The Ultimate Battle of Housing: A Dream Home vs House Hacking

This article is about the choice between a dream home and something called house hacking. It’s an ultimate battle to see which housing choice is smarter financially. It’s also about how you can have both your dream home and amazing wealth if you wait until the right time to make your purchase.

A good or a bad choice with your housing, especially in your 20’s or 30’s, can make a difference of hundreds of thousands of dollars in the end! And that could mean the difference between achieving financial independence decades earlier (or not).

So, to make my point about these housing choices, I’ve created the ultimate battle of housing! This battle will pit two housing choices – a dream home and house hacking – against one another in a fight for financial dominance. You get to watch (and learn) as the battle progresses.

Housing Battle - Dream Home vs House Hacking

Preview of the Ultimate Battle of Housing

In one corner is the heavy-weight champion of the housing world – the dream home. This rarely contested champ is the most desirable choice of dreamy-eyed home buyers worldwide.  The benefits of these amazing yet financially questionable dream homes are pushed daily by real estate agents, media giants like Zillow and HGTV, and well-meaning family members.

In the other corner is the scrappy and financially lean challenger – the house hack.  The challenger represents hybrid home-rentals, like small multi-units or houses with rentable basements and guest houses.  This financially powerful housing options allows you to live cheap or free and then later transition to a full-time rental if desired. You can read my House Hacking Guide for more details.

At the end of the article, I’ll give you the winner of this epic battle, including all of the gory financial details. Winning simply requires having the higher net worth after 20 years.

But in case you’re curious now, I’ll give you a little sneak peak of the final results. The winner has a landslide victory. It’s not even close.  The final net worth difference for the winner after twenty years is between $420,000 to $760,000 depending upon appreciation scenarios. Yikes!

If you want a higher net worth, more life options, and faster financial freedom, I suggest you choose the winner.

But let me begin with the back story for this battle. It began with a contrarian comment I received on a recent article.

Dream House or Alternative Housing Choices – Which is Better?

Recently the blog editor at asked me to write a guest post titled Forget the Dream House: These 3 Alternatives Will Buy You a Dream Life Instead. It got a lot of reads and comments because it challenged some conventional thinking. But I was mostly preaching to the choir. Many comments were positive stories confirming my advice to not buy a dream house early in your life. These people had used house hacking, live-in flips, and live-in-then-rents to build wealth and exit the rat race early.

But I also appreciated one commenter who pushed back. I enjoy an intelligent, good-natured counter argument because it makes me think.  He shared that buying his dream home near Palo Alto, California (Silicon Valley) was the best financial decision his family ever made. He stretched to buy the house for $250,000, and 19 years later he sold it for $1,250,000! That’s an incredible 8.84% appreciation rate, according to my financial calculator. The national average, in comparison, is closer to 3-4%.

I conceded that he had in fact done quite well. And I agreed that housing choices are complex, personal, and local, so people need to think long and hard about their final decision. But I also pointed out that his success was not easy to replicate. And furthermore, he could have done EVEN better in his location if he had used a few of the strategies I outlined in the article.

That comparison of scenarios is what inspired me to create this Battle of Housing.  I’ve had to make some assumptions, as all examples must, but I think it will illustrate my main point.

The main point is this:

Being entrepreneurial with your housing, especially in the first decade or two of your adult life, is the best wealth building decision you can make.

Now let’s jump into the ring of the Battle of Housing!

Two Identical Home Buyers

In this battle, I’m going to use two identical 30-year-old couples who make housing choices. The couples each earn over $150,000 per year. They all have excellent credit, save a reasonable amount of money, and perform well at solid jobs. They each begin with $30,000 savings to contribute to their first housing choice.

The couples live in Coweta County, GA, which is part of metro Atlanta. This is a growing, economically thriving location in the southeastern United States (and also where I grew up!). They both plan to start having children in the next 2-3 years after buying their home.

Outside of their housing choices, these couples make the exact same financial decisions. For example, if one puts $10,000 into a 401k at work, so does the other. And if one spends $800 per month on food and buys a $20,000 car, so does the other. I won’t go into those non-real estate details, but I want to set that up so that we can only focus on the financial impact of their housing.

Their choices of housing look like this:

  1. Couple #1 immediately buys a brand-new dream home in a great location. They live there for 20 years.
  2. Couple #2 takes a different path:
    • They immediately buy a small, older duplex and live there 2.5 years while renting out the other side.
    • After 2.5 years, they buy a bigger duplex with more space and keep the first duplex as a rental. They live in this second duplex for 7.5 years while also renting out the other side.
    • After 10 years, they buy their dream home, which is exactly like the house couple #1 bought (only at an appreciated price). They keep their two duplexes as rentals during the final 10 years of the battle.

Now let me share more details and numbers for each housing choice.

Choice #1 – The Dream Home

Dream home example Zlllow Listing - The Housing Battle - Dream Home vs House Hacking

I randomly pulled the listing above from It’s an actively marketed, new construction home in Newnan, GA. I hid the identifying details to protect their privacy.

This dream home is centrally located near good schools, shopping, and work options. It’s also a short walk to the neighborhood pool, tennis courts, playground, clubhouse, and walking trails. And the interior of the home has a beautiful kitchen, hardwood floors, nicely finished bathrooms, and a private back yard.

Couple #1 has the credit and income to qualify for a home loan. And a special 10% down financing program allows them to stretch and buy the house even without the traditional 20% down payment. Their purchase financials look like this:

Dream House Purchase Numbers - Housing Battle - Dream Home vs House Hacking

The ongoing housing costs for Couple #1 and their dream home look like this:

Dream House - Housing Expenses - Housing Battle - Dream Home vs House Hacking

Now let’s look at the original housing choice of Couple #2.

