How This Calculator Works
The engine models three parallel futures using identical inputs, so the comparison is apples-to-apples. Each path's net worth is tracked annually for five years.
Path 1: House hacking a duplex
You buy the duplex with the entered down payment and live in one unit. Your monthly cost is the full PITIA minus the rent from the other unit. Net worth grows through two channels: appreciation (value × (1 + appreciation rate)ⁿ) and amortization (the loan balance shrinking as tenants and you pay it down). Because the tenant subsidizes the payment, house hacking typically builds equity faster per dollar of personal cash outflow than any other path.
Path 2: Buying a single-family home
Same mechanics, but 100% of the payment comes from your pocket. The equity build is real but the monthly burn is higher — which is exactly what the side-by-side table exposes.
Path 3: Keep renting and invest the difference
The renter invests the same down payment at your assumed return, plus each month's difference between the cost of owning the single-family and the current rent (which grows at your rent-growth assumption). This is the financially rigorous version of "renting is throwing money away" — sometimes it is, and sometimes the invested difference compounds faster than home equity.
The remaining-balance formula
Balance(m) = Loan × [ (1+r)ⁿ − (1+r)ᵐ ] ÷ [ (1+r)ⁿ − 1 ]
where m is the number of months elapsed. This is the standard closed-form remaining balance on an amortizing loan.
Worked Example
A $400,000 duplex (3.5% down, 6.75%, $1,400 rent from unit 2) versus a $350,000 single-family versus renting at $1,600: the house hack costs roughly $1,700/month out of pocket, the single-family costs about $2,600, and renting costs $1,600. After five years at 3% appreciation, the house hack's equity is roughly $95,000, the single-family's about $83,000, and the renter's invested portfolio lands somewhere between $60,000 and $90,000 depending on the assumed return. The house hack wins on net worth and has the lowest monthly cost — which is why it is the default first move for most aspiring investors.
What the Model Deliberately Excludes
- Transaction costs: buying and selling run 6-10% round trip, which penalizes short holding periods.
- Maintenance and CapEx: owners pay 1-2% of value annually; renters do not.
- Taxes: the renter's investment returns are pre-tax; mortgage interest deductions and depreciation are ignored.
- Vacancy: the house hack assumes continuous rent collection.
Treat the output as a directional comparison, not a guarantee. Adjust appreciation and rent growth to stress-test pessimistic scenarios before committing.
Frequently Asked Questions
What down payment should house hackers use?
FHA's 3.5% is the classic entry point for owner-occupied 2-4 unit purchases. Conventional owner-occupied financing allows 5-15% on 1-2 units. Model both with our homebuyer mortgage calculator.
Why does renting sometimes win?
In high-price, low-rent markets, the monthly cost of owning far exceeds renting. If that gap invested at 6-8% compounds faster than leveraged appreciation, the renter path wins — especially in the first three years before amortization and appreciation compound.
Does the model account for rent I pay myself?
Yes — in the house hack path, the rent from the other unit reduces your out-of-pocket cost, which is the economic equivalent of paying yourself. The equity build happens regardless of who funds the payment.