What if your home could help pay for itself?
What if you could buy a home, live in it yourself, and have rental income help cover your mortgage?
That’s the idea behind house hacking—one of the most accessible ways to begin investing in real estate while building equity and reducing your monthly housing costs.
Unlike many investment strategies, house hacking allows qualified buyers to purchase a property using owner-occupied financing, which typically requires a lower down payment and offers more favorable interest rates than traditional investment loans.
In this video, I explain how house hacking works, why it has helped so many investors get started, and how to evaluate whether it’s the right strategy for you.
What Is House Hacking?
House hacking is the practice of purchasing a home as your primary residence while generating rental income from part of the property.
That might mean:
- Living in one side of a duplex while renting the other.
- Renting a finished basement or accessory apartment.
- Renting spare bedrooms to roommates.
The goal is simple: reduce your housing costs while building long-term wealth.
Why Investors Love House Hacking
One of the biggest advantages of house hacking is that you purchase the property as an owner-occupant.
That often means:
- Lower down payment requirements
- Better interest rates
- Lower monthly payments
- Potential property tax advantages while you live there
Even better, if you later move out and convert the property into a rental, you generally keep the owner-occupied interest rate for the life of the loan.
In other words, you receive many of the financial benefits of an investment property while qualifying for more favorable financing.
How We Used House Hacking
We now own 28 rental units, and several of our first investments were both forms of house hacking.
I rented out rooms in my first home for a few years. I lived cheaply, saving money like crazy.
Another property was our primary residence. After living there for several years, we converted it into a rental while keeping our owner-occupied financing.
The second was a duplex where we lived in one unit and rented the other.
Those early decisions helped lay the foundation for the investment portfolio we have today.
A Real-World Example: 120 E. Dixie Street
Rather than talking only about theory, let’s look at a real property.
120 E. Dixie Street in Bloomington, Indiana is a great example of a home that offers flexibility for both owner-occupants and investors.
The property features:
- Rental permit for up to five unrelated adults
- Multiple bedrooms
- Three full bathrooms
- Ample off-street parking
- Convenient location just blocks from Kirkwood Avenue
Using conservative assumptions:
- Purchase Price: $420,000
- Down Payment (5%): $21,000
- Estimated Monthly Payment (principal, interest, taxes, and insurance): approximately $3,059
Rental rates in the area commonly range from $800 to $1,000 per tenant.
Even using the conservative estimate of $800 per month, renting four bedrooms while living in the fifth could generate approximately $3,200 per month in rental income—enough to cover the estimated monthly payment.
House Hacking Builds Wealth in More Than One Way
When you house hack, you’re not just reducing your monthly expenses. You’re also building wealth in several ways.
Mortgage Paydown
Every payment your tenants help make reduces your loan balance and increases your equity.
Appreciation
Historically, real estate has tended to appreciate over time. Even using a conservative estimate of 3% annual appreciation, a property’s value can increase significantly over several years.
Monthly Savings
If your housing costs are dramatically reduced—or even eliminated—you have the opportunity to save and invest that money toward your next property.
For many investors, this creates a cycle of purchasing, building equity, saving, and repeating the process.
Is House Hacking Right for Everyone?
No.
Let’s be honest. Sharing your home isn’t for everyone.
I certainly enjoy my personal space, and there were moments during our own house-hacking experience that tested my patience. But those few years also helped put us on the path to the financial freedom we enjoy today.
The goal isn’t to live with roommates forever.
The goal is to make a temporary sacrifice that creates long-term opportunities.
House hacking asks you to trade a little privacy today for a lot more financial freedom tomorrow.
Curious Whether House Hacking Could Work for You?
Every property is different, and every buyer’s goals are different.
Whether you’re considering 120 E. Dixie Street or another property in the Bloomington area, I’d be happy to help you evaluate the numbers and determine whether house hacking makes sense for your situation.
There’s no one-size-fits-all strategy—but if house hacking is the right fit, it can be one of the smartest ways to begin building wealth through real estate.
Have questions? Contact Deb Tomaro Real Estate to learn more about house hacking, owner-occupied investment opportunities, or homes currently available in the Bloomington and Monroe County area.