I finally had a chance to wade through old emails, I saw it again.

Well, the book is published and I am not on the back cover telling you how wonderful it is. My loss.

But that is no reason for you not to know about this book and, more importantly, the house hacking concept.

I reached out to Craig and he graciously agreed to write this guest post. It is sort of a Cliff Notes version of the book, if Cliff Notes is still a thing. (It was for me back in school half a century ago.)

In ten short points, Craig will share with you what house hacking is all about. Then, if you want to give it a shot, well, now there is a book about it:

Here’s Craig…

10 Steps to House Hacking

What the heck is house hacking? It’s the idea that you buy a one- to four-unit property for a low percentage down (typically 3% to 5%). You live in one part and rent out the others such that the rent you receive fully covers your mortgage, and you live for free. 

The average American spends 34% of their income on housing expenses. The average FIRE enthusiast maybe spends 20%. The average house hacker spends 0% and likely makes money on their housing. What would eliminating rent or your mortgage payment do to your savings rate? How much would it speed up your journey towards financial independence? 

In this article, I am going to take you through the ten steps of purchasing your first house hack—from the initial emotional stages all the way to closing and managing your first one. You ready? Let’s do it! 

Step 1: Realize the Power

Craig (right) with Casper on top of Mount Olympus, Chautauqua Greece 2018

I am a huge personal finance nerd and have been for years. In all of my time researching, networking, and experiencing, I have yet to find a strategy that provides returns in the 100%+ range with little risk. Yup, you read that correctly. 100% or more return. I have done it three times and have achieved these returns (or more) every time! How is this possible?

The first reason house hacking is so powerful is that you do not need a large sum of money to get in. All you need is 3% or 5% of the price of a property. The median house in the United States is $230,000. With 3% down, you’ll need less than $10,000 to get in. 

The great thing about real estate is that there are multiple wealth generators. You get wealthier from the rent coming in, the savings from not paying anything, the principal on the loan you are paying down, the appreciation on the property, and the tax benefits. After you add the increase in your net worth from all of these generators, you are becoming much richer than the low amount you put down. 

Through this strategy, I have gone from a net worth of negative $30,000 in May 2017 to financially free and hundreds of thousands of dollars of net worth in August 2019. Not a bad deal, right?

Step 2: Pick Your Strategy 

Now that you know just how powerful house hacking can be, which strategy is best for you? At first thought, you are likely thinking, This guy is nuts! There is no way I’m going to live in a house with people I don’t know, or even a multifamily property where I need to share walls. Don’t worry! There is a strategy out there for everyone.

Luxurious: This is where you buy your dream home. Only, your dream home has an accessory dwelling unit (ADU) in the back, a mother-in-law suite in the basement, etc. Rather than having your mother-in-law live there, you can rent it either as a short-term rental on Airbnb or as a long-term traditional rental. Either way, the rent will offset your mortgage costs. 

Traditional: This is what most people think of when they think house hacking: buy a 2-4 unit property, live in one unit yourself, and rent the other three units out. This way, you get your own place, but you just have to share walls with your tenants. 

Rent by the Room: My favorite strategy. This is where you purchase a single family house, live in one room, and rent out the others. With this strategy, you live with roommates, but you still get your own bedroom and quiet place if you please. 

Trailer: This strategy is the most aggressive and, as a result, the most profitable. You guessed it! Buy a trailer, park that baby in your driveway and rent out your entire unit. I do have a friend that did this quite successfully for a few months. 

Now that we laid out the different strategies, it’s your turn to pick one! Let us know which is best for you. 

Step 3: Where to House Hack?

After you pick your strategy, it is time to figure out where to house hack. Lucky for you, the search is already narrowed down to one city: the one you live in! By definition, you need to live in a house hack, so unless you plan on moving, you have to do it in the city you are currently in. I would recommend driving around the neighborhoods and figure out which one you would prefer to live in and which one your strategy would work best for. 

