As US home prices rise at the fastest pace in over 6 years (CNBC, 2020), there are now 312 US cities where the typical home is over one million USD (Mansion Global, 2021). That is a 17% increase in these so-called million-dollar cities compared to last year. As a result, more and more Americans are finding it harder to afford homes, especially in coastal metro areas. However, what if I told you there was a way to reduce or even eliminate your monthly mortgage payment? Welcome to the world of house hacking.

While the concept itself has been around for a while, it has recently been gaining popularity among financially savvy home buyers. To put it simply, house hacking is renting out part of your primary residence in order to help cover the costs related to home ownership. To give you a better understanding, let’s take a look at a real life example from a friend of mine who closed on his first house hack last year. For reference, Jack, bought a duplex and lives with his family in one half, while renting out the other unit. Here are the numbers:

Purchase price: $260,000

Down payment: $9,100

Monthly mortgage payment and operating costs: $1,800

Net monthly rental income: $1,900

Not only did Jack completely eliminate his monthly housing expenses, he actually makes $100 a month to live in his home. Sounds easy right? Well yes, and no. While anyone can do it, not every property you see for sale will cash flow like this. For example, if Jack’s purchase price was twice the amount, but his rental income was the same, he would be paying out of pocket for his monthly payments. Housing prices and rental incomes varies widely based on location, size and the condition of the home you are looking to buy.

However, there are strategies you can use when trying to house hack. Most importantly, is to look for properties that have as many rentable spaces as possible. Looking to buy a single family home? Check if there is a finished basement or attic space that can be used as a studio or additional bedroom. Multi-family homes offer more opportunities to generate revenue with each additional unit. Triplexes and fourplexes offer more cash flow potential then a duplex would.

As with any real estate investment, location is one of the most important factors to consider when looking at a property. Look for areas where rent prices are growing, and the job market is steady. Other things to consider are crime rates, school ratings, and public transportation access. Make sure to check the zoning laws in your area as multi-family homes are sometimes zoned in areas with a bunch of other multi-family homes which can sometimes make an area less desirable. Ideally, look for neighborhoods that have a good mix between single and multi-family homes.

Depending on your market, you may want to consider alternative rental strategies. The typical method would be to find a tenant, have them sign a 12-month lease, and collect rent every month. However, if you live in an area close to a university you could rent out each bedroom room to a different student on shorter leases and possibly make more money than you would with a traditional yearly lease. Or if you house hack in a touristy area you could list your property on AirBnb or VRBO for daily and/or weekly stays. Make sure to check that your area allows you to do short-term rentals before committing. Going the short term lease route means you have higher turnover. This can mean a bit more work on your end. However, high turnover means that you get the opportunity to inspect for damages and maintenance issues more often than when you have a long-term tenant.

There are so many ways to invest in real estate, so make sure to figure out what works best for your financial goals. To learn more about real estate investing check out the Bulletproof Cashflow Podcast at