House hacking calculator for the Blue Collar House Hack

The Blue Collar House Hack lives or dies on one number: how much the old house’s rent clears its payment. This house hacking calculator takes that spread, sends it at your HELOC every month, and builds the ladder door by door, so you can see when each draw gets paid back and when you could buy the next home.

How to use the house hacking calculator

• Rent your current home would bring. Fair market rent, not wishful rent. My benchmark is what a buyer putting 20% down on your house would pay each month at current rates, taxes, insurance and HOA included, checked against real rentals nearby. Budget the low end. If you’ll pay a property manager or want a repair allowance, take it off the rent first.
• Its full payment today. Principal, interest, taxes and insurance from your mortgage statement, plus any HOA.
• Price of the next home. Keep it a lateral move, about what your current home is worth. The calculator uses the same price for every next home.
• Your HELOC line amount. The approved line, or your best estimate. It only has to cover one draw at a time; the rest of the line is your cushion. The biggest lines go on homes the owner lives in, so the line gets opened before you move out, with the real purpose on the application.
• Down payment and closing costs on each next home. 5% down and 2.5% closing costs are my planning numbers for a conventional primary residence. VA can be zero down with enough entitlement.
• Example HELOC rate. Most lines are variable.
• Spread each later rental adds. Later doors are bought at current rates, so they usually clear their payment by less. The default is $250 a month, and you can enter 0 for break-even or a minus sign if a door runs short.
• Doors to plan for. From 2 to 10.

What the calculator assumes

• Door 1 is the house you live in now. Buying door 2 turns door 1 into a rental, so the plan starts with a draw for door 2.
• Each draw is the down payment plus closing costs on the next home.
• Every dollar of spread goes at the line, every month. Interest builds at your example rate, and the line is paid to zero before the next draw.
• Each later rental adds the same spread, and prices, rents and the line’s rate stay flat.
• Left out: vacancy, repairs, appreciation, taxes, the end of the line’s draw period, and whether you qualify for the next loan.

Door 1 math on the defaults

	Rent on your current home	$2,600
−	Its full payment (PITI)	$1,700
=	Spread aimed at the line	$900

Each draw: 5% down plus 2.5% closing costs on a $375,000 home is $28,125.

Hypothetical example at an example line rate of 7.5%. Not a quote.

How to read the ladder

The headline, 7.0 years on the defaults, is when your last planned door arrives. Each cycle runs shorter than the one before, because every rental’s spread stacks onto the same line. Rob Peter to pay Paul, then let the rent pay Peter back: you borrow from the line, and the rents pay it off.

What changes the answer most

• The first spread. Drop the rent to $2,200, a $500 spread, and five doors take 12.1 years instead of 7.0.
• Later spreads. If later rentals only break even, $0 instead of $250, five doors take 8.8 years.
• The line’s rate. At 8.5% instead of 7.5%, it’s 7.1 years. The spread matters far more than the rate.
• The year rule. Run the defaults to ten doors and the ladder lands at 13.2 years, with every door at least 12 months after the one before.
• Qualifying. Every purchase has to qualify with the old payment, the line’s payment and the new one. On a Fannie Mae loan, the lender uses market rent, not a lease, counts 75% of it only against the old home’s payment, and wants six months of reserves on that home if you’ve been a landlord less than a year. Rules differ by loan program; my page on renting out your house and buying another covers them.

The whole plan, my rules and the risks are on the Blue Collar House Hack page. For the line itself, read how a HELOC works and using a HELOC for the down payment on your next home.

Questions people ask me about this

What appreciation rate does the calculator use?

None. The ladder runs only on rent spreads and paying the line back, so it doesn’t count rising values, principal paydown or tax effects. Those are where most of the wealth shows up over time, but I won’t build a plan that needs them to work.

Why does the calculator say I’m stuck at door 1?

Your rent doesn’t clear the old home’s full payment, so there’s nothing left to send at the line. Check the rent against real comparable rentals and the payment against your statement. If the numbers are right, the plan doesn’t fit that house, and selling may be the better call.

Does the calculator know I have to live in each home for a year?

No, it only does the money. Every next home has to be a genuine primary residence you move into, and my rule is at least 12 months in each one. On a long run the ladder can show doors less than a year apart near the end; when it does, the later date wins.

Can I run this with a VA loan?

Yes. Set the down payment to 0% if your remaining entitlement covers the next home, and the line still covers closing costs. How much entitlement you have left after keeping the first home is the question to answer first, so start with VA entitlement.

Should my spouse and I look at this together?

Please do. Both of you need to understand the plan and be in, or I don’t do it, because a lien on the house you live in can scare a spouse. Sit down with the ladder together, so you’re both watching the same money move instead of taking my word for it.

Sources

• Fannie Mae Selling Guide B3-3.8-05, departing residence rental income
• Fannie Mae Selling Guide B3-4.3-15, borrowed funds secured by an asset
• VA, VA home loan limits and entitlement