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The Man Who Retired at 27: Why You Should Consider House-Hacking

Way back in the olden days, people used to be amazed at my life story. I was
“The Man Who Retired at 30”, and it was so unusual that it would show up in news headlines all over the place. 

Thankfully, this is no longer such a surprising story. The idea of financial independence has spread far and wide with the rise of the FIRE movement, and people now realize it’s not such a big deal after all. And in fact, people are doing more innovative things than I did, and getting themselves to financial independence in less time.

My story was a nine-year working career, and retirement at 30. This was achieved by earning an engineer’s salary, not spending all of it, and investing the surplus in very standard index funds and fixing up my own house.

Today we will learn about a guy who did it in about three years, and is now financially free at age 27. And this was accomplished on a lower salary, without the cooperation of the badass and high-earning partner that helped me, and without my own honey badger dedication to bike transportation and DIY home renovation.

His secret was simply buying houses in an area with solid demand and renting them out. But with an interesting twist: by partitioning larger houses into smaller, more affordable units, he was able to make a small initial investment go much further, and grow much more quickly.

This is an age-old business model, but it has come back in a newer, better form and today it sometimes goes by the name House Hacking. And my goal with this article is to get you to consider the practice, because it is often the highest hourly wage and most flexible job you can possibly create for yourself. And, if you do it right, you are improving your city by providing a useful service, making housing more affordable and increasing density in a place where it is needed.

What is House Hacking?

At its most basic level, this is just a trendy name for “renting out part of your house as an apartment.” You can go further and add layers of complexity (and profit), for example moving yourself into that apartment and renting out the bigger part of your house, a move which I call the “Mustachian Inversion.” Or go even further and live in a tinyhouse in your own back yard. But at the core, we are still talking about renting apartments. 

While it may sound a bit daunting and/or inconvenient if you’ve never done it, the reality is that becoming a landlord is usually surprisingly easy, and also ridiculously profitable. Seriously – almost every one of my friends these days has some form of rental property, and is financially independent. And these two life conditions are usually related.

So if you currently live somewhere with extra space – or if you plan to shop for a house at any point in your future – and you have any use at all for more money, you should consider it seriously.

There are two fundamental reasons that house hacking works so well:

1 ) Rents are Non-linear. Or in plainer English, people pay a lot for their first bedroom, bathroom and kitchen. But they only pay a little bit more for each additional bedroom. So as the homeowner you can sacrifice just a little bit of your space, but get a larger portion of the rent that you would have collected from renting out your entire house. 

2) Borrowed Money is Ridiculously Cheap. We are living in unprecedented times, where banks are willing to lend out huge amounts of money at just about zero cost after you adjust for inflation. This effectively makes houses cheaper to own, because you lock in the purchase price today, but pay it off super slowly with dollars that are worth a bit less with each passing year.

With those big puzzle pieces in hand, let’s put the rubber to the road with a real-world example.

In fact I can use myself as a case study because I currently own a house all to myself, with a bit more space than I need. 

Case Study: Should Mr. Money Mustache Hack his Own House?


Dear Self,

I currently have a small house in Longmont, Colorado, which is a fairly expensive market because it is right next to the stratospheric wealth engine of Boulder. The current value is about $390,000 which includes some renovations I have done since I bought it. 

The total house size is about 1800 square feet:

  • 900 sf main floor
  • 500 sf finished basement which includes bedroom, bathroom, and small kitchen/living area
  • 400 SF finished 2-car garage which could become living space if I wanted.

I don’t have a mortgage on this place, because I am overly conservative and bought it with cash. But if I did, it would have the following monthly stats:

  • Outstanding balance: $312,000 (assuming a 20% downpayment)
  • Monthly payment: $1600 (includes principal, interest, taxes+insurance at local rates)

Note: This is assuming today’s 30-year interest rate* of about 3.08%

… a couple of additional details:

  • Amount of this that is Principal Repayment (a form of savings): $520
  • Actual carrying cost of the house after you account for that principal repayment: About $1080


First of all, wow, isn’t it amazing that you can own a $390,000 house for only a thousand bucks a month of actual cash outlay? That’s the cheap money at work. 