For example, if you are renting by the room, it would be best to be near a school, a hospital, or a place where a lot of people are employed. If you want to try the short-term rental strategy, then it may make sense to be by a tourist attraction. For a traditional rental? Maybe near a public transportation line, a bus stop, or a convenient place to live. 

I always like to buy in the path of progress. In other words, you do some research to understand where the development in your city is headed, and you buy in that area. Property prices likely have not tremendously increased yet, but they are destined to increase in three to five years once the developments happen. 

Step 4: Assembling Your Team

There are two main team members you need when purchasing a house hack: a lender and an agent. Your first order of business is to find a lender to pre-approve so you know what kind of property you can afford. Once you have your lender, it’s time to find your agent so he or she can set you up with an MLS search for properties that fit your criteria. I highly suggest you find an agent that has rental properties and ideally has even house hacked themselves. 

When assembling all members of your team, I highly recommend you interview three to five of each. Ask them all the same questions, and pick whichever person you think will get you into the best possible house hack.

Step 5: Financing 

Now that you have your team in order, you need to go over the different financing options with your lender. If you are doing a low-percent-down loan, you will need to live in the property for a year. 

There are two loan options that I suggest because they are the easiest and cheapest: one is a low-percent-down conventional loan and the other is an FHA. 

The main difference between the two is that a conventional loan will be 3% to 5% down and the Private Mortgage Insurance (PMI) will burn off once you have 20% equity in the property. The FHA, on the other hand, is 3.5% down and the PMI will remain until you refinance into a conventional mortgage. Additionally, with an FHA you can purchase a 2-4 unit property with 3.5% down, but you can only have one FHA loan out at a time. 

Which loan you choose depends on what you want to buy. For a single-family home, I would recommend doing the low-percent-down conventional. For a two- to four-unit, I’d recommend the FHA. However, make sure that you can add value to that property so you can obtain 20% equity in the property, or refinance so you are able to use the FHA again. 

Step 6: How to Find Deals

Craig and his first hacked house

There are lots of ways to find deals, many of which are beyond the scope of this article. With house hacking, though, it doesn’t really matter that you get the best home-run deal. You just need to get in, eliminate your housing expense, and start saving so that you can do your next one in a year. That one-year timer does not stop until you close on the house. 

With that being said, I find all of my deals on the MLS. Remember that search your agent set up for you? You’ll find your deals right there in that email. Most of those properties are livable, and if you pick the right strategy, you can easily offset your expenses. 

Step 7: Analyzing Deals & Making Offers

There are a lot of variables that come into play when analyzing a real estate deal: rent, principal on the loan, interest, taxes, insurance, private mortgage insurance, vacancy, capital expenditures, maintenance, and repairs. That’s a lot of numbers to keep track of. How are you expected to analyze a deal and do it quickly so that you can make an offer? That’s what I’m here for.

When analyzing a house hack, you don’t need to know all of these numbers. All that you need is to figure out what your monthly rent is going to be (look at comparable properties for this number), what your monthly payment will be (ask your lender), and how much you need to set aside for reserves. I typically will set aside between $250 and $500 per month depending on the age, size, and location of the property, plus if there are any expected large expenses coming up (roof, HVAC, electrical, furnace, etc.).

Once you’ve done your analysis, it’s time to offer on the property. With house hacking, again, it doesn’t matter that you nickel and dime with the seller to get $5,000 or $10,000 off the purchase price. At the end of the day, that’s $20-$30 per month in cash flow. If your deal is that close, you shouldn’t do it. It is more important to get into the property so you can start saving on rent, cash flowing, and you can get closer to picking up the next one. 

When I offer on my house hacks, I usually just offer at listing price. If the inspection comes back with any major issues, that is where I will negotiate the price down.  

Step 8: Marketing the Property

Once you’re in the property, it’s time to start filling the vacancies. If you are doing an AirBnb or luxury house hack, I would recommend doing any renovations, staging, getting professional pictures taken, and putting it on the market ASAP. 

