A Guide To House Hacking Duplex

A house hacking duplex is one of the most common house hacking strategies there is, and it’s really how house hacking got started when it was officially coined as ”house hacking.”

Today, people have evolved this investing strategy into bigger properties, such as triplexes and fourplexes, vacation properties, single-family rent-by-the-room, and even more, but house hacking a duplex is still one of the most common strategies.

Let’s dive in and learn all about house hacking a duplex.

What is a house hacking duplex?

It is when you purchase a two-unit property (a duplex), live in one unit, and rent out the other to cover a portion of your mortgage.

Pros of a House-Hacking Duplex

There are 5 major benefits of a house hacking duplex:

  1. Access to some of the best financing options
  2. Get to reduce your largest monthly expense (if you buy a good deal)
  3. Learn how to be an investor and/or landlord by easing into it
  4. Receive tax benefits from your primary residence
  5. Can buy really nice properties in great areas

Access to some of the best financing options

When you’re purchasing a house hack duplex, even though it is probably an investment property in your eyes, since you’re going to be living there too, the lender allows you to use what’s considered an owner-occupied loan. Whereas, if you were purchasing a duplex as a rental property, you would have to use a traditional investment loan.

The benefits of an owner-occupied loan are that the interest rates are usually lower and most importantly, the down payment percentages are usually lower. With an owner-occupied loan, you can often only put 3.5-5% down as a down payment. Whereas with an investment loan, you would likely need to put at least 20% down, possibly upwards of 30%.

Get to reduce your largest monthly expense

For most people, their three largest monthly expenses are housing, transportation, and food. The housing category is usually mostly rent or a mortgage. But, when you house hack a duplex, you have rental income coming in from the second unit that offsets a portion of your mortgage and reduces how much you have to pay each month — if you buy a good deal.

You can analyze your deals with our free house hacking calculator to see if you have a good deal or not.

Learn how to be an investor and/or landlord by easing into it

Rather than starting your real estate investing journey by buying a 10-unit apartment building and learning it with a large, expensive property with a lot of tenants, you can learn all the skills you need to be a successful investor with just a few tenants. In the case of a house hack duplex, you can get practice with just one tenant.

The skills you learn with house hacking translate very well into larger properties. Starting with a duplex allows you to learn the ropes with minimal risk, relatively, and without getting overwhelmed.

Receive tax benefits from your primary residence

In most instances, when someone purchases a single-family home as a primary residence, there is very little tax benefit to them. However, when you’re house hacking a duplex as your primary residence, it opens up multiple valuable tax benefits for you.

Can buy really nice properties in great areas

This is one of my personal favorites. House hacking often has a bad reputation because people think that you have to live in a crappy property in a bad area in order to house hack. I’m here to tell you that is NOT the case.

Just this past weekend, I was in a very wealthy town outside of a national park in New England when I came across a beautiful duplex.

I had to stop and take a picture of it specifically for this post.

house hacking duplex setback off the street in a town

Not only is this a beautiful property, but it was also in an awesome area. This house hacking duplex is an exact example of how house hacking doesn’t have to be crappy. It doesn’t have to fit the reputation house hacking often gets.

This is just one example. There are many, many more of these across the country — and even the world.

Cons of House Hacking a Duplex

House hacking a duplex is not always a perfect strategy. There are some great pros, that we just covered, but there are also two cons:

  1. A house hack duplex isn’t the most profitable strategy
  2. It’s usually attached to a neighbor, and they can sometimes be noisy

It isn’t the most profitable strategy

I created this concept of “comfort given up versus profitability” when house hacking. It simply says that the more comfort you give up, the more profitable your house hacking strategy should be. When house hacking a duplex, you’re generally not giving up much comfortability, so you’re a bit lower in terms of profitability.

As long as the numbers in your analysis still meet your requirements, then it’s okay, but it’s worth noting that house hacking a duplex generally isn’t the most profitable strategy.

Noisy neighbors

I have house hacked three different times where I shared walls with other people. Two of the three times I could never hear my neighbors — it was great.

The third time, the property I’m sitting in right now as I write this, didn’t have the same luck. It’s a house hacking duplex, actually.

I can frequently hear my neighbors and they’re quite loud. It’s not the end of the world, nor is it that disruptive, but it’s definitely not ideal.

This can be minimized by the type of property you buy (super nice and in a good area or rundown and in a bad area) and how strict you are with your tenant screening.

The tenants in the second unit of my house hack duplex came with the property when I purchased it. I didn’t get to screen them myself.

If you think about the house hacking duplex in the image above, they probably don’t have this issue, but, it’s worth noting that it could be an issue for you.

You now know what it is, the pros, and cons, but about the how — how to house hack a duplex? Let’s dive in.

How to House Hack a Duplex

There are entire books written about how to house hack a duplex, but it can be summarized into 6 steps:

  1. Determine the area
  2. Find a real estate agent
  3. Find a property
  4. Analyze the properties
  5. Purchase the duplex
  6. Meet existing tenants or find tenants to fill vacant unit

The very first step in with a house hacking duplex is to determine which area you would like to buy the property in. From a high level, which city? Then, which neighborhoods within that city?

Once you’ve determined that, you will need to find a real estate agent to help you with your search. What’s great about being the buyer of a house hack duplex, you likely won’t have to pay anything for your agent. The buyer’s agent is usually paid out of the seller’s agent’s commission.

The next step is to work with your agent to find properties that you’re interested in. You should analyze any properties you might be interested in to see if they make sense from a financial perspective first (you can use our house hacking calculator to do that), before you waste time going to look at it in person.

When you have properties you like and that make sense financially, you can then spend time going to walk them in person and make sure they meet your expectations in real life (not just in pictures).

After you’ve walked the properties and found the one for you, you will go through the process of purchasing your house hacking duplex.

From there, you will want to get to know the tenants you’re inheriting if the property comes with tenants in the second unit, or find tenants to fill one of the empty units.

And that is how to house hack a duplex!

FAQs About House Hacking A Duplex

Can you house hack a duplex?

Yes, you can! It’s one of the most popular house hacking strategies there is.

Can you house hack while renting?

Technically, no. House hacking is only when you own the property. But, if you live with roommates while renting to reduce your housing cost, that’s similar to house hacking, you just don’t own the property. Maybe that can be considered rent hacking.

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Analyzed by: Robert Leonard
I am the founder of Everything House Hacking and a real estate investor. I house hacked my way to financial freedom. My goal is to help you learn my tactics so you can house hack your way to freedom.

Learn more here.