But that’s just the beginning of the amazement. Because my house happens to be in a row of townhouse-like identical detached houses located along the side of a small hill. The fronts of these houses have a few steps down to the sidewalk, and street parking. The backs of the houses are accessed by an alley, where we each have a two car driveway, two-car garage, and a ground-level entrance which leads to the sorta-walk-out basement. 

This setup is just ripe for creating a separate apartment, and indeed several of my neighbors have already done so. So what if I did it myself?

Scanning Craigsist and Zillow for smallish 1BR apartments in the better neighborhoods, I am surprised to see them in the $800-$1000 range. Especially with off-street parking and the fact that my house backs onto the main bike path and a beautiful greenway with a mountain stream running through it, I feel confident that I could be within this range so let’s say $900.

So where does this leave us?

  • Monthly rental income: $900 per month ($10,800 per year)
  • Portion of house carrying cost covered: 83%! (900/1080)
  • Portion of total house payment covered: 56%

Wealth difference over the first ten years, if you conservatively reinvest the proceeds: about $150,000


Wow! So even in this very beginner situation, I cut my housing costs by 83% and increase my wealth by $150,000. Just by giving up a portion of my spare living space and putting up a Craigslist ad. 

I wonder what would happen if we took this even further?


Meet Craig Curelop

Our House-hacking member Craig Curelop shares his stories with a group at a recent event at the HQ Coworking space
(which you can join too)

Craig started with this strategy in a small way, but scaled it up rapidly. It went roughly like this:

2017: bought a house in a less-than-pristine but very central Denver neighborhood for $385,000 (with only $17k down). Lived there in one small room partition, rented out part as an apartment, and rented out the rest as an Airbnb.

Rental Income: $2850/month (plus free rent he values conservatively at $400)
Costs: About $2250 including expenses
Net cashflow benefit: $1000/month = $12,000 per year.
(including principal payoff, this is over a 100% return on that initial $17k downpayment!)

So at the end of year one, Curelop’s portfolio looked like this:



2018: Bought a second house for $343,000 ($27k down including some upgrades). Then immediately rented it out by the room for a total of $3100 per month. Carved out a little space for himself, and moved in. Raised the rent on the previous unit since he wasn’t living there any more. The end result was this:


2019: With so much passive income already rolling in, Craig continued to save vigorously and bought another house for $380,000, this time with a 5% downpayment ($19k) plus $32k in repairs and other costs to make it a nice two-unit rental. This brought him to this situation:

And BOOM – at this point Craig was already set for life.

$4150 per month is more than enough to live on, which means he never has to work again – unless he chooses to do so. This happens to be my personal definition of “retirement”, because the old definition of ceasing to work is obsolete. Work is better when you don’t need the money.

And it gets even better. The $4150 number is before taking into account the fact that about $2000 of principal is being automatically paid off on these three loans per month, or that they are appreciating in value at an expected $3000 per month based on expected inflation alone. And thanks to US tax laws regarding property depreciation, a large portion of this cashflow arrives completely tax-free.

And as luck would have it, the Denver real estate market has gone up much faster than inflation in recent years, boosting his net worth by an additional $100,000+.

All of this wealth has been exploded out of an initial cash outlay of only about $100,000. With this amount invested in index funds, the 4% rule would suggest you rely on only about $4000 per year of passive income. Craig is getting about ten times higher returns, in exchange for some good brainpower, a moderate amount of work and some risk – all multiplied by the magical power of massive leverage with money from banks.

A Bit More on Risk

So far, everything sounds almost too good to be true. And indeed, this story is an unusually successful one. Things can and do go sometimes wrong when you use leverage, so it is important to know what could happen:

Interest rates on a fixed-rate mortgage are locked in, so this part is relatively safe.

