house-hacking-guide)

What if your tenant paid most of your mortgage? That's the core idea behind house hacking with a duplex — you buy a two-unit property, live in one side, and rent out the other.

It's one of the most practical wealth-building strategies available to first-time buyers, and it's more accessible than most people think. Here's how it actually works, with real numbers and honest trade-offs.

How House Hacking Works

You purchase a duplex (a building with two separate units) as your primary residence. Because you live there, you qualify for owner-occupied financing — lower down payments, better interest rates, and access to FHA and VA loans.

Your tenant's rent offsets your mortgage payment. In many markets, the rental income covers 50-100% of your total housing cost. You're building equity in a property worth two units while paying less than most renters.

After 12 months of owner occupancy (the typical lender requirement), you can move out and rent both sides, converting the property into a full investment.

The Numbers: A Real-World Example

Let's say you buy a duplex for $400,000 in a mid-sized metro area.

Purchase Details

Purchase price: $400,000
Down payment: 3.5% (FHA) = $14,000
Loan amount: $386,000
Interest rate: 6.5%
Mortgage payment (P&I): $2,440/month
Property tax: $367/month
Insurance: $200/month
[FHA mortgage insurance](/blog/fha-loan-requirements-2026) (MIP): $225/month
Maintenance reserve (1%): $333/month
Total monthly cost: $3,565

Rental Income

Unit B rent: $1,600/month
Vacancy allowance (8%): -$128/month
Net rental income: $1,472/month

Your Actual Housing Cost

$3,565 - $1,472 = $2,093/month

You're living in a property you own for $2,093 a month. In most markets, that's less than renting a comparable standalone unit. And roughly $600 of your mortgage payment goes toward principal each month — equity you're building.

Without the rental income, you'd be paying $3,565. Your tenant is effectively covering 41% of your housing costs.

Financing: Your Biggest Advantage

The single best reason to house hack is financing. Owner-occupied loans are dramatically better than [investment property loans](/blog/best-dscr-lenders-2026).

Owner-Occupied (You Live There)

FHA loan: 3.5% down, credit score 580+, allows rental income to qualify
Conventional: 5-15% down for duplexes, better rates than investment loans
VA loan: 0% down if you're a veteran — the most powerful house hacking tool available
Interest rates: same as single-family primary residence rates

Investment Property (You Don't Live There)

20-25% down required
Interest rates 0.5-0.75% higher
Stricter qualification standards
Rental income only counts at 75% for qualification

On a $400,000 duplex, the difference between 3.5% down (FHA) and 25% down (investment) is $14,000 vs. $100,000. House hacking lets you control a $400,000 asset for $14,000.

Using Rental Income to Qualify

Most lenders allow you to use 75% of the projected rental income from the other unit to help you qualify for the mortgage. If Unit B would rent for $1,600, lenders count $1,200 toward your qualifying income. This can make the difference between approval and denial.

Get a rent estimate from a local property manager or appraiser — lenders will verify the number.

Finding the Right Duplex

Not every duplex is a good house hack. Here's what to look for:

Unit Configuration

Separate entrances are essential. You want privacy, and your tenant wants it too. Avoid duplexes where both units share a front door or hallway.
Similar-sized units are ideal. If one unit is a 3-bedroom and the other is a 1-bedroom, you'll either live in the small one (uncomfortable) or the big one (less rent from the small unit).
Separate utilities save headaches. When each unit has its own electric, gas, and water meters, the tenant pays their own bills. Shared utilities mean you're either splitting bills manually or eating the cost.

Location

Look for areas with strong rental demand: near colleges, hospitals, military bases, or downtown job centers.
Check comparable rents before you buy. The deal only works if the rent covers a meaningful portion of your costs.
Avoid areas with high vacancy rates. A vacant unit means you're paying the full mortgage.

Condition

Cosmetic issues are fine — paint and flooring are cheap fixes.
Structural problems, old electrical, or failing plumbing are expensive and disruptive when you have a tenant next door.
Get a thorough inspection. With two units, there are twice as many things that can go wrong.

Zoning and Legality

Verify the property is legally zoned as a duplex. Some "duplexes" are illegally converted single-family homes. If it's not legal, you can't get proper insurance, and you face code enforcement risk.
Check local landlord-tenant laws. Some cities require rental licenses, lead paint certifications, or specific safety features.

Being a Landlord Next Door

This is the part most guides gloss over. Living next to your tenant is different from being a remote landlord.

The Pros

You can monitor the property easily. You'll notice a leak, a pest problem, or a maintenance issue before it becomes expensive.
Tenants tend to take better care of the property when the owner lives next door.
No [[property management](/blog/property-management-complete-guide) fees](/blog/property-management-fees-guide). You're right there.

The Cons

Boundary issues are real. Your tenant might knock on your door at 10 PM about a clogged drain. Set expectations early: maintenance requests go through text or email, not your front door.
You'll hear them. Duplexes share a wall. You'll hear music, conversations, footsteps. If you're noise-sensitive, this will wear on you.
Awkward situations. Collecting rent from someone you see daily can be uncomfortable, especially if they're late. Use an online payment system (Zelle, Venmo, or a property management app like Avail or TurboTenant) to remove the personal element.
Screening matters even more. A bad tenant in a remote property is stressful. A bad tenant sharing your wall is unbearable. Screen thoroughly: credit check, income verification (3x rent minimum), landlord references, and background check.

