How One Couple Lived Rent-Free for 3 Years to Save Toward Down Payment

A couple look at a house they recently purchased.
Getty Images

A few years back, a Southern boy met a Cali girl and fireworks exploded. At least they did in how I tell the story. 

Not too long after, we saw a lot of commonalities and shared purpose, so things got decidedly real. 

When we got invested in our relationship lasting for the long term, we knew serious financial decisions lay ahead and I’m delighted that our goals aligned. However, we knew realizing them would require a lot of effort — effort we were more than willing to put in if it got us what we wanted.

But just as cars don’t run on hopes and dreams, willingness doesn’t simply put money in the bank. If it did, we, and millions more, would be set.

If we wanted a house to raise a family in, we would have to save money for a down payment.

Fortunately, a break fell into our laps and we took full advantage, allowing us to save money quicker. 

The Unusual Arrangement That Covered Our Rent for 3 Years

In 2016, my mother graciously decided to support my girlfriend (now wife) and me by investing money she received from her mother’s estate in a multiunit property in New Orleans. 

The agreement was that we would pay each month’s mortgage while renting out the two additional units, with long-term tenants in one and short-term guests from Airbnb in the other. 

The math would work out where we would pay for any shortfalls, repairs or maintenance. 

There’s a name for this arrangement, i.e., living in a multifamily home while renting out the other units to cover the mortgage payment: house hacking.

We appreciated the deal because it gave my parents a return on their investment and my wife and me a free place to stay.

However, I want to be clear: House hacking doesn’t require assistance from family. In fact, purchasing a multifamily home can serve as a pathway to homeownership. The added rental income you’ll receive can even be considered as part of your overall income when you apply for a mortgage in some cases. 

Further, the 20% down payment is not necessary due to alternative mortgage products like FHA loans, which require as little as 3.5% down and allow you to finance a multifamily property with up to four units.

The house we called home had three units with long-term tenants on one side and a short-term rental behind us in a lock-off unit.

This partition between us and the short-term rental made the space suitable for hosting Airbnb guests because the guests did not need to interact with us. The layout gave them complete privacy to come and go as they pleased using the separate side entrance. 

Aside from competitive pricing, this was one of the most frequently cited positive features about the unit shown in our reviews over the three years we ran the Airbnb. It allowed guests to be completely independent during their stay, as they would be in a hotel.

The Math Behind Our Housing Hack

To determine what rent to charge, we looked at comparable units in the area and saw how much renovated properties fetched. We wanted it to cover at least 75% of the mortgage. From there, we knew it was up to us to book the Airbnb enough to avoid paying anything out of pocket.

However, getting to such a high rent required top-to-bottom renovations in the long-term unit. We did all the repairs ourselves, relying on experience accumulated over previous home renovations. 

Each month, the mortgage came to $1,800 with a $250 bill for an HVAC system replacement we financed. The long-term tenants paid $1,700 each month, while the Airbnb averaged $500 per month over the course of the year. 

Our occupancy rates for the Airbnb depended on the time of year, as New Orleans is a tourist destination during the fall through spring. For the three years we had the property listed on the platform, we averaged occupancy rates of 25% to 35% — mostly weekends during tourist season. 

For repairs, we budgeted for $100 to $200 per month. The income from the Airbnb provided enough cushion to cover routine maintenance and the HVAC replacement. With time, we likely could have raised the rent in the long-term unit as the market price increased to turn a profit on the property.

In a sense, the group saw us as stewards of the investment, and we were paid fairly for our efforts. That’s to say, not everything came up roses managing tenants and Airbnb guests. We financed a fair number of repairs. The HVAC system, appliance upgrades and maintenance activities came out to roughly $12,000 during our three years there. 

But between these two income sources, we managed to offset our living expenses and budget for routine maintenance and repairs. As an added bonus, we also got to pick our neighbors and the guests who stayed with us.

For a comparable rental unit in New Orleans between 2016 and 2019, we would have paid $1,200 to $1,500 per month. By not paying this housing expense, we were able to save that money instead. 

After we moved out of the unit to the San Francisco area, my parents chose to maintain the property and rent out the units to long-term tenants.

In the end, house hacking helped us get closer to what we want: a home of our own and, eventually, financial independence.

4 Reasons House Hacking Worked for Us

Now that you have a better idea of how we went about house hacking, I’ve distilled four major takeaways for how and why you should consider using your space to reach your financial goals.

1. House-Hacking Requires a Low Time Commitment

At first, we were wary of how much time this would take given our busy schedules. I worked a demanding job, and my wife was a medical resident. 

However, after the first six months of guests, we quickly developed a routine for flipping the Airbnb between guests. This made short-term renting an effective means for making money.

For a traditional rental, finding the right tenants can take time, but it’s well worth the effort. After all, these will be your neighbors for at least a year.

2. You Can Take Advantage of Assets You Own

A primary reason house hacking is a great option is that you leverage assets you own. In a sense, this side hustle requires less recurring time after the initial investment of time and money. This breaks the traditional trade-off between time and money and allows for scalability.

3. It Doesn’t Require Specialized Skills 

Outside of requisite soft skills — such as relationship management, marketing and good judgment — house hacking doesn’t require many hard skills.

4. You Can Earn a Good Return

For the amount of time and money you invest, house hacking can generate a decent return. This is all the truer if it leads to a complete offset of your living expenses.

If you have multiple units for rent like we did, the potential to earn a decent return is high. This arrangement has allowed us to save money much quicker than we would have by renting a one-bedroom apartment elsewhere in the city and carrying monthly rental payments.

Is House Hacking Right for You?

Ultimately, the decision rests on how much you can reasonably expect to earn from your multiunit property and the area you live in. We lived in an up-and-coming neighborhood near two universities and a bustling nightlife. 

Before proceeding with a house hack and indebting yourself on a multiunit property, make sure the fit is right for you. While we were nervous at first, we found the arrangement rewarding. 

Next step: affording a house in the San Francisco Bay Area.

Riley Adams is a CPA who is originally from New Orleans and works as a senior financial analyst at Google in the San Francisco Bay Area. He also runs the personal finance website Young and the Invested, which is dedicated to helping young professionals explore financial independence and entrepreneurship.