But economic conditions can flip in a heartbeat. If you have multiple rental houses, you could end up in a situation where all of them are vacant for several months at a time. Or, rents could decline by 20-30% and stay there for a year or more, as may currently be the case in Pandemic-affected cities like San Francisco and New York. If your rentals are in a one-trick town and that industry happens to evaporate like typewriters or coal mining, you could be faced with dropping rents and property prices. The worst case could include defaulting on your mortgages and losing all accumulated equity.

There is no free lunch, but real estate is a fundamentally sound human need – people will always need housing. So as long as you keep your leverage reasonable, your profit margins high, and your lifestyle costs low and flexible, you decrease the chance of big financial stress. Which brings us to our next point: you don’t have to push the limits of leverage far in order to be very successful.

Because Craig has been so aggressive and efficient, it can seem a bit intimidating to hear his story. And in fact, I’m hesitant to even mention that in 2020 he has gone even further and bought seven additional homes, just because he is on a roll and enjoying the game (for now).

Oh, and while most wealthy people go out shopping for mountain houses, Craig is going the opposite way at the moment – experimenting with Van Life, having bought a nicely converted vehicle which is currently parked in the back yard of our HQ coworking space.

Oh, and he also wrote this book on the subject.

But fear not. You absolutely don’t have to go to these extremes in order to become financially independent. Because all you need is enough money, so that you no longer have to think about the stuff. House hacking is simply a very powerful tool to get you there much faster.

So if you do have a use for more money, you should definitely keep this in mind. Even the slightest bit of dabbling like renting out a basement or making sure your next house has a suitable rental space, can cut years off of your mandatory work career, and bring in an income equivalent to hundreds or thousands of dollars per hour that you to put into it.

It’s well worth the hassle, and you just might discover that you love it.

In the Comments: Have you tried house hacking or at least rental real estate? How has it been working out for you?

Do you have a question for Craig specifically? Feel free to ask him here, and I’ll invite him to participate in the discussion. You can also find him at his own website, where he has built a small team for continued real estate deals and other fun, at https://www.thefiteam.com/



* Indicates an affiliate link – MMM may earn a commission if you decide that Credible’s Mortgage rates or Student Loan Refi Rates are the best for you, see affiliates policy.


  • Tyler November 6, 2020, 8:50 am

    It’s important to note that there’s no way he’s going to see any cash flow on expensive properties like those without the use of Airbnb which is not passive.

    Reply
  • Jennifer November 6, 2020, 1:08 pm

    Renting out part of your house is nice–but first you need to have a house!

    Reply
  • anni November 6, 2020, 2:36 pm

    MMM, why no masks required at HQ? We were doing alright in Colorado. Why risk it?

    Reply
  • skluug November 8, 2020, 7:24 pm

    Hi Pete,

    What are your thoughts on Georgism? Henry George wrote in Progress and Poverty that, since land is not the product of any man’s labor, all the value created by land (not including the improvements built on top) should be taxed and used to the benefit of all. Most economists agree that a Land Value Tax is very efficient since, unlike other taxes, it doesn’t disincentivize production. Do you think this is a good/ethical basis for an economic system?

    – skluug

    Reply
    • Mr. Money Mustache November 9, 2020, 3:47 pm

      I agree with the idea of taxing more based on land value (especially based on land size), and less based on the structure value. This should encourage parcels to be chopped up into smaller pieces, so that urban density can go up. Plus, you can still own a really nice home or apartment in the city without excessive taxes – as long as it isn’t occupying too much land. Because spreading out the city with large land parcels is a net cost to other people who now have to travel past your place to get where they are going.

      Bonus: this approach would also make car parking lots and car roads much more expensive, which means we would waste less space on them.

      Reply
  • SegaMan November 8, 2020, 8:33 pm

    I wouldn’t say being a landlord is an inherently immoral thing, but I do think some landlords think too highly about the benefits they think they provide to society and how much they should be compensated relative to the effort they put into it.

