Michael Thompson
Investment Property Specialist • NMLS #456789 • February 15, 2026
Duplex Mortgage & House Hacking 2026: How to Live Mortgage-Free by Renting the Other Unit
What if your tenant paid your mortgage? That's the core idea behind house hacking: buy a duplex, live in one unit, rent the other, and let rental income cover most or all of your housing costs. In 2026, with mortgage rates around 6.5% and rents at record highs, this strategy is more powerful than ever. Here's exactly how to do it.
Quick Answer
You can buy a duplex with as little as 3.5% down (FHA) or 0% down (VA) as long as you live in one unit. Lenders count 75% of rental income from the other unit to help you qualify. The average house hacker reduces their housing cost by 50-100%, with many living completely mortgage-free. It's the single most powerful wealth-building strategy for first-time buyers.
Multi-Family Financing
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In This Guide
What Is House Hacking?
House hacking is a real estate strategy where you purchase a multi-unit property (duplex, triplex, or fourplex), live in one unit as your primary residence, and rent out the remaining unit(s). The rental income offsets your mortgage payment, often reducing your housing cost to near zero.
Why it works in 2026: The median rent for a 2-bedroom apartment is $1,850/month nationally, and significantly higher in major metros. Meanwhile, owner-occupied financing lets you buy with as little as 3.5% down. The math often works out so that your tenant's rent covers 60-100% of your total mortgage payment.
The wealth-building angle: While your tenant pays down your mortgage, you're building equity in a property that appreciates over time. After 1-2 years, you can move out, rent both units, and buy another property. This is how many real estate investors build their first portfolio.
The Numbers: Real Duplex Examples
Example 1: Midwest Duplex (Indianapolis, IN)
Purchase
- • Purchase price: $285,000
- • Down payment (FHA 3.5%): $9,975
- • Loan amount: $275,025
- • Rate: 6.5%
- • Monthly P&I: $1,738
- • Taxes + insurance + MIP: $650
- • Total payment: $2,388/month
Income
- • Unit B rent: $1,400/month
- • Vacancy reserve (5%): -$70
- • Maintenance reserve (5%): -$70
- • Net rental income: $1,260/month
- • Your cost to live: $1,128/month
- • Comparable 1BR apartment rent: $1,200/month
- • You save: $72/month AND build equity
Example 2: Sun Belt Duplex (Tampa, FL)
Purchase
- • Purchase price: $420,000
- • Down payment (FHA 3.5%): $14,700
- • Loan amount: $405,300
- • Rate: 6.5%
- • Monthly P&I: $2,562
- • Taxes + insurance + MIP: $950
- • Total payment: $3,512/month
Income
- • Unit B rent: $2,100/month
- • Vacancy reserve (5%): -$105
- • Maintenance reserve (5%): -$105
- • Net rental income: $1,890/month
- • Your cost to live: $1,622/month
- • Comparable 2BR apartment rent: $2,200/month
- • You save: $578/month AND build equity
Example 3: VA Loan House Hack (San Antonio, TX)
Purchase
- • Purchase price: $340,000
- • Down payment (VA 0%): $0
- • VA funding fee (financed): $7,820
- • Loan amount: $347,820
- • Rate: 6.25% (VA rate)
- • Monthly P&I: $2,142
- • Taxes + insurance: $550
- • Total payment: $2,692/month
Income
- • Unit B rent: $1,650/month
- • Vacancy + maintenance: -$165
- • Net rental income: $1,485/month
- • Your cost to live: $1,207/month
- • $0 down payment invested
- • Equity built in year 1: ~$8,400
- • Infinite return on investment
Financing Options for Duplexes
| Loan Type | Down Payment | Credit Score | PMI/MIP | Max Units |
|---|---|---|---|---|
| FHA | 3.5% | 580+ | Yes (life of loan) | 4 |
| VA | 0% | 620+ (most lenders) | No | 4 |
| Conventional (5% down) | 5% | 620+ | Yes (removable) | 4 |
| Conventional (15% down) | 15% | 680+ | Yes (removable) | 4 |
| Conventional (25% down) | 25% | 700+ | No | 4 |
FHA: The Most Popular Choice for First-Time House Hackers
The FHA loan is the go-to for first-time duplex buyers because of the low 3.5% down payment and flexible credit requirements. The 2026 FHA loan limits for duplexes are higher than single-family homes: $649,750 in standard areas and up to $1,472,550 in high-cost areas.
