House-Hacking is the act of purchasing a duplex, tri-plex, or four-plex as your primary residence. This allows you to live in one unit and rent the other units out.

This is an ingenious method to purchase your first home because you will reap the benefits of home-ownership while your tenants pay the mortgage. You will enjoy smaller living expenses than you were paying for rent in that old apartment you were staying in. In some instances, you might even get paid to live in this home!

When you vacate the property and all units are rented you will receive monthly cash-flow until you sell the property. Of course, that is provided you ran the numbers correctly before purchase.

Reduced living expenses, home-ownership, and passive income when you move out, that is great! The only downside to this plan is that with a conventional mortgage it does still require 20% down in order to purchase the property. That is where the FHA-hack comes into play!

An Affordable Way to House-hack (the FHA-hack)

The FHA-hack is the exact same process as the house-hack but without a 20% down payment.

A Federal Housing Administration (FHA) loan can only be used for primary residences, but only requires 3.5% down payment! Any property with four units or less can be classified as a primary residence.

So, the FHA-hack is when you purchase a duplex, triplex, or four-plex with only 3.5% of the purchase price out of pocket! You can still negotiate that the seller pays closing costs and fees at closing to mitigate your expenses. To put this in perspective, a $200,000 duplex would only cost you $7,000! That is less than a car, and you can earn that money back in the first year with how much you’re saving on rent.

The Numbers

My First FHA-hack

Entry numbers

Purchase: $81,000

Down payment: $2,835

Monthly numbers while living in it

Rent income: $515

Mortgage/taxes/insurance: $590

Property Manager: $73.50

Utilities: $120

Total cost of living (plus repairs): $268.50

Housing allowance was: $850.00

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