House Hacking: How to Buy a Duplex, Live in One Unit and Rent the Rest
Figures checked October 28, 2026 against primary sources
House hacking means buying a home with two to four units, living in one and renting out the others, or renting spare rooms in a single-family house. The rent helps pay the mortgage, and because you live there, you can use owner-occupant loans with much smaller down payments than an investment property needs. This guide covers the loan rules from HUD (FHA), Fannie Mae and the VA, the 2026 loan limits, how lenders count the rent, a worked duplex example at current rates, how the IRS taxes the rented part, and what can go wrong.
The Short Answer
- You must actually live there. FHA requires at least one borrower to move in within 60 days of closing and intend to stay at least one year. VA loans require you to certify you will live in the home.
- Down payments are small. FHA: 3.5% with a credit score of 580 or higher, on 1 to 4 units. Fannie Mae: 5% on a 2-4 unit home you live in (through its automated underwriting). VA: no down payment if the price is not above the appraised value.
- Loan limits are higher for more units. In 2026 the standard conforming limit is $1,066,250 for two units and $1,601,750 for four; FHA's floor is $693,050 for two units.
- Lenders count only part of the rent. FHA counts 75% of the expected rent as income, and for 3-4 units the rent must pass a self-sufficiency test.
- At 2026 rates it rarely makes housing free. In our hypothetical $500,000 duplex, the other unit's rent covers less than half of the payment.
- The rented part is taxed like a rental. You split shared costs, deduct the rental share on Schedule E, and depreciate the rented part of the building.
What House Hacking Is
There are three common versions:
- A 2-4 unit building. You live in one unit and rent the others on regular leases. This is the version the loan rules below are written for.
- Renting rooms. You buy a single-family home and rent bedrooms to roommates. The loan is an ordinary one-unit mortgage. Don't assume a lender will count room rent toward qualifying the way it counts rent from a separate unit; ask first.
- An accessory dwelling unit (ADU). A basement apartment, garage apartment or backyard cottage. FHA treats a one-unit home with one ADU as a one-unit property and limits how much of the ADU's rent can count toward qualifying.
The appeal is simple: you get into real estate with an owner-occupant loan, the tenants pay part of your housing cost, and you learn to be a landlord with the property next door. The catch is that you share walls with your tenants, and the numbers depend heavily on the interest rate.
Loan Options for a 2-4 Unit Home You Live In
| Loan | Units | Minimum down payment | Occupancy rule |
|---|---|---|---|
| FHA | 1-4 | 3.5% (credit score 580+); 10% (score 500-579) | Move in within 60 days, intend to stay at least one year |
| Conventional (Fannie Mae) | 2-4 | 5% through Desktop Underwriter; manual underwriting 15% (2 units) or 25% (3-4 units) | Must be your principal residence |
| Conventional, high-balance loan | 2-4 | 15% (2 units); 25% (3-4 units) | Principal residence |
| VA | Up to 4 | $0 if the price is not above the appraised value | You must live in the home |
Fannie Mae's figures come from its Eligibility Matrix dated August 5, 2026, which lists a 95% maximum loan-to-value for a 2-4 unit principal residence purchase underwritten through Desktop Underwriter, and 85% (two units) or 75% (three or four units) for manually underwritten and high-balance loans. FHA's come from HUD Handbook 4000.1: borrowers with a minimum decision credit score of 580 or higher can get maximum financing (96.5% of value), while scores from 500 to 579 are limited to 90%.
FHA adds mortgage insurance: an upfront premium of 1.75% of the base loan, usually financed, plus an annual premium (0.55% a year on a 30-year loan with less than 5% down and a base loan of $726,200 or less). VA loans may require a VA funding fee instead. Lenders can also add their own rules on top, such as cash reserves for multi-unit homes, so ask before you make an offer.
FHA Rules: Occupancy, Rental Income and the Self-Sufficiency Test
Occupancy. HUD Handbook 4000.1 says: "At least one Borrower must occupy the Property within 60 Days of signing the security instrument and intend to continue occupancy for at least one year." FHA will also refuse to insure a loan if the deal was "designed to use FHA mortgage insurance as a vehicle for obtaining Investment Properties." After the first year, you can generally move out and keep renting the property, but you cannot plan to do that from the start.
How the rent counts. Rent from the other units of a 2-4 unit home can be counted as income. If you have no rental history on the property, the lender uses 75% of the lower of the appraiser's fair market rent or the lease. That amount is added to your income; HUD says the lender "may not reduce the Borrower's total Mortgage Payment" by it. For 2-4 units, the appraisal must show fair market rent on a small residential income property report.