    Yes, they are providing housing as a service, but unless they built it themselves, they aren’t really contributing anything new to the housing supply. If one buys a duplex to rent out it’s units, they aren’t adding new units to the market. They might fix them up and make them nicer, but that just becomes a zero-sum proposition where affordable housing stock is lost to create more upscale housing. Yes, there a benefit there, but it is disproportionately for higher income earners who would and could rent somewhere else at the expense of lower income folks who are already struggling as-is and don’t have nearly as many desirable options on where to go next.

    I see actually creating new units, whether through “house hacking” or backyard ADU’s, as benefiting society the most because that is genuinely creating new housing and density and opening up the potential for car-lite or car-free lifestyles. A landlord doing this is actually helping alleviate a societal ill and profits here can be seen as a fair reward for it.

    However, when a landlord buys an existing property just to live off the rent money, that does veer into more exploitative territory. They did not create any new housing. While here it can be argued that they can provide a service by maintaining the units and keeping them habitable, when the amount taken in far exceeds the amount of effort it takes to manage the property, that just comes off as exploitation of a human need. Profit in itself isn’t exploitation, but excessive profit is. No one here is saying a farmer is taking advantage of anyone for profiting off of produce for $1/pound, but if a farmer- rather, a middleman, is selling it at $50/pound during a famine, that comes off as questionable at best and immoral at its worst.

    I’ve just bought my first house. I could have bought a duplex, but having been a renter my whole life, I don’t want to feel like I’m profiteering from the housing shortage that has really made life much harder than it had to be. Instead, I want to be part of the solution. I plan on building an ADU in the near future, and any income coming from that will feel earned because it’s like growing food during a famine, not just making existing product more expensive for a quick profit.

    Reply
    • Rob June 14, 2021, 6:13 am

      The first issue with your premise is it is not zero sum. This argument that socialist and communist make was false the first time and it was stated and was false each subsequent event. When I buy a house for $250k, the originally owner now has $250k to invest in other things including other houses which benefits society. Additionally, the income I generate from the property allows me to buy new properties, including new builds! The increase in the rental stock also reduces the rents in the area (or holds them down), which means the renters benefit from increased cash flow AND more options!

      Second, how is an arms length transaction exploitive? If the renter didn’t see it in their best interest, they wouldn’t do it!

      Third, in most large cities the power is so strongly skewed towards the renter, you can say the renters are frequently exploitive off the owner.

      Fourth, no one is forcing you to live in an expensive city. There are cheap places to live everywhere in the world.

      I could go on and on with this topic but its easy to tell the anti-landlord people have never actually had to save money, invest time and resources into buying a property, going through all the hassle on the front end, collecting rent, dealing with dead-beat tenants, legal issues, etc.

      Reply
  • Jeff November 13, 2020, 11:35 am

    Very motivating article! Would house-hacking still be a valid strategy for someone fresh out of university and living in a relatively expensive housing area (say Toronto, Canada or New York, USA)?

    Reply
  • Caleb November 13, 2020, 11:58 am

    If I’m doing the math correctly, on three properties, Craig carries over $1 million dollars in liabilities. The cash flow is nice, but if *one* of those houses goes unrented for a month, it appears his mortgage is probably close to $2K on those properties, so that’s going to eat half of his passive income. Too much risk on the balance sheet for me.

    Reply
    • Mr. Money Mustache November 13, 2020, 4:22 pm

      True, but another way to look at it is, Craig can still live indefinitely for free even with one permanent vacancy. And of course, he has cash reserves equal to several years living expenses, can tap into equity from some of the houses if needed, etc.

      In the event of a true economic crash (property prices drop AND rental market dries up as people move back in with their parents or into homeless shelters), this model could indeed collapse. But it’s not nearly as unstable as some might think, especially if combined with a Mustachian way of life: i.e. you save at least half of the passive income and quickly end up with gigantic and ever-growing reserves.

