Mortgage Killer Accelerator

Strategy 3 of 107

House hack: rent a room, a unit or an ADU

Depends on people or program rulesFrom new cash flow, not your paycheck

What it is

Buy a two-to-four-unit home you live in (FHA allows owner-occupied up to four units), or rent a room or an accessory dwelling unit in the home you have.

Steps

  1. Buy a two-to-four-unit home you live in (FHA allows owner-occupied up to four units), or rent a room or an accessory dwelling unit in the home you have.
  2. Send the rent, after its own costs, straight to principal.
  3. After the required occupancy (FHA: intend to live there at least one year), move to the next home and repeat, keeping the first as a rental.

Repeat: Every month the unit is rented; the move-and-repeat cycle after each occupancy period.

Measure: Net rent sent to principal each month.

Try it in the calculator Enter its amount in "Monthly non-income amount to principal". Add a payoff goal of 5 years to see what is still needed.

Risks

  • Vacancy and repairs; a bad tenant.
  • Local zoning and landlord rules.
  • Lenders count boarder or ADU income only under their rules.

Who it fits

Average household, Newlyweds, Married couples, College students, Single, No high school diploma, No college degree

Needs

A spare room, unit or space to rent

How predictable

Depends on people or program rules (tenants, family, IRS records, lenders)

A worked example (hypothetical, not guaranteed)

Picture a hypothetical household (average household). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.

They follow the steps: buy a two-to-four-unit home you live in (FHA allows owner-occupied up to four units), or rent a room or an accessory dwelling unit in the home you have.

Suppose it brings $600 a month on principal from this strategy, not from the paycheck. The loan would be paid off in 16 years 3 months instead of 30 years, saving about $196,219 in interest. To finish in five years, they would still need about $3,374 a month more from other strategies. That is why the five-year sequences stack several at once.

The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.

Sequences that use it

  • Starter cycle: withholding, rollover, room rent: No new debt. Each step adds a monthly amount to principal; together they stack.
  • Live-in landlord ladder: Buy owner-occupied, rent the other units, move after the occupancy period, repeat. Each property's rent pays its own principal.
  • Home side-gig stack: Booking days, parking or storage space, and a room or unit each add a little. Every net dollar goes to principal; the total from income stays the same.

Sources and more information

Where to get help

Related strategies

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