The self-sufficiency test (3-4 units only). For a three- or four-unit home, the property has to roughly pay for itself on paper:
- Take the appraiser's fair market rent for all units, including the one you will live in.
- Subtract the larger of the appraiser's vacancy and maintenance estimate or 25% of that rent. The result is net self-sufficiency rental income.
- The monthly mortgage payment (principal, interest, taxes and insurance) divided by that figure may not exceed 100%.
Hypothetical: a $650,000 triplex where each unit would rent for $1,700. Total market rent is $5,100; minus 25% leaves $3,825. With 3.5% down at 7.32%, principal and interest on the FHA loan come to about $4,384 a month; add $650 of property tax and $250 of insurance and the payment is about $5,284, or 138% of $3,825. It fails. To pass, the payment would need to be $3,825 or less, which takes a lower price, higher rents or a lower rate. Duplexes do not face this test.
2026 Loan Limits for 2-4 Unit Homes
Loan limits rise with the number of units. Conventional (conforming) limits are set by the Federal Housing Finance Agency; FHA's are set by HUD as a share of them. Your county's limit sits somewhere between the floor and the ceiling.
| Units | Conforming: most of the U.S. | Conforming: high-cost ceiling | FHA: floor | FHA: ceiling |
|---|---|---|---|---|
| 1 | $832,750 | $1,249,125 | $541,287 | $1,249,125 |
| 2 | $1,066,250 | $1,599,375 | $693,050 | $1,599,375 |
| 3 | $1,288,800 | $1,933,200 | $837,700 | $1,933,200 |
| 4 | $1,601,750 | $2,402,625 | $1,041,125 | $2,402,625 |
Alaska, Hawaii, Guam and the U.S. Virgin Islands have higher limits. Look up your county in FHFA's 2026 county list or HUD's FHA mortgage limits tool. A conventional loan above the standard limit but within your county's limit is a "high-balance" loan, which carries the bigger down payment shown above.
Worked Example: A Duplex at Today's Rates
Hypothetical: you buy a $500,000 duplex with two similar units, using FHA with 3.5% down, and rent the other unit for $2,000 a month. We use 7.32%, Freddie Mac's 30-year average for the week of October 22, 2026. Freddie Mac's survey covers conventional loans, so your FHA quote may differ.
| Item | Amount |
|---|---|
| Down payment (3.5%) | $17,500 |
| Base loan | $482,500 |
| Upfront mortgage insurance (1.75%, financed) | $8,444 |
| Loan amount | $490,944 |
| Principal and interest (30 years, 7.32%) | $3,372 / month |
| Annual mortgage insurance (0.55%) | $221 / month |
| Property tax ($6,000 a year) and insurance ($2,400 a year) | $700 / month |
| Total housing payment | $4,294 / month |
| Rent from the other unit | -$2,000 / month |
| Set-aside for vacancy and repairs (10% of rent) | $200 / month |
| Your net housing cost | about $2,494 / month |
The rent covers 47% of the payment. Whether that is a good deal depends on what you would otherwise pay: if renting a comparable unit costs $2,000, house hacking here costs about $500 a month more in cash. In return you build equity (roughly $4,700 of principal is paid off in the first year), you own a property that could appreciate, and you get the tax treatment below. For lending, FHA would count 75% of the $2,000 rent, $1,500 a month, as extra income.
Change any input and the answer moves quickly. Run your own numbers with the rental property calculator (enter the whole building's rent and costs) and check what payment your income supports with the home affordability calculator.
How the IRS Treats the Rented Part
IRS Publication 527 says that if you rent part of your property, you divide certain expenses between the rental part and the personal part "as though you actually had two separate pieces of property."
- Shared costs are split. Mortgage interest, property tax, insurance and other whole-building costs are divided by any reasonable method; the IRS names the number of rooms and the square footage as the two most common. In its own duplex example, with two units of about the same size, $10,000 of mortgage interest and $2,000 of property tax become $5,000 and $1,000 of rental expenses on Schedule E. The personal half is deductible only if you itemize.
- Costs for the rental unit alone, such as painting the tenant's unit, are fully rental expenses.
- Depreciation. You depreciate the rented part of the building (not the land) over 27.5 years. In our duplex, if the land is worth 20% of the price, the rented half of the building is $200,000, or about $7,273 a year for a full year. Our rental depreciation guide has the full method and a calculator.
- Losses. With depreciation, the rental half can show a tax loss even when it brings in cash. Rental losses are passive, but if you actively participate, up to $25,000 a year can offset other income, phasing out between $100,000 and $150,000 of modified adjusted gross income.
