House Hacking: How Buyers Can Afford Real Estate by Purchasing a Multifamily Property

Struggling to Buy Your First Home? There May Be Another Option.

With home prices and interest rates remaining elevated, many buyers feel like homeownership is out of reach. A traditional single-family residence (SFR) often comes with a monthly payment that stretches budgets beyond comfort.

However, there is another strategy that has helped many first-time buyers become homeowners years sooner than they thought possible: purchasing a multifamily property, living in one unit, and renting out the others.

This strategy, often called "house hacking," allows the rental income from the other units to help offset the mortgage payment and may make qualifying for financing easier.

Why Multifamily Can Be More Affordable Than a Single-Family Home

Many buyers automatically search for a house because that's what they envision living in. But a duplex, triplex, or fourplex can provide something a single-family home cannot: income.

Instead of paying the entire mortgage yourself, your tenants help pay it for you.

While multifamily properties often cost more than a house, the rental income can dramatically reduce your out-of-pocket housing expense.

 

Comparing Monthly Costs

Example 1: Buying a Single-Family Home

Let's assume a buyer purchases a home for $750,000 with 5% down.

• Purchase Price: $750,000
• Down Payment (5%): $37,500
• Loan Amount: $712,500
• Estimated Monthly Payment (including taxes and insurance): approximately $5,200/month

The buyer is responsible for the entire payment.

Example 2: Buying a Duplex

Now let's compare a duplex.

• Purchase Price: $900,000
• Down Payment (5%): $45,000
• Loan Amount: $855,000
• Estimated Monthly Payment (including taxes and insurance): approximately $6,200/month

The second unit rents for approximately $2,500/month.

Effective monthly housing cost:

• Mortgage Payment: $6,200
• Rental Income: -$2,500
• Net Cost to Owner: approximately $3,700/month

Even though the duplex costs $150,000 more than the house, the owner's monthly housing cost is about $1,500 less.

Example 3: Buying a Fourplex

Let's take it one step further.

• Purchase Price: $1,200,000
• Down Payment (5%): $60,000
• Loan Amount: $1,140,000
• Estimated Monthly Payment (including taxes and insurance): approximately $8,300/month

Three rental units produce:

• Unit 2: $2,200/month
• Unit 3: $2,200/month
• Unit 4: $2,200/month

Total Rental Income: $6,600/month

Effective monthly housing cost:

• Mortgage Payment: $8,300
• Rental Income: -$6,600
• Net Cost to Owner: approximately $1,700/month

The owner lives in one unit while tenants help cover most of the payment.

 

Can You Really Buy a Multifamily Property with a Low Down Payment?

Many buyers are surprised to learn that owner-occupied multifamily properties can qualify for many of the same financing programs available to single-family homes.

Potential options may include:

• FHA financing with as little as 3.5% down
• Conventional financing with as little as 5% down
• VA financing for eligible veterans with little or no down payment
• State and local first-time buyer assistance programs
• Down payment assistance grants and loans

In many cases, lenders may also allow a portion of the projected rental income from the other units to help the buyer qualify.

This can significantly increase purchasing power compared to buying a single-family residence.

Additional Benefits

Beyond reducing monthly housing costs, multifamily ownership offers other advantages:

• Build equity while tenants help pay the mortgage
• Gain landlord experience on a smaller scale
• Create additional income streams
• Potential tax advantages (consult a tax professional)
• Easier transition into real estate investing
• Opportunity to keep the property as a long-term investment after moving out

Is House Hacking Right for Everyone?

Not necessarily.

Living next to tenants requires a different mindset than owning a traditional home. You'll be responsible for maintenance, tenant relations, and property management decisions.

However, for buyers who are willing to make that trade-off, a duplex, triplex, or fourplex can be one of the fastest ways to build wealth and overcome today's affordability challenges.

Final Thoughts

Many young buyers assume they cannot afford real estate in today's market. The reality is that they may simply be looking at the wrong type of property.

By purchasing a multifamily property, living in one unit, and renting the others, buyers can potentially lower their housing costs, qualify for a larger property, and begin building wealth through real estate much sooner than they imagined.

If you're interested in exploring duplexes, triplexes, or fourplexes in Southern California, let's discuss what options may be available and whether a house-hacking strategy could work for your situation.

 

Here's a visual example: