How house hacking math works
Net housing cost = full monthly payment + reserves − rent collected
The full monthly payment is principal, interest, taxes, insurance and any mortgage insurance. Reserves are what you set aside from the rent for repairs and the months a unit sits empty. What remains after your tenants pay is what it costs you to live there.
For example, if the full payment is about $2,960 and the other unit rents for $1,700, you are living there for roughly $1,430 a month after reserves, in a property you own.
Why it works
Owner-occupied loans allow much smaller down payments than investment loans, often 3.5% to 5% instead of 20% to 25%, and usually carry lower rates. House hacking lets you buy a rental with owner-occupant financing, as long as you genuinely live in it. Lenders generally require you to move in and stay for a minimum period, commonly a year.
Run it as a rental too
The test of a good house hack is what happens when you move out. Before you buy, analyze the property as a full rental with every unit rented. If it cash flows then, you have bought an investment. If it only works while you live there, you have bought a discounted home, which can still be a fine decision.