real estate investor celebrating freedom on hike overlooking canyon


The dream of financial freedom is what most real estate investors are after. For a lot of young investors, this means building a steady stream of passive income and a strong real estate portfolio that will grow and mature over time. 

Photo of a midwestern duplex, a fantastic home for house hacking

If you're a first-time homebuyer who wants to find a good jumping-off point in the real estate investing world, house hacking is the way to go.

We’re going to break down house hacking, explain why it's such a great way to make money, and show you how to build your own house hacking strategy step by step. We'll also go into different financing options that are out there and what aspects of a property make it a good choice for house hackers.

Why Is House Hacking A Great Investment?

Simply put, house hacking is a way to make money off a rental property while also living in that rental property. You buy a property with more than one unit (or a single-family home with extra space), live in one unit or area, and rent out the rest while you repair the unit you’re living in. 

With this plan, you can get rental income to help pay for your mortgage and other housing costs. In the end, this could lower your housing costs or even let you live for free.

Traditional real estate investments require a lot of money, but house hacking is a good way for young investors with little money to get started. Among the advantages of house hacking are:

1. Lower Barriers To Entry: FHA loans and other mortgage programs with lower down payments make it easier for first-time buyers to buy a home.
2. Reduced Cost Of Living: Rental income can help pay for things like your mortgage, property taxes, insurance, and repairs.
3. Build Equity: When your tenants help pay down your mortgage, you build equity in the property by making renovations and repairs. 
4. Gain Valuable Real Estate Experience: "House hacking" is a great way to get hands-on experience with property management and real estate investing, which will help you invest more down the road.
5. Tax Breaks: As a property owner, you’ll be able to find tax breaks for things like mortgage interest and property depreciation.

Notebook open on table with the words, "Tax Benefits" written on it

Building Your House Hacking Strategy: A Step-by-Step Guide


Step #1: Be Realistic With Your Goals & Financial Expectations

Figure out what you want to get out of your investments and look at your finances, including your credit score, income, and savings. This will help you figure out how much you can spend on your house hacking property.

Step #2: Research Your Markets

Look into multiple markets and areas that fit with your goals. Think about things like population growth, demand for rentals, and nearby amenities to make your property as appealing as possible to renters.

Two young real estate investors searching how to house hack and searching for the perfect property to buy.

Step #3: Select Your Property Carefully

Think about different types of properties, like duplexes, triplexes, and single-family homes with an accessory dwelling unit, and figure out how much rental income they could bring in. Think about the property's condition, any repairs that need to be done, and your ability to handle the project.

Step #4: Shop Around For Financing

Look around for the best mortgage rates and terms, and think about using programs for first-time homebuyers, like FHA loans, that require less of a down payment.

House hacker looking for financing options

Step #5: Find Your Blind Spots

What can you do yourself and where do you need professional help? Depending on your skill set, you may need to reach out to mortgage brokers, property inspectors, contractors, lawyers and accountants. Sites like Angi and LegalZoom are great resources to find professionals near you.

Step #6: Close The Deal

Work with your real estate agent to make an offer that is competitive based on the state of the market and the property. Once your offer is accepted, you will need to finish the closing process, which includes inspections, appraisals, and getting your mortgage finalized.

Step #7: Prep The Property For Tenants

Repair and improve your property as needed to make sure it is safe, useful, and appealing to potential renters. You’ll need to determine whether it’s a long-term or short-term rental property based on the area.

Step #8: Market Your Rental

Market your short or long-term rental online to start the tenant applications rolling in. 

Step #9: Screen Potential Tenants

Make sure you find reliable, responsible renters by coming up with a strict process for screening tenants. This process could include checking their credit, performing a thorough background check, employment history and any references they may have.

Step #10: Manage The Property (Or Find A Property Manager)

As a house hacker, you will be in charge of things like collecting rent, doing maintenance and repairs, and dealing with tenant problems. You can manage the property yourself, or you can hire a property management company to do it for you.

Step #11: Track Your ROI

Keep track of how your property is doing, including how much it rents for, how much it costs, and how much it goes up in value. Always look at your investment strategy and make changes as needed to get the most out of it.

Step #12: Look Towards The Future

As you get better at house hacking and build equity in your property, you might want to use that equity to buy more properties and grow your real estate portfolio.

How To Find The Perfect Home For House Hacking

Research, hard work, and patience are all needed to find the right property for house hacking. When looking for a home with potential for house hacking, think about the following things to improve your chances of success:


  • Location: Focus on areas with a lot of people looking to rent, good job markets, and amenities that people want. The area should be appealing to renters and have good growth prospects in the long run.
  • Condition Of The Property: Check the property's condition, its layout, and the amount of work, if any, that needs to be done. Choose a property that fits your desired level of involvement. Want a turnkey solution? Buy a property that’s ready to move into. Are you more of a fixer upper? Get one that needs some work.
  • Find Motivated Seller Property Owners: Look for properties owned by motivated sellers. You’re far more likely to find a better deal.
  • Area’s Market Outlook: Find out about the current state and future trends of the local real estate market. Look for areas that are likely to go up in value, have low vacancy rates, and have rental rates, all of which will help you reach your house-hacking goals.
  • The Global Economic Outlook: Think about the economy as a whole, because things that happen around the world can affect local housing markets. Keep up with changes in interest rates, job growth, and other economic factors that could affect how well your investment does.

Financing Options For House Hackers


  1. FHA Loans: Federal Housing Administration (FHA) loans offer lower down payment requirements (as low as 3.5%) and less strict credit score requirements, which makes them a good choice for people buying their first home.
  2. Conventional Mortgages: Most of the time, these loans require a larger down payment (5–20%) and a higher credit score requirement than FHA loans do. However, they may have better interest rates and lower mortgage insurance costs in the long run.
  3. VA Loans: If you've served in the military or are still serving, you may be able to get a VA loan, which has low interest rates, options for no down payment, and no mortgage insurance requirements.
  4. Hard Money Loans: These loans, which are usually given by private lenders, can be a good choice for investors who want to buy a property that needs repairs or renovations but doesn't meet the criteria for a traditional loan. Remember that these loans usually have higher interest rates and shorter terms for paying them back.
  5. Fannie Mae Loan: Fannie Mae loans are home mortgage loans that are backed by the Federal National Mortgage Association (FNMA), commonly known as Fannie Mae. Fannie Mae loans typically offer competitive interest rates and flexible terms, making them a popular choice for first-time homebuyers. These loans can be used to finance the purchase of a primary residence, a second home, or an investment property.

A calculator, timing device and small home on a table representing a mortgage.

The Takeaway:

House hacking is how young real estate investors can start their road to financial independence and help cover (if not completely pay) their mortgage.

But when all is said and done, finding the right property is critical, and that’s where Leadflow comes in. With a proven sellability score and the ability to identify motivated sellers, it’s the perfect tool for first time home buyers to identify target properties for house hacking.

Want to see what Leadflow can do for you? Grab a 7-day free trial below!