If you are renting out units or rooms on a long-term basis, I would still get renovations and professional pictures taken ASAP. Once the rooms are ready, start advertising. There are loads of sites out there, and you should put the listing on all of them. The more places your advertisement is, the more tenants you will have inquiring, and the higher probability you’ll get one that you like.

The places that I list mine are: Craigslist, Facebook Marketplace, Zillow, Trulia, Hotpads, Roomster, Roomies, Silvernest. If I can find others, I use those too!

Step 9: Screening Tenants Roommates

In this entire process, this is THE MOST IMPORTANT one. Nothing will make your life more miserable than bad tenants or roommates.

Once you have marketed your property, you will have people of all walks of the earth inquiring. Do your initial screen by talking with them on the phone, checking out their social media, and googling their name. If everything seems okay, set up a showing. I like to do “open house” style showings, where I say come by between ten and noon on Saturday so that I can make the best use of my time. 

At the open house, I meet each tenant, shake their hand and show them the house while having a 10 to 15-minute conversation with them. In this time, I can tell pretty quickly if they are going to be a good fit for the house or not. If they are, I send them an application right there before they leave. 

The application includes: their income, background checks, credit checks, references, and more. Regardless of how nice they seem, I always make sure they meet my criteria: 

  • Income = 3x rent
  • Background Check = Clear 
  • Credit Score = 600 or more
  • References: Call previous landlords, employers, etc. 

If all of these boxes are checked, I accept them and allow them to move in.  

Step 10: Managing the House Hack

Congratulations! You just purchased your first house hack. You got it filled up and now people are paying you rent on a monthly basis, and you’re living for free. The bulk of the work is over, and now you just need to manage it: collect rent each month, respond to maintenance requests, and keep order in the house. 

To collect rent each month, I use a web application called Cozy. Tenants can enter in their bank information and it automatically gets paid each month. Set it and forget it. While living there, you will know pretty quickly if something needs fixing. I would find a handyman and give them a call when something goes awry. If you can’t find one, try using TaskRabbit. Keeping order in the house is generally easy if you did a good job screening your tenants in step #9. However, if there is some animosity between neighbors or roommates, I would try to get to the root of the problem and solve it ASAP. 


There you have it! A brief, ten-step guide to house hacking. I think everyone pursuing financial independence should house hack—it will put you on the super-fast track because you will be eliminating your largest expense, all while gaining equity in a property, paying down the loan, and saving on taxes. 

Given the confines of this article, I was unfortunately unable to dive deep into any one of these steps, but I did write a book called…

 The House Hacking Strategy: How to Use Your Home to Achieve Financial Freedom

…where I put everything I know about house hacking in almost 300 pages of text. If this article isn’t enough for you, reading the book will help you acquire the knowledge you need to become a proficient house hacker.

Happy House Hacking!


It has been a 3-year journey, with hundreds of folks dedicating their time and energy to produce, promote and support this project. But now it is here and I am proud to announce my friends Travis Shakespeare and Taylor and Scott Rieckens have just released…
Yes, I have a small part in it. But that is pretty much their only mistake. I’ve seen it twice now and my only regret is I am not an investor. Buy it to enjoy watching a real family’s real journey into FIRE. It is not always easy, but it is always compelling. And it is a great way to spread the FIRE word.



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Important Resources

  • Talent Stacker is a resource that I learned about through my work with Jonathan and Brad at ChooseFI, and first heard about Salesforce as a career option in an episode where they featured Bradley Rice on the Podcast. In that episode, Bradley shared how he reached FI quickly thanks to his huge paychecks and discipline in keeping his expenses low. Jonathan teamed up with Bradley to build Talent Stacker, and they have helped more than 1,000 students from all walks of life complete the program and land jobs like clockwork, earning double or even triple their old salaries using a Salesforce certification to break into a no-code tech career.
  • Credit Cards are like chain saws. Incredibly useful. Incredibly dangerous. Resolve to pay in full each month and never carry a balance. Do that and they can be great tools. Here are some of the very best for travel hacking, cash back and small business rewards.
  • Empower is a free tool to manage and evaluate your investments. With great visuals you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you'll see what's working and what you might want to change. Here's my full review.
  • Betterment is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • NewRetirement offers cool tools to help guide you in answering the question: Do I have enough money to retire? And getting started is free. Sign up and you will be offered two paths into their retirement planner. I was also on their podcast and you can check that out here:Video version, Podcast version.
  • Tuft & Needle (T&N) helps me sleep at night. They are a very cool company with a great product. Here’s my review of what we are currently sleeping on: Our Walnut Frame and Mint Mattress.