      Reply
  • Misha November 20, 2020, 1:32 pm

    Here is a different thought: Instead of house hacking on your own (renting to strangers), house hack with family. Many folks leave the nest for various reasons (understandably), but the setup of living with your parents is actually quite mutually beneficial, since the kids’ rental expense stays in the family and there are no ethical quandaries about exploiting the less fortunate when prices can be negotiated as a family. It is not always possible, but more often than not, this kind of setup is unfairly stigmatized when it is in fact a wealth-creation engine.

    Reply
  • M.A. November 22, 2020, 9:55 pm

    I think that there’s something to be said about having the temperament to be a landlord and to house hack.

    I love the idea of both and in fact have done some combo of both the last 11 years, but am throwing in the towel because: 1) As an introvert, I just hate having other ppl in my house! I want to be with the ppl I chose to marry/birthed. That all. Life’s too short. 2) I find house repairs and anything to do with tenants very stressful and zero fun. Again, life is too short to lose sleep over a broken lease.

    I do love seeing you master house hackers and real estate investors killing it though! I’ll life vicariously through you from now on.

    Reply
  • Tom November 30, 2020, 3:53 pm

    This may have been answered already. If I wanted to house hack but then quit my salaried job in a year, would that work? Wouldn’t I need to prove that I have an income in order for the loan to be approved and maintained?

    Reply
  • Tom December 20, 2020, 12:58 pm

    My wife and I have been “house hacking” without realizing it for 5 years now and are now “soft retired” because of it! She is Latin American so living for multiple roommates was never an issue for her, and I always enjoy the extra company and $$! Just renting out spare rooms we were able to accumulate tens of thousands of passive income that helped us jump start our investments in rental units and alternative investments. I saved oodles of money by doing all the renovations myself (YouTube is an amazing tool for any house addition/repair, and some quick back-of-the-envelope-math always shows I EASILY make $200+/hr to learn and do the work myself). Now I have been trying to find other investments to mitigate our risk of overleverage on housing (Go TSLA and BTC!! :) ) to preserve and grow our wealth and give back to the local community and world!

    Reply
  • squire December 22, 2020, 2:17 pm

    When I graduated h/s in 1966, my friends dad bought a 4br/2 1/2bath home in the college town where his son was attending college. Rented out the other 3brs to classmates from our town at the going rate. Sold the house after 4yrs (above purchase price), to another dad from my hometown to do the same thing.

    Reply
  • Doug January 5, 2021, 2:03 pm

    I had some fun making money with real estate for ~10 years. Rented out a condo in California. Househacked a duplex in Edgewater, CO (just west of Denver). Airbnb’d a personal residence while living in Australia and then later on rented out the guest room after our return.

    Craig should probably look into Denver’s short-term rental restriction on only renting personal residences (2016)… I know one person who either sold off their Airbnb house or converted it to a long-term rental due to this change. There’s no way his houses would rent for 3k+/month if rented long-term. https://www.denverpost.com/2016/07/02/denver-starts-licensing-short-term-rentals/

    From the Airbnb website: “In Denver, only your primary residence can be used as a short-term rental. If you plan to rent your primary residence to guests for a period of less than 30 consecutive days, you’ll need a a Short-Term Rental business license.”

    https://www.denverpost.com/2019/09/04/airbnb-denver-short-term-rentals/

    Reply
  • DAN WATERMAN January 8, 2021, 5:32 am

    House hacking is something I have considered doing for a little while now in the Uk. However, due to Brexit, I’m going to sit back for a moment and pay close attention to its effects on the housing markets. Thank you for this post I always appreciate bloggers who are willing to include the numbers for their readers to give them a more comprehensive understanding. Hopefully, things pan out in my favour and this is something I can put in practice in the near future!

    Reply
  • Bridgette February 3, 2021, 9:03 am

    I understand and appreciate the logic behind house hacking and real estate investment as a way to achieve Financial Independence; however, I do struggle with the moral aspect of it. I was actually looking into it myself for a while.

