House hacking in Minneapolis and the Twin Cities
House hacking means you live in one unit of a small multi-family, or rent rooms in your home, and the rent cuts what you pay to live there. It still works with today's rates. Here's how to set one up.
What house hacking is and why it still works
You buy a home you'll live in, usually a duplex, triplex or fourplex, and rent out the other units. Or you buy a single-family home and rent out rooms or a finished lower level. The rent pays part of your mortgage, sometimes most of it.
I get asked whether it still makes sense with higher interest rates. It does. Higher rates make the rent from the other unit more important, not less. And because you live there, you can often buy with a much smaller down payment than a pure investment property needs.
When you move out later, the property can stay as a rental. Plenty of investors start exactly this way.
Ways to house hack
Duplex or 2 to 4 units
Live in one unit, rent the rest. The classic version, and owner-occupant loans can apply up to four units.
Rent out rooms
Buy a single-family home with extra bedrooms and rent them to roommates.
Lower level with its own entrance
A finished basement or lower level can work as a rental if it meets code, including egress windows in bedrooms.
Live in, then rent
Live in the property for a while, then move and keep it as a rental.
Loan options for owner-occupied 2 to 4 unit homes
General rules only. Lender requirements change, so confirm everything with your lender before you shop.
| Down payment | Key rules | |
|---|---|---|
| FHA | As low as 3.5 percent | You must live in one unit as your primary home. 3 and 4 unit buildings have an extra test that the rents support the payment. |
| Conventional | Owner-occupied 2 to 4 units can take less down than an investment loan | Down payment and reserve rules vary by number of units and lender. |
| VA | Zero down for eligible veterans | Up to 4 units, and you must live in one of them. |
What I check on a duplex before you offer
Much of the Twin Cities' small multi-family stock is in Minneapolis and older inner-ring suburbs. Older buildings mean more to check. On a walkthrough I look at:
- Foundation, grading and water in the basement
- Separate meters and mechanicals for each unit, or shared ones that affect your costs
- Egress windows in any lower-level bedroom
- Signs of unpermitted conversions
- Lead-based paint disclosure on homes built before 1978
In Minneapolis, sellers usually need a Truth in Sale of Housing evaluation before listing, which gives you a head start on the condition. Minneapolis also requires a rental license to rent out a unit, so check the city's rules before you count on that rent.
How I help you buy a house hack
Set the budget with your lender
Find out your loan options and whether the lender will count part of the expected rent toward qualifying.
Search the right areas
I set up searches for duplexes and homes with rentable space and send them as they hit the market.
Run the spreadsheet
Rent, mortgage, taxes, insurance, utilities, repairs and vacancy, so you know your real monthly cost of living there.
Walk it like an engineer
Structural, drainage and code issues, plus what it takes to make the rental unit legal.
Offer, inspect and close
I negotiate the deal, go through the inspection with you and keep everything on schedule to closing.
"This was our first time buying an investment property and Mike explained us all the pros and cons about it and made us to take the right and informed decision."
Looking beyond your first property?
See how I help investors with rentals, small multi-family and fixer-uppers across the Twin Cities.
Frequently asked questions
Is house hacking still worth it with higher interest rates?
In many cases, yes. Higher rates raise the payment, which makes the rent from a second unit or rented rooms more valuable. Run the numbers on your real monthly cost after rent before you decide.
Can I use an FHA loan to buy a duplex in Minnesota?
Yes. FHA lets owner-occupants buy 2 to 4 unit properties with as little as 3.5 percent down, as long as you live in one of the units. 3 and 4 unit buildings have extra requirements. Confirm the details with your lender.
How long do I have to live in a house hack before I can move out?
Owner-occupant loans like FHA generally expect you to move in soon after closing and live there as your primary home for at least a year. Your loan documents and lender set the exact terms, so ask before you plan a move.
Can rent from the other unit help me qualify for a mortgage?
Often, yes. Many lenders can count part of the expected rent from the other units when you buy a 2 to 4 unit home, but the rules vary by loan and lender.
Do I need a rental license to rent out a unit or rooms?
Many Twin Cities cities, including Minneapolis, require a rental license, and rules differ from city to city. Check with the city where you're buying before you sign a lease.
Where can I find a duplex for sale in Minneapolis?
I can set up a saved MLS search for duplexes and small multi-family homes in Minneapolis and nearby suburbs, with alerts the moment one is listed. Call or text me at 612-655-3309 and tell me your budget and areas.
Want to see if a house hack works for you?
Call or text me at 612-655-3309 and we'll run your numbers together.
612-655-3309