  1. The Slowmads says

    This is a fantastic way to hand college housing if you have responsible kids. I had an Uncle who did this and found his house trashed and needing extensive repairs. Screen those tenants well. 😉

    • Robin says

      My wife was the roommate in a house hack in college, and that experience encouraged us to buy a duplex, turn it into a triplex, then buy another home that we are in the process of building an ADU for. Certainly screening tenants/roommates is important – but just as important as them having X credit rating is getting a responsible feeling from them (and their references!).

    • jlcollinsnh says

      When I saw that, I send Travis an email teasing him about the other movie. His response:

      “Ha! It seems to be a good thing. If you search for it our page comes up 4th! looks like a dumb movie, so will probably come & go while FIRE is here to stay apparently!”

      Funny, and good publicity. 🙂

  2. Profit Greenly says

    Adding multiple tenants to your house will likely increase the electricity consumption of that house. This can actually be good because it means you can put even more money into a financially profitable solar array on the roof of said house. Solar isn’t profitable in every single state, but it is in most. For example solar crushes bonds even in a cloudy and relatively conservative state like Pennsylvania (see my blog post if you want hard numbers and more analysis).

    • Craig Curelop says

      The amount of electricity you use will likely increase slightly. But not as much as you’d think. You’ll have similar consumption in common areas, but more in private areas where people would not reside otherwise. Solar panels are great! I do not have them, though a few friends do and they love it.

      • Profit Greenly says

        Yeah, I think the biggest increase would come from hot water and dryer usage, but you’re right adding another person to the house might not even add 10% to the total energy usage. I guess that’s another reason to do this, more people per house is a far more energy efficient way to live!

        All that being said since the size of solar array you can install and still get good ROI from is limited by your total electric consumption adding roommates will allow you to invest more in solar. Since solar is a better investment than standard “safe” investments in most states this means that you’ll be able to transfer more money from low performing bonds to higher performing solar. Since you haven’t installed solar on your house yet you have a great opportunity. If you have $5k or more invested in low performing vehicles like bonds, CDs, or savings accounts you can convert some or all of it into higher performing, lower risk solar panels on your roof!

  3. Dugan says

    Any analysis on the return on investment you get with this strategy? It seems like it would have to be close to the 6% that Rich Carey gets with his Truly Passive Real Estate Investing.

    • Craig Curelop says

      Hey Dugan,

      With this strategy your returns are well north of 6%. With House Hacking, you are putting such a low percentage down (aka investment) relative to the amount your net worth gains. I have actually never seen a house hack where the individual’s total net worth gain is not 100% or more of the initial investment.

      With house hacking, your net worth increases through the following:
      1) Cash Flow – Excess rent over the mortgage and expenses
      2) Loan Paydown – Principal portion of loan
      3) Appreciation – Over time, houses do appreciate (just like index funds)
      4) Rent/Mortgage Savings – You’re living for free!
      5) Tax Benefits – Outside the scope of this article, but still applies

      After you add up all of these benefits in the first year, you are likely adding tens of thousands to your net worth while only investing a fraction of that.

      • Dugan says

        Thanks Craig– I was specifically wondering what the average ROI per year is since I imagine you’re not suggesting that it’d be a sustained 100% per year– mostly because your rent can’t double every year so your main source of continued future growth is appreciation of the house which is a bit of a gamble. I’m also curious as to what the average profit is since it seems like the type of strategy that could pay off really well under ideal circumstances, but also leave you pretty broke if everything went wrong (e.g. the house depreciates in value, you can’t find renters, a renter trashes your place and you have to go through the lengthy legal process of evicting them, fridge/stove/heater all stop working, etc…).