    My city (and from what I can tell most larger cities) are struggling with an affordable housing crisis. There has also been a societal realization that the income gap may be less of an issue versus a wealth gap in regards to economic mobility.

    I worked at HFH previously, so I have seen numerous studies and examples of how homeownership helps provide families with stability and bridges that wealth gap. By purchasing more affordable houses, we are constraining stock and therefore increasing pricing which makes it even more difficult for low income buyers to bridge that gap.

    I read through previous comments and responses, as requested, and I noted the responses to this line of thinking. I DO agree that it is moral if you take a decrepit property and make it better as well as keep it affordable. That is adding value to society. From all of the people I know who do this, this is not the case. They want a secure bet and lack your fixer upper skills, so they purchase a house in a good state, maybe make some cosmetic upgrades, and then rent it out for a sizable amount in order to pay the mortgage and have a profit.

    I DO NOT agree with the premise that this is akin to grocery stores. Adding in middle people always adds additional cost and makes the market less efficient. So by inserting yourself between the bank and the person living in the home, you insert extra, often times unnecessary, cost. Grocery stores exist because there isn’t a better model currently, but people sure do love Farmer’s Markets for that reason.

    Agreed that overall we need to improve high density housing through zoning changes and reduced regulations, but real estate investors need to own up to their part of the problem as well.

    I feel that ensuring my happiness through early retirement is not worth the sacrifice of another person not having the opportunity to even be financially secure, not to mention independent. Kudos to the landlords who do the right thing and uses this as a tool to improve society, but there are a lot who use it as a tool to solely make their lives better.

    Reply
    • Rob June 14, 2021, 6:19 am

      An alternative POV is just to encourage people not to live in areas that are already overcrowded and reduce regulations on formation of new properties. The cities you refer to make it nearly impossible to build new stock on purpose because the folks running them do not want affordable housing built on their side of town. Why live in SF when you can get the same job outside Austin, TX or Raleigh, NC with 15% lower wage and 75% lower cost of living and no housing crisis?

      Reply
  • Jessica February 9, 2021, 1:05 am

    Thanks for these inspirational articles :)

    My question is how much is too much risk? I live in South Africa- a third world country and our interest rate is also at an all time low of 7% I know this is much higher than America. Also not sure if Americans pay levies? basically because of the crime in our country we mostly live in security complexes and pay high levy fees to cover the cost of electric fencing and 24hour security guards. This levy can add up to 25% of your monthly costs..

    So if your rental property stands open for 7 months you will be paying 7% interest to the bank and high cost security features guarding an empty home.

    Do you recommend a “limit” to how much interest or overall costs you should take on? is there a way to work this out?

    Jessica.

    Reply
  • BB March 7, 2021, 11:23 pm

    I would love to househack, and tried to find a way to make it work for a long time before it had a name, but I’m from los Angeles, and would need one hell of a profitable house hack to be able to leave. I would love to see these numbers run in a market where a 900 square foot burned out crack den starts at 700k

    Reply
  • Jiaming June 6, 2021, 8:09 pm

    Voice from China. House hacking can not be used in China. The housing price is increased a lot. But the rent is growing a little. The rent income can not cover the loan. However, I still learn something from your article. Thank you.

    Reply
  • Steve Brophy NYC July 5, 2021, 11:25 am

    Being a landlord is a high price to pay, for some of us. Owned 5 properties and after the landlord experience, sold every one!

    Reply
  • Martize Smith July 6, 2021, 9:58 am

    I’m a extremist so I would do it but I hate having a partner that is not as serious about retiring early as I am. I save large portions of my check and she says I save to much smh. Not trying to be a slave for 40 years I could probably cover more ground without her. But I don’t make excuses so I’ll still execute. Found out about the FIRE movement years ago when I was making $12 a hour now I make $70K a year and will savings at least $30K a year and buying real estate and index funds. However, I want higher growth so I look to beat these numbers every year. I also help others earn more.

    Reply

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