How much money do you need to start house hacking?

The simple answer is that, compared to buying a dedicated rental property, you shouldn’t need a lot of money to start house hacking. The in-depth answer to this question depends on your local area and the types of properties you’re interested in buying.

If you want to house hack a duplex (like I did) you won’t need much more money than what’s needed to buy the property and get it to a rentable condition. However, if you choose a property with more units (or a small apartment building of 5+ units) – you’ll need more money.

So, in this post, I’m going to talk about how you can figure out how much money you’d need to start house hacking.

The money to buy the property

Before you can start house hacking, you have to purchase the property. Based on conversations, both offline and online, when people ask “how much money do I need to house hack” – they’re basically asking “how much do I need to buy the property so that I can house hack?”

In this section, I’m going to talk about that.

Down payment

In order to purchase a property for house hacking, you’re going to need to have some down payment money saved. The amount of down payment money needed will depend on the price of the home and the type of loan you’re using. However, you can usually expect to need somewhere between 3.5% and 25% of the purchase price of a property as a down payment.

The charts are examples of how much money you will need for your down payment:

FHA loan

With an FHA loan, you can put use as low as 3.5% of the purchase price for a down payment. This type of loan comes with its own set of requirements and rules that can make finding a property more difficult. But it’s great for anyone looking to house hack while spending the least amount of money upfront.

Take a look at the table below to get an idea of how much down payment money would be needed if you were putting down a minimum of 3.5%.

Home Price	Down Payment Percentage	Down Payment Amount Needed
$50,000	3.5%	$1,750
$100,000	3.5%	$3,500
$150,000	3.5%	$5,250
$200,000	3.5%	$7,000
$300,000	3.5%	$10,500
$400,000	3.5%	$14,000
$500,000	3.5%	$17,500

Conventional Loan

With a conventional home, you’re actually able to put down as low as 3% of the home’s purchase price. However, I don’t know anyone personally who has gone with a conventional loan and only put down 3%. The lenders I’ve worked with have always recommended putting down a minimum of 5% when using a conventional loan to avoid higher interest rates and PMI.

Conventional loans also don’t have the same requirements as FHA loans – giving you a wider selection of potential properties to house hack.

So, the table below will give you an idea of the down payment amount needed if you choose a similar path as me when I was house hacking.

Home Price	Down Payment Percentage	Down Payment Amount Needed
$50,000	5%	$2,500
$100,000	5%	$5,000
$150,000	5%	$7,500
$200,000	5%	$10,000
$300,000	5%	$15,000
$400,000	5%	$20,000
$500,000	5%	$25,000

VA Loan

If you’re a veteran or in the military, a VA loan is a great option for getting an extremely low down payment (as low as 0%). This could save you tens of thousands of dollars upfront and allow you to start house hacking much sooner.

USDA Loan

USDA loans are basically for rural areas where there’s not much potential for house hacking. It’s not impossible to house hack in a rural area but, unless you know the area and people well, you’re not likely to find success.

Closing Costs

Another expense you’re going to have when purchasing property is closing costs. These are basically the fees you have to pay to the lender, title company, appraiser, attorney, etc..

You will receive a paper with an itemized list of what’s included in your closing cost but, overall, you can expect to pay an additional 3-5% of the home’s purchase price on closing costs.

Home Price	Closing Costs Percentage	Closing Costs Fee
$50,000	3%	$1,500
$100,000	3%	$3,000
$150,000	3%	$4,500
$200,000	3%	$6,000
$300,000	3%	$9,000
$400,000	3%	$12,000
$500,000	3%	$15,000

Getting the property ready for house hacking

The money you need in order to get the property ready for house hacking can depend on so many factors that it’s hard to even provide a range. A few of the factors it depends on are:

• What needs to be fixed immediately for safety or functional reasons
• What needs to be fixed/improved so that the property becomes attractive
• What needs to be improved so that you can maximize income

If you’re new to house hacking and looking to start as cheaply as possible, I’d recommend you purchase a property that’s as “put together” as possible.

You don’t want anything that requires a renovation more significant than adding paint replacing light fixtures, faucets, blinds, etc…

It may also be beneficial to purchase a multi-family property that already comes with a paying tenant. This will give you an income stream as soon as you purchase the property and will make getting started with house hacking much easier.

The duplex that I used to house hack came with a tenant and made my life much easier in the beginning. However, if possible, try not to purchase a property that comes with a tenant that doesn’t have a lease agreement (I did). While my experience wasn’t bad, I can easily see how that situation could make life harder than needed.

If you follow my recommendations above, here are a couple of tables to give you an estimate of how much I typically pay for stuff in Ohio:

Do it yourself

I’m a big fan of trying to DIY everything at least once to fully understand what’s involved in a process. Doing things myself allows me to recognize what I like and what I want to pay someone else to do.

There are also some tasks that don’t make much sense to hire out unless you have more work that needs to be done at the same time. For example, hiring an electrician to replace 1 outlet is going to be expensive because, even though it’s only 1 outlet, the electrician still has to pack up all of their tools, drive to your location, replace the outlet, and then pack up and leave. Whereas, I could have the outlet replaced before the electrician could finish packing up his van and leave the house.

The table below is factoring my time (at $50/hr) and materials into the cost of the projects below.

Project Name	Project Cost
Painting the walls in a room (1 hour of prep + 2 hours painting)	$200
Replacing a faucet (1 hour)	$100-$250
Changing locks (front door + back door) (1 hour)	$100
Replacing a light fixture (1 hour)	$150-$250
Installing blinds (1 hour)	$70
Replacing an outlet (15 minutes)	$25

Hiring someone else:

The table below includes both labor and materials

Project Name	Project Cost
Painting a room	$500-$700+
Replacing a faucet	$400
Changing locks (front door + back door)	$200+
Replacing light fixtures	$350+
Installing blinds	$200+
Replacing an outlet	$100+

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