Quick answer
House hacking means living in one unit of a multi-unit property while tenants rent the others. Buy a $450,000 duplex with 5% down, rent the other unit for $1,800, and your share of the $3,302 monthly PITI falls to about $1,652 — saving about $448 a month against renting at $2,100. Move out later and the property must stand on its own numbers, which the calculator tests separately.
How the House Hacking ROI works, step by step
Enter the purchase price, down payment, rate, tax and insurance, the rent from the other units, and what you would otherwise pay in rent. The calculator builds the full PITI payment on a 30-year fixed mortgage, adds the utilities you cover, subtracts tenant rent to get your effective housing cost, and compares it with renting.
The owner-occupier advantage is the deposit: living in the property qualifies for owner-occupied financing — as little as 3.5% down on an FHA loan with a credit score of 580 or higher, for 1 to 4 units — where an investor would need 20% to 25%. That leverage is the strategy's engine and its risk: your cash invested is small, so returns on cash look large in both directions.
Then judge the move-out case, because you will probably not live there forever. The calculator re-runs the property with your unit rented at market rate and no owner subsidy. Cash-on-cash after move-out is the investment verdict; the live-in figure is a housing-cost verdict. Both need to pass, and at the default inputs the move-out case does not: $3,400 of rent against $3,302 of PITI plus $150 of utilities leaves about minus $52 a month.
For three- and four-unit purchases, FHA adds a self-sufficiency test that duplexes skip: 75% of the appraiser's market rent for all units, including the one you occupy, must cover the full monthly mortgage payment. FHA also lets lenders count about 75% of the rent from units you will not occupy as qualifying income, and requires three months of PITI in reserves after closing for three- and four-unit properties.
Tax splits with the building. Rent from the other units is taxable income, against which you can deduct the rental share of expenses: a proportion of mortgage interest, tax, insurance, repairs and depreciation on the rented portion, reported on Schedule E. The depreciation shelters income now and is recaptured when you sell — and the owner-occupied share of the gain may qualify for the primary-residence exclusion, which the rental share does not.
The formula
Effective housing cost while house hacking = PITI + utilities you cover − rent from other units. PITI = principal and interest on a 30-year loan + tax ÷ 12 + insurance ÷ 12. Cash invested = down payment + closing costs (about 2% of price). Cash flow after move-out = (rent from all units) − PITI − utilities. Cash-on-cash = annual move-out cash flow ÷ cash invested.
Worked example — try it on the calculator above
Worked example: $450,000 duplex, 5% down, one unit rented at $1,800
Down payment: $22,500. Loan: $427,500 at 6.5% over 30 years — principal and interest $2,702.09. Tax $5,400 a year ($450 a month) and insurance $1,800 a year ($150) bring PITI to $3,302.09. Add $150 of utilities and subtract the other unit's $1,800 rent, and your effective housing cost is $1,652.09 a month, against $2,100 to rent elsewhere — a saving of about $448 a month. Cash invested is $31,500 (deposit plus 2% closing). Move out and rent your unit at $1,600: total rent $3,400 against PITI of $3,302.09 plus $150 of utilities leaves about minus $52 a month — this deal works as subsidised housing first and as an investment only with rent growth.
Frequently Asked Questions
How many units can I buy with an owner-occupied loan?
Up to four. FHA and conventional owner-occupied loans cover 1- to 4-unit properties if you live in one unit, typically moving in within 60 days and staying at least a year. Five or more units is a commercial property with commercial financing. The 2-to-4-unit owner-occupied purchase is the largest low-deposit opportunity in US housing finance.
Can I use expected rent to qualify for the loan?
Often yes. Lenders commonly count about 75% of the rent from units you will not occupy (per leases or an appraiser's rent schedule) as qualifying income, which can substantially raise what you are approved for. FHA loans on 3- to 4-unit properties add a self-sufficiency test: the property's total rent, less 25% for vacancy and maintenance, must cover the full PITI payment.
Do I have to pay tax on the rental income while house hacking?
Yes — rent from the other units is taxable income, against which you can deduct the rental share of expenses: a proportion of mortgage interest, tax, insurance, repairs and depreciation on the rented portion. Owner-occupiers split expenses between Schedule A (personal share) and Schedule E (rental share). The depreciation on the rental portion is a significant shelter — and is recaptured when you sell.
What are the main risks of house hacking?
Concentration and proximity: your home and your investment are the same building, your tenants are your neighbours, and a vacancy hits both your housing cost and your return at once. Low-deposit leverage means a modest price fall can put the loan underwater. The strategy works best bought below market in an area where the move-out numbers — not just the live-in numbers — already pass.
Estimates, not advice. This calculator provides educational estimates based on the inputs you enter and the assumptions shown on this page. It is not financial, tax or investment advice, and it cannot see your full situation. Verify important figures against official sources, and consider a qualified professional for decisions about your own money. See our Disclaimer and Methodology.