        • Craig Curelop says

          Hey Dugan,

          Great question. So after you get your money back after the first year, the ROI is essentially infinite. Because you’ve earned all of that back already. The reason why the ROI is so high is because you are able to put down so little (3%) when doing an owner occupied home.

          Sure, the house could depreciate and all of those horrible things could happen. Though, through research and education, you should be able to make the probability of that happening pretty darn low. Screening your tenants, getting the property inspected, doing research on the area, etc. Even if the house does depreciate, it doesn’t matter because the rent will cover your mortgage payments you’ll never be forced to sell.

          Given the large returns you make and the ability to de-risk the investment through education, I just don’t know a better risk/reward trade-off when it comes to an investment.

          • Matty says

            It’s a wonderful strategy. “Essentially infinite” is perhaps a bit of an exaggeration. I’m curious on your thoughts to see if this is the way to look at it:

            Down payment – $10k – equals initial invested capital.
            To make it easy, let’s assume that after mortgage debt service, maintenance and other costs, your return from rental income is $5k. Let’s additionally assume that you saved $10k in personal housing costs by having third parties fund your living (this is on top of the $10k return). Total return $15k on $10k of equity… not bad for a first year. (for sake of the rest, let’s assume you invest that $15k to paydown the principal on the mortgage)

            Subsequent years should see an increase in the return from the rental as debt service will go down. Your return is based on the equity in the investment. So your year two return is likely going to be less on a percentage terms, but improved on a real dollar amount. Say $25k down ($10k initial plus year 1 return reinvested in property $15k). Year two return should be better than $15k, barring significant repairs.

            Now, if you can find another vehicle to park the $15k that can generate the same return, you can repeat the year 1 return in year 2 with a new property. If you acquire a new property that you are not living on, you are moving from house hacking to real estate investing…

            I’ve seen many take the house hacking piece and do very well. It’s a wonderful way to limit expenses and grow your personal balance sheet.

            It’s a very smart, savy strategy.

          • Craig Curelop says

            Yes – you are right that as you continue to do this strategy you will find that your return on equity goes down. Not because you are generating a lower return, but because your equity position is getting to be so large. This is a GREAT problem to have.

            You can use that equity by taking out a home equity line of credit (HELOC) on the property or if you did ever want to sell it, that’s cash in your pocket.

            The idea is to repeat this strategy 3, 4, 5 times over the course of 3, 4, or 5 year so that you can have a portfolio of property giving you passive income that exceeds your expenses :).

  4. Nic Chambers says

    Big fan of house hacking (It really does work – just don’t force the numbers and you’ll be sitting great) and the Bigger Pockets team! Thanks for sharing JL, it sounds like a great book!

  5. The Rich Dog says

    In my area, the city has set up some rules so you can’t rent more than 1 room and any airbnb will be taxed. As for a 3 or 4 unit, you’d still be losing money living in one and renting the others. I guess this strategy doesn’t work anywhere

    • Craig Curelop says

      AirBnbs are taxed all around the nation. You just need to incorporate the tax as a cost. Just because it is taxed doesn’t mean it won’t work.

      W2 income, rental income, 1099 income, and all other forms are taxed and people still do it.

    • Robin says

      Are rents that low in Quebec relative to housing costs? We lived in the largest unit of a triplex in a major urban area with extremely high real estate costs but our two tenants still paid our mortgage and expenses plus additional profit. A duplex isn’t initially guaranteed to cash flow if you live in half depending on the region – but 3-4 units ones almost always do.

  6. John says

    This is exactly what I did! I bought a 3 bedroom house this year and it’s my first house. I am a single guy so I made up my mind to find 2 roommates to help pay my mortgage. I was very successful and now it has been half a year and this whole experience has been totally great. Some numbers: $2381 monthly mortgage, 15 years fixed, 20% down. rents are $700 small room & $800 bigger room, all bills paid. The rents are really cheap but still helped me greatly.