Key FHA duplex rules: You must live in one unit for at least 12 months. After that, you can move out and keep the FHA loan (it doesn't convert to an investment loan). You can then buy another property with a new FHA loan if you can demonstrate a legitimate reason for moving (job relocation, family size change, etc.).
VA: The Ultimate House Hack for Veterans
Veterans can buy a duplex with zero down payment and no PMI using a VA loan. This is arguably the most powerful house hacking tool in existence. With $0 invested and rental income covering most of the mortgage, the return on investment is technically infinite.
How to Qualify with Rental Income
One of the biggest advantages of buying a duplex is that lenders count rental income from the other unit to help you qualify. Here's exactly how it works:
The 75% Rule
Lenders use 75% of the projected rental income (to account for vacancy and maintenance). This is added to your personal income for DTI calculation.
Your income: $75,000/year ($6,250/month)
Projected rent from Unit B: $1,500/month
75% of rent: $1,125/month
Total qualifying income: $7,375/month ($88,500/year)
Without rental income: Max home price ~$320,000
With rental income: Max home price ~$415,000
Additional buying power: $95,000
How to document projected rent: Your lender will order an appraisal that includes a rental survey of comparable units in the area. The appraiser determines the "fair market rent" for the unit you'll rent out. If you already have a signed lease, that amount can be used instead (as long as it's at or below market rate).
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Finding the Right Duplex
What to Look For
- Separate utilities: Each unit should have its own electric, gas, and water meters. Shared utilities create billing headaches and reduce your net income.
- Separate entrances: Tenants value privacy. Side-by-side duplexes with separate front doors are ideal.
- Similar unit sizes: If both units are roughly equal, you can live in either one and rent the other at market rate.
- Good school district: Even if you don't have kids, good schools attract quality tenants willing to pay higher rent.
- Low crime area: Check local crime maps. Safety affects both your quality of life and rental demand.
- Proximity to employment: Duplexes near hospitals, universities, and business districts attract reliable tenants.
- Parking: At least 2 spaces per unit. Lack of parking is the #1 complaint from duplex tenants.
The 1% Rule (Quick Analysis)
A quick way to evaluate a duplex: the total monthly rent from both units should be at least 1% of the purchase price. A $300,000 duplex should generate at least $3,000/month in total rent ($1,500/unit). If it meets this threshold, it's likely a solid investment. In 2026, many markets exceed this ratio, making house hacking even more attractive.
Being a Landlord Next Door: What to Expect
Advantages
- • Easy to monitor property condition
- • Quick response to maintenance issues
- • Tenants tend to behave better with owner nearby
- • No property management fees needed
- • Build landlord experience with low risk
Challenges
- • Less privacy than a single-family home
- • Tenant may knock on your door for issues
- • Need to set clear boundaries early
- • Noise can be an issue with shared walls
- • Must learn landlord-tenant laws in your state
5 Rules for Successful Owner-Occupied Landlording
- Screen tenants thoroughly: Credit check, background check, employment verification, and landlord references. Never skip this step because they're "nice."
- Use a written lease: Even though you live next door, treat this as a business. A proper lease protects both parties.
- Set communication boundaries: Provide a phone number or email for maintenance requests. Establish quiet hours. Don't become friends until after the lease ends.
- Build a maintenance fund: Set aside 5-10% of rent for repairs. A broken furnace at 2 AM is expensive if you're not prepared.
- Know your state's laws: Landlord-tenant laws vary dramatically by state. Understand eviction procedures, security deposit rules, and fair housing requirements before you rent.
Tax Benefits of House Hacking
House hacking offers significant tax advantages that renters and single-family homeowners don't get:
- Depreciation deduction: You can depreciate the rental portion of the property (50% for a duplex) over 27.5 years. On a $300,000 duplex, that's approximately $5,454/year in tax deductions, saving you $1,200-$1,800 in taxes annually.
