Housing Hacking Your First Home Using An FHA Loan

House hacking is a unique home buying strategy, but it is one that most people don’t always consider when preparing to purchase their first home. This strategy can help you in paying for a portion, if not all, of your monthly costs, including your mortgage. It is a fantastic way to get started buying properties. On top of that, if you purchase your property with an FHA, your down payment is typically much smaller than a traditional 20% down loan. You can get into a property for a small down payment, and then have some or all of your expenses covered if you can master this home buying strategy. 


(photo by Bernard Hermant)


What Is House Hacking?

House hacking is a strategy that entails living in a portion of a property that you own while you rent the rest of the property out to others. You would live in one room or unit in your home, and then you will rent out the rest of the space.

Auction.com reports that house hacking works for people who own moderate-sized houses, but it can also be useful for multi-unit rental properties. You could rent out a bedroom, a basement, or anything else in the home.

Why Do People Engage In House Hacking?

The main reason why people try out house hacking is to help them cover part of their expenses that come with owning the house. It becomes easier for people to cover their mortgage payments if they have enough money coming in from their roommates or tenants.

You can boost your cash flow on your property if you can find enough reliable renters. The added income can exceed the expenses that you pay monthly for things like your mortgage, taxes, insurance, utilities, etc. First-time home buyers can use house hacking as a good entry point into the real estate industry. 

(photo by Michelle Henderson)


Works Well With an FHA Loan

House hacking is particularly effective for home buyers who apply for Federal Housing Administration loans. FHA loans are available for first-time homebuyers, as they require a small down payment. How Small? FHA loans require a 3.5% down payment. What does this mean? Your initial out-of-pocket expense to buy a house is minimal, and then once you are living there, you are living there for free. Can your first investment get any better than that?! 

House hacking helps you pay for the mortgage, as you can collect enough money from renters to pay for the mortgage expenses and other charges for your house. Think of it as though you were living in your home for free, or at least close to free.

Keys For Making Your House Hacking Effort Impactful

House hacking works well for many real estate opportunities. However, it is vital that you still keep strict buying guidelines when searching for a property. House hacking does not mean that you can buy any old house and you get to live for free. Do your due diligence! Here are a few tips you should utilize if you want to engage in house hacking:

  • Duplexes, Triplexes, and Quadplexes are all possible properties to purchase with an FHA loan as long as the buyer lives in one of the units for at least 12 months. 
  • Be aware of the location of your property when choosing a property. You should look for a place that would be interesting to potential renters.
  • Take note of the units you are renting out. Forbes writes that people can establish rental spaces in many forms, from finished basements to smaller rooms that may be converted into bedrooms. Whatever you rent out should be practical.
  • You’ll have to promote your property well enough and make it appealing to different audiences.
  • You might have to repair parts of your property if it is older or needs updating. You must plan for this when purchasing your home, especially if you find something less expensive. Cheaper properties are sometimes cheaper for a reason. 
  • Be aware of your monthly expenses and how much others in the area charge for rent. You should provide a competitive rate for your units. Ideally, it will still be enough to where you can cover all or most of your monthly expenses.

Utilizing the house hacking strategy can be worthwhile by finding a great property, and also purchasing it with a small down payment through an FHA loan. House hacking is all about creating a great home for your roommates or tenants (if multiple units). 


Alex Capozzolo is the owner of the Brotherly Love Real Estate blog and a content writer for the real estate industry. We buy houses in Philadelphia, PA. Our focus is on helping people through one of the most important investment decisions of their lifetime by seamlessly providing fast, honest and professional real estate services.