6 Different Ways to Hack Your Housing (Find One That Works for You!)

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By now, most of us have heard of the term that Brandon Turner infamously coined, “house hacking.” It’s when you purchase a property, live in part of it, and rent out the rest. That way, your roommates and/or tenants are paying a significant portion (or all) of your mortgage.

There is no question house hacking is the single best way to generate wealth for those in the beginning stages of their journey toward financial independence. Here are some reasons why:

• It either dramatically reduces or eliminates one of your largest expenses: living expense.
• You build equity for free as your tenants pay down your mortgage, while the property (in many cases) appreciates.
• You save on taxes, as you are able to deduct a portion of your house expenses, as well as account for depreciation.
• You can get into a house hack for very little down if you’re a first-time homebuyer. With such little money down, it will be tough to find higher cash-on-cash returns on any other type of investment.

Now that you can see how powerful house hacking is—and before you start making excuses as to why you can’t do it—I truly believe that one of these forms of house hacking can work for almost anyone: families, those who live in expensive areas, etc. You just need to get creative. I have, and so have many of my friends and colleagues. 

Here, I’ll outline the different types of house hacking I have either done or seen other investors execute. I hope that a variation of one of these house-hacking strategies can work for you.

1. The Traditional House Hack

Definitely the most popular and the one that almost everyone has heard of is the traditional house hack. This is when you purchase a two-to-four-unit property with a low-down payment residential loan. The 3.5%-down FHA and 5% conventional loans are very popular choices here, as well as a few other options, depending on your eligibility.

You live in one unit (perhaps with a roommate) and rent out the remaining unit(s). The rent from your roommate plus your other units should either cover the mortgage or come close to covering the mortgage. That way, when you move out, the property cash flows nicely.

This strategy works in most lower-priced markets, but it is almost impossible to find a deal that works in higher-priced markets, where rents will usually not be enough to cover the mortgage.

2. Calling the Living Room Home and Renting Out the Rest (Seriously)

They call it a “living” room for a reason, right? Craig Curelop did this in Denver, Colorado, a city where price points are much higher than the national average. It is increasingly difficult to find a property where a traditional house hack works. So Craig had to get creative.

With this strategy, Craig rented out the upstairs unit like a traditional rental. However, this was not enough to fully cover his mortgage. So he decided he would put up a room divider and a curtain to section off a portion of the living room and call it his bedroom. 

By not occupying one of the bedrooms, he rented it out on Airbnb, increasing his cash flow anywhere between $250 and $750 per month (after reserves), depending on seasonality.

3. Renting by the Room

This is a strategy I used on my first two properties, and it worked magnificently to get the ball rolling early in my career in a higher-priced market, Colorado Springs. The idea is to purchase a single-family home with at least four bedrooms and two baths, and live in one bedroom while renting out the others. You can typically get significantly more in rent when you rent by the room.

Purchasing a single-family home (especially as a first-time homebuyer) opens up a lot of potential financing options. At the time of this writing, there are 3%, 3.5%, and 5% down loan options on single-family homes. The low down payment with increased rents really boosts your cash-on-cash returns.

We haven’t even gotten to appreciation yet. Single-family homes are known to appreciate more quickly than multifamily homes. This is the case because both investors and non-investors are interested. With more demand comes higher prices—not to mention the fact that non-investors will typically pay a premium, given they are looking for a home, not necessarily a deal. 

I hear the age-old debate of investing for appreciation versus investing for cash flow, and renting by the room in a single-family home can present opportunities for both. 

4. Living in a Trailer/RV and Renting Out Your Primary Residence

A friend in Colorado has taken house hacking to the next level: He purchased a stationary RV for $3,000. He puts that in his parking space and lives in that while fully renting out his one-bedroom apartment on Airbnb. This strategy is for the hustler who is clearly willing to do what it takes to achieve early financial independence.

In Denver, where the price point is relatively high, this makes a lot of sense for young, single folks looking to eliminate their housing expense.

5. Renting Out an Additional Dwelling Unit

This is the opposite of the trailer house hack, and works well if you have a family and are looking for more privacy.

You either purchase a property with an additional dwelling unit (ADU) or build one yourself. It’s helpful if the unit has at least a small kitchenette, an operative bathroom, and a comfortable bed to sleep in. Then, you guessed it—rent it out! You could rent it full-time or on Airbnb. This way, you and your family can have your own personal space in the main house, while your guests enjoy their own space in the guest house.

6. The Live-in Flip

Mindy Jensen is notorious for the live-in flip strategy. She has done this nine times! 

This is where you purchase a property that needs some TLC, ideally with a low percentage-down loan. You live in the property for at least two years, and while living there, you fix it up. Once it is all fixed up and after the two-year timeline, you sell it and pay no capital gains on the first $250,000 of net proceeds ($500,000 if you’re married).

You may be wondering: Why two years? For every other strategy, it is just one. To avoid paying a significant amount of capital gains tax, you are required to live there for two years.

The live-in flip strategy is nice because it could be combined with the other strategies (except for the trailer/RV one) to create a compounding effect. When combined, you will significantly increase the value of the property while also garnering more rental income.

In a traditional house hack and in the living room house-hack strategy, you can live in one unit and fix it up while renting the other, then switch.

If you choose to rent by the room in a single-family home, maybe you add a couple of extra bedrooms, redo the basement, etc. This is obviously easiest because you have access to the entire property the whole time.

On the ADU, you can build your own or turn the shed in the back into one. Either way, you’ll be able to rent it out, and this will increase the value of your property.

Final Thoughts

With so many real estate strategies to explore, house hacking stands out as one of the most accessible, powerful ways to fast-track your journey toward financial independence. The real question isn’t whether you should house hack, but rather how you’ll make it work for you.

Whether you’re a young professional looking to maximize returns in a high-cost market or a family in search of extra income with minimal disruption to your lifestyle, there’s a house-hacking strategy that can help you reduce your largest expense and start building wealth. Your approach will depend on your goals, the market conditions, and how flexible you’re willing to be. 

The beauty of house hacking is that it doesn’t require sacrificing your comfort or dreams. By choosing the right strategy, you’ll be well on your way to living for less and investing for more.

So what’s stopping you from getting started? The perfect house hack for you is out there, so get creative, dive in, and start turning your living space into a wealth-building machine.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.