      • John says

        Hi Craig! It’s John! I am a multi-millionaire now! I bought your book and it is a part of the reason that I decided to go in for real estate. Now I own 5 rentals and my home with 1.6M in debt but a net worth of around 2.04 Million.

        One feedback to your book is some of the equations for calculating the rate of returns aren’t very accurate. Or I don’t agree the returns are that high.

  7. Tyson Schumpert says

    Quick question…. and anyone can feel free to answer/explain.

    College student and extremely new to investing, however I just recently opened the VTSAX ETF fund through vanguard. I viewed their FAQ’s page to better understand the admiral vs ETF distinctions. I still believe i am bit confused…. So once my account balance hits 3000 will it now be considered as having Admiral shares or would i have to repurchase the “admiral shares” version?

    All responses all welcomed, Thanks!!!

  8. Tim says

    Hi Craig, thanks for your post.

    Your strategy seems to rely heavily on the assumption that rent will fully offset the mortgage cost + property tax + expenses, and will continue in the future.

    I live in a HCOL city where the rent income, even using the trailer strategy, will not offset the mortgage payment. This might be an extreme scenario but I assume there are cities where this might be the case. Add on property tax, expenses, and potential vacancy rate, I don’t see how this strategy would be viable.

    In addition, in a market down turn where the house goes down in value, the rent income would be impacted and might no longer cover the mortgage payment. If this continue for an extended period (1-5 years), it might lead to a default on the mortgage.

    Furthermore, I wanted to point out that the strategy requires the owner to essentially perform the task of a property management agent part time (marketing and screening tenant, urgent home maintenance, etc). It is hard to quantify the time spent working on your own property and tenant, but a property manager generally charges 8-12% of the monthly rent. It might be worth factoring in such “cost”.

    What would be your recommendation in these situations.

  9. Tyler G. says


    Hopefully this isn’t a silly question, and there may be an answer I haven’t considered yet. How does one deal with parking when there are now 3-4 occupants each with their own vehicle? Even with quite a large driveway, I feel like there would be a constant shuffle of vehicles that would become quickly frustrating.

  10. CC says

    Wow, this post didn’t age well. There’s gonna be a zillion leveraged house hackers going bust this autumn and fall from Covid-19 fallout. House hacking works well when times are good and banks are giving out loans like Halloween candy. Doesn’t work so when when credit markets freeze and people lose their jobs and cities outlaw evictions.

    The fact that you don’t address evictions or difficult renters makes me suspect you haven’t been doing this long, or maybe not at all. In your world I guess there’s zero risk to being a landlord, the cash just rolls in and they never get laid off, never refuse to pay and declare bankruptcy to avoid eviction … those things don’t happen on the Simple Path to Wealth®.

  11. Kevin says

    Craig, thank you for sharing your journey and literally writing the book on house hacking! Definitely worth the read for anyone on the fence.

  12. Chelsea says

    Am I the only one that thinks the term “House Hacking” is not only offensive, but misleading? We own a 2-unit as our first home and it’s not just a “sit back and relax and have all the money flow in” process always. Picking tenants, evicting tenants if needed, having your neighbors BE your tenants when you’re just trying to enjoy a cup of coffee outside in the morning…..there’s a lot more responsibility around it. Not to mention, now that this whole concept has exploded, it’s contributing to the housing crisis and spiking rent costs because suddenly, “my” speculative investment where I offered $50k more than asking price, is passed onto the renter under the guise of “market rate rent”.

    Also, the text needs to be updated, unless it’s a state-by-state criteria. PMI insurance no longer automatically drops when you hit 20% equity. You have to refinance.

  13. Wendy Thompson says

    I would be house hacking to offset the cost of living for myself, but not cover it. My plan is to purchase a 2-family and live in it at 50% of the mortgage for about 5 years and then move and rent out both units.
    Is this a reasonable plan?

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