Setting Boundaries From Day One

Use a formal lease. No handshake deals, even if the tenant seems great.
Define quiet hours, parking rules, shared space responsibilities, and pet policies.
Communicate professionally. Being friendly is fine. Being friends creates problems when you need to enforce rules or raise rent.

Tax Benefits

Owner-occupied duplexes offer significant tax advantages.

What You Can Deduct

Since half the property is a rental, you can deduct 50% of:

Mortgage interest
Property taxes
Insurance premiums
Maintenance and repairs (on the rental unit, 100%)
Depreciation on the rental portion of the building

Depreciation

You can depreciate the rental half of the building (not land) over 27.5 years. On a $400,000 duplex where the building is worth $320,000, the rental portion is $160,000. Annual depreciation: $160,000 ÷ 27.5 = $5,818 per year — a paper loss that reduces your taxable rental income.

Rental Income Reporting

You report rental income and expenses on Schedule E of your tax return. If your rental expenses (including depreciation) exceed your rental income, you may be able to deduct up to $25,000 of the loss against your regular income if your adjusted gross income is under $100,000. This phases out between $100,000 and $150,000 AGI.

Work with a CPA who understands rental properties. The tax code here is favorable but complex.

The Exit Strategies

House hacking isn't permanent. Here's what comes next:

Option 1: Move Out, Rent Both Sides

After 12 months, rent your unit too. Now you have two income streams covering the mortgage and generating cash flow. Buy another property to live in (and house hack again if you want).

Option 2: Sell After 2 Years

If you've lived in the property for 2 of the last 5 years, you can exclude up to $250,000 ($500,000 if married) of capital gains from taxes on the portion you occupied. Buy the duplex, live in it for 2 years, and sell with significant tax savings.

Option 3: Refinance and Scale

Once the property has appreciated, refinance to pull out equity. Use that equity as a down payment on your next investment property. This is how many real estate investors build portfolios starting from a single duplex.

Option 4: Stay Long-Term

Some people love duplex living. The rental income supplements your household budget permanently. When the mortgage is paid off, the rent is nearly pure income.

Common Mistakes to Avoid

Overestimating rent. Use actual comparable rents, not Zillow estimates or what the seller claims. Talk to local property managers.
Underestimating expenses. Budget 1% of property value annually for maintenance, plus 8-10% vacancy. Things break. Tenants leave.
Skipping the inspection. A duplex with deferred maintenance will eat your rental profits for years. Pay $500-$700 for a thorough inspection.
Not screening tenants. Desperation to fill the unit leads to bad tenants. A vacant month costs $1,600. A bad tenant can cost $5,000-$15,000 in damage, legal fees, and lost rent.
Ignoring local laws. Some cities have rent control, just-cause eviction requirements, or mandatory relocation assistance. Know the rules before you buy.

Frequently Asked Questions

Can I use an FHA loan to buy a duplex?

Yes. FHA loans allow you to buy properties with up to four units as long as you live in one. You need 3.5% down with a 580+ credit score. The FHA loan limits for duplexes are higher than for single-family homes — in 2025, the limit is $604,400 in standard areas and up to $1,394,775 in high-cost areas.

How much rental income do I need to qualify for the mortgage?

Lenders typically count 75% of the market rent for the non-owner unit. You'll need a rent appraisal or comparable rent analysis. Combined with your regular income, this needs to support the total mortgage payment within standard debt-to-income ratios (typically 43-50% for FHA).

Do I have to live in the duplex for a certain amount of time?

FHA and conventional owner-occupied loans require you to move in within 60 days of closing and live there as your primary residence for at least 12 months. VA loans have similar requirements. After that, you're free to move out and rent both units.

What if I can't find a tenant right away?

Budget for it. Assume 1-2 months of vacancy when you first buy. Price the unit competitively, market it well (professional photos, listings on Zillow/Apartments.com/Facebook Marketplace), and screen thoroughly rather than rushing to fill it.

Is house hacking worth the hassle of being a landlord?

For most people, yes. Saving $1,000-$2,000 per month on housing while building equity in a two-unit property is a significant financial advantage. The landlord responsibilities are real but manageable with one unit. If the idea of tenant management genuinely stresses you out, consider hiring a property manager (typically 8-10% of monthly rent) — you'll still come out ahead financially.

Can I house hack with a triplex or fourplex?

Absolutely. FHA and VA loans cover properties with up to four units. More units mean more rental income, but also more management, more maintenance, and higher purchase prices. A duplex is the simplest entry point.

The Bottom Line

Buying a duplex and living in one side is one of the most efficient ways to build wealth through real estate — especially as a first-time buyer. You get owner-occupied financing, rental income from day one, tax benefits, and a clear path to scaling.

It's not passive. You'll deal with tenants, maintenance, and the learning curve of being a landlord. But the financial math is hard to beat. If you can handle living next to your tenant for 12-24 months, house hacking can set you up for years of financial flexibility.

[Using a HELOC for an [Investment Property Down Payment](/blog/investment-property-down-payment): Smart Strategy or Risky Move?](/blog/heloc-for-investment-property-down-payment)
Investment Property Down Payment: Your Real Options in 2026
Property Taxes Explained: How They Work and How to Reduce Them

Buying Duplex Live In One Side

Key Takeaways