- Mortgage interest deduction: Deduct 50% of your mortgage interest as a rental expense (the rental unit's share), plus potentially deduct the other 50% as a personal mortgage interest deduction if you itemize.
- Property tax deduction: 50% deducted as rental expense, 50% as personal deduction (up to $10,000 SALT cap).
- Repair and maintenance: 50% of all property repairs are deductible as rental expenses.
- Insurance: 50% of your homeowner's insurance is a rental expense deduction.
- Capital gains exclusion: After living in the property for 2 of the last 5 years, you can exclude up to $250,000 ($500,000 married) in capital gains on the owner-occupied portion when you sell.
Tax Savings Example
$300,000 duplex, 50% rental use, 24% tax bracket:
- • Depreciation: $5,454 deduction = $1,309 tax savings
- • Mortgage interest (50%): $8,500 deduction = $2,040 tax savings
- • Property taxes (50%): $2,000 deduction = $480 tax savings
- • Insurance (50%): $900 deduction = $216 tax savings
- • Repairs (50%): $1,200 deduction = $288 tax savings
- • Total annual tax savings: ~$4,333
- • That's $361/month back in your pocket
Exit Strategies & Long-Term Wealth Building
Strategy 1: Move Out & Keep It (The BRRRR Lite)
After 12+ months, move out and rent both units. Your duplex becomes a fully rented investment property. Buy a new primary residence (or another duplex) and repeat. After 5-10 years, you could own 3-5 properties generating $3,000-$5,000/month in passive income.
Strategy 2: Refinance & Cash Out
If the property appreciates, refinance to pull out equity for your next investment. A $300,000 duplex that appreciates to $360,000 could yield $30,000-$40,000 in cash-out equity for a down payment on property #2.
Strategy 3: Sell with Capital Gains Exclusion
After living there 2+ years, sell and exclude up to $250,000 ($500K married) in gains on the owner-occupied portion. A duplex bought for $300,000 and sold for $400,000 could mean $50,000 in tax-free profit on your half.
Strategy 4: 1031 Exchange
Exchange the rental portion into a larger investment property and defer all capital gains taxes. This is how experienced investors scale from a duplex to an apartment building over time.
Frequently Asked Questions
Can I buy a duplex with an FHA loan?
Yes. FHA loans allow you to purchase a 1-4 unit property with just 3.5% down payment, as long as you live in one of the units as your primary residence. You can use 75% of the projected rental income from the other unit(s) to help qualify for the loan. FHA duplex loan limits are higher than single-family limits.
How much down payment do I need for a duplex?
For owner-occupied duplexes: FHA requires 3.5% down, VA requires 0% down, conventional requires 5-15% down. For investment duplexes (non-owner-occupied): typically 20-25% down. First-time buyers almost always benefit from owner-occupied financing with lower down payments.
Can rental income help me qualify for a duplex mortgage?
Yes. Lenders typically allow you to count 75% of the projected rental income from the other unit toward your qualifying income. For example, if the other unit rents for $1,500/month, lenders add $1,125/month to your income for qualification purposes. This can increase your buying power by $50,000-$100,000.
What is house hacking?
House hacking is a real estate strategy where you buy a multi-unit property (duplex, triplex, or fourplex), live in one unit, and rent out the other unit(s). The rental income covers part or all of your mortgage payment, allowing you to live for free or at a significantly reduced cost while building equity and wealth.
How long do I have to live in a duplex with an FHA loan?
FHA requires you to occupy one unit as your primary residence for at least 12 months after closing. After that, you can move out and rent both units. The FHA loan stays in place; it doesn't convert to an investment loan. You can then potentially get a new FHA loan for your next primary residence.
Is house hacking worth it in 2026?
Absolutely. With rents at record highs and owner-occupied financing available at 3.5% down, the math is more favorable than ever. The average house hacker reduces their housing cost by 50-100% while building equity and gaining landlord experience. It's widely considered the best wealth-building strategy for first-time buyers.
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