- Selling. Publication 523 says you can't exclude gain on a separate part of the property used for rental unless you owned and lived in that part for at least 2 of the 5 years before the sale. For a duplex, that usually means splitting the gain between your unit (eligible for the home sale exclusion) and the rented unit (taxable, reported on Form 4797). A rented room inside your own home does not need that split, but depreciation taken after May 6, 1997 is still taxed.
Risks and Landlord Rules
- Vacancy. Your lender qualified you partly on rent. If the unit sits empty or a tenant stops paying, you cover the full payment.
- Repairs. Older multi-unit buildings come with more roofs, furnaces and water heaters per owner. Keep a cash reserve beyond your down payment.
- Living next to your tenants. Complaints, noise and late rent all happen at your front door. Use written leases and screen carefully.
- Landlord law. Leases, security deposits, notice periods and evictions are governed by state and local law, and some cities add rent limits, registration or inspections. Learn them before you sign a lease.
- Fair housing. The federal Fair Housing Act exempts some owner-occupied buildings with no more than four units, but the exemption does not cover discriminatory advertising, and state or local fair housing laws can be stricter. Treat every applicant by the same written criteria.
- Rates. At higher rates the rent covers less of the payment, as the example shows. Compare current mortgage rates before you commit.
For the broader trade-offs of being a landlord, read the pros and cons of owning rental properties. If you are thinking about short stays instead of leases, run the numbers in our Airbnb calculator and check local short-term rental rules first.
Sources & Methodology
- HUD, Single Family Housing Policy Handbook 4000.1 (update issued August 12, 2026): owner occupancy, credit score and LTV, rental income, self-sufficiency test.
- HUD Mortgagee Letter 2025-23: 2026 FHA forward mortgage limits.
- Fannie Mae, Eligibility Matrix (August 5, 2026): maximum LTV for 2-4 unit principal residences.
- FHFA, Conforming Loan Limit Values for 2026, its methodology addendum (2-4 unit baseline limits) and county list (high-cost ceilings).
- VA, VA-backed purchase loan and 38 U.S.C. 3704(c) (occupancy certification).
- IRS Publication 527, Residential Rental Property (2025): renting part of a property, the duplex example.
- IRS Publication 523, Selling Your Home (2025): property used partly for rental.
- 42 U.S.C. 3603(b): Fair Housing Act exemptions.
- Freddie Mac, Primary Mortgage Market Survey: 7.32% 30-year average, week of October 22, 2026.
FHA mortgage insurance rates are from HUD Handbook 4000.1 Appendix 1.0 as used in our affordability calculator. The examples are our own amortization math with a fixed rate; property tax, insurance, rents and land share are illustrative assumptions, not market data.
FAQ
Can I use an FHA loan to buy a fourplex?
Yes, if you live in one of the units. FHA insures 1-4 unit homes with 3.5% down for credit scores of 580 or higher, but a three- or four-unit home must also pass the self-sufficiency test: the mortgage payment cannot exceed the building's total market rent minus 25% (or the appraiser's higher vacancy and maintenance figure).
How long do I have to live in a house-hacked property?
For FHA, at least one borrower must move in within 60 days of closing and intend to live there at least one year. Conventional and VA loans also require you to occupy the home as your residence. Telling a lender you will live there when you do not plan to is a misrepresentation on your loan application.
Does the rent from the other units help me qualify?
Usually, yes. FHA adds 75% of the expected rent to your income when the property has no rental history. It is added to income rather than subtracted from the payment, so it helps less than people expect.
What is the minimum down payment on a duplex?
3.5% with FHA (credit score 580+), 5% with a conventional loan through Fannie Mae's Desktop Underwriter, or nothing with a VA loan if the price is not above the appraised value. High-balance conventional loans need 15% on a duplex.
Is house hacking worth it?
It can be, but at 2026 rates the rent from one unit rarely covers the whole payment. Compare your net housing cost with what you pay to rent now, add a cash reserve for repairs and vacancies, and decide whether you want to be a landlord to your neighbors.
Can I deduct the whole mortgage interest on a duplex I live in?
The rented share goes on Schedule E as a rental expense. The share for your own unit is deductible only if you itemize, under the usual home mortgage interest rules.
This article is for general information and is not financial, tax, legal or lending advice. Loan rules and limits are from HUD, Fannie Mae, FHFA and VA documents and tax rules from IRS Publications 527 and 523 (2025 editions), all read on 2026-10-27. Lenders can apply stricter requirements than the agency minimums. The duplex and triplex examples are hypothetical; your rate, taxes, insurance and rents will differ.