Choice #2 – House Hacking Before Buying a Dream Home

ouse hacking duplex example Zlllow Listing - The Housing Battle - Dream Home vs House Hacking

I also pulled this listing from It was sold within one year from when I wrote this article.

This duplex is located in an older neighborhood within walking distance of the beautiful, historic downtown square in Newnan, GA. The location is safe, but it’s definitely more working class than Couple #1’s dream home location.

The duplex was built in 1939, but I’ll assume the electrical panel/service, roof, and HVAC were all updated within the last 15 years. The kitchen and bathroom finishes are very basic, but it does have hardwood floors. The structure of the building is solid.

Couple #2 live in the side of the duplex with 2 bedrooms and 1 bath. When not occupied, the 2-bedroom side will rent for at least $600 per month. The other 1 bedroom, 1 bath side is already rented to a long-term tenant paying $450 per month.

The purchase numbers for this second duplex looked like this:

House Hack #1 - Purchase Numbers - Housing Battle - Dream Home vs House Hacking

Couple #2 benefits from interest and depreciation tax deductions on the duplex. Because only one unit is rented, only part of the unit can be depreciated (38% of the total cost in this case because the second unit is smaller).

House Hack #1 - tax savings - Housing Battle - Dream Home vs House Hacking
Note: 27.5 years is the IRS standard for depreciable life of residential real estate

So, here is the total housing cash flow for Couple #2 while living in their house hack duplex:

House Hack #1 - Housing Cash Flow - Housing Battle - Dream Home vs House Hacking

As I said earlier, after 2.5 years couple #2 make another duplex purchase. I’ll explain the details in the next section.

Couple #2 Buys Their Second Duplex

house hacking duplex #2 picture - The Housing Battle - Dream Home vs House Hacking

Couple #2 buys a second duplex, which is larger, newer, and a higher price. They like the concept of house hacking, but with the arrival of their new baby, they want a bigger nest.  This duplex works because each identical side had 3 bedrooms and 1.5 baths.

Like their other duplex, the location is working class but safe. It is also relatively close to their work so that they can walk or bike to save money and to get exercise.

During the 2.5 years before buying the second duplex, Couple #2 managed to save an extra $46,680 to help with their new purchase and down payment. This savings resulted from the difference in their housing costs compared to Couple #1:

 Difference in Cash Flow - DH vs HH1 - Housing Battle - Dream Home vs House Hacking

The purchase numbers for this second duplex looked like this:

House Hack #2 - Purchase Numbers - Housing Battle - Dream Home vs House Hacking

Couple #2 benefit once again from interest and depreciation tax deductions on duplex #2. Because only one unit is rented, only part of the unit can be depreciated (50% in this case because the units are equal size and value).

Housing Battle - Dream Home vs House Hacking
Note: 27.5 years is the IRS standard for depreciable life of residential real estate

They also benefit from the rental cash flow from duplex #1, which now has both sides rented. Here is the cash flow calculation for duplex #1:

Rental Cashflow - duplex #1 - Housing Battle - Dream Home vs House Hacking

And here is the resulting positive cash flow Couple #2 receives from their newest housing situation:

House Hack #2 - Housing cash flow - Housing Battle - Dream Home vs House Hacking

Couple #2 lives not only for free but for positive $230/month! They stay in this housing situation for another 7.5 years. Then they decide to buy a bigger, more expensive dream home. But they do keep both duplexes as rentals since they cash flow well and because they like the locations.

Couple #2 Buys Their Dream Home

After a total of 10 years of house hacking, Couple #2 buys their dream home after all. I try to talk them out of it, but the pressure from HGTV, Zillow, and well-meaning family members is too great. But perhaps it won’t be such a bad decision after all.

During their final 7.5 years living in duplex #2, Couple #2 managed to save $174,510 to help with their dream home purchase and down payment. This savings resulted from the difference in their housing costs compared to Couple #1:

Difference in Cash Flow - DH vs HH#2 - Housing Battle - Dream Home vs House Hacking

As I said before, Couple #2’s dream home is exactly like the home Couple #1 bought.  The only difference is that prices have increased in 10 years. For now, I’ll use a scenario of 3% appreciation, but later in the article, I’ll share what happens with a much higher appreciation rate.

With an appreciation rate over the last 10 years of 3% (close to historical averages), the purchase financials for the identical dream home look like this:

Dream House #2 purchase- 3% appreciation rate - Housing Battle - Dream Home vs House Hacking

The Final 10 Years

Now Couple #2 lives in their dream home for another ten years, just like Couple #1 who are still in their original dream home. Because of their large down payment on the dream home, Couple #2 actually has a mortgage payment $208/mo less than Couple #1 ($1368 – 1160 = $208). Both couples generally pay the same other housing expenses (taxes, insurance, HOA, etc) because their houses are identical.

But couple #2 has a special advantage. While enjoying the comfort of their dream home, they still have their two duplexes producing income to help with their finances.  And although this cash flow would likely increase over time in step with appreciation, I’ll keep it flat to make the math more simple.

Total cash flow - 2 duplexes - Housing Battle - Dream Home vs House Hacking

The total cash flow from rent and tax savings on both duplexes combined is $1,095/mo. Couple #2 chooses to use this cash flow and combine it with their $208/mo mortgage payment savings to accelerate the payoff of their dream home mortgage. With a big monthly payment of $2,463 ($1160 + $1095 + $208), they pay off the loan early in only 9 years, 7 months.  They even have an extra 5 months to pile up $12,315 in cash!

At this point, it’s been twenty years from the start of the competition. It’s time to look at the final results and announce the winner of this Ultimate Battle of Housing!

The Winner of the Ultimate Battle of Housing

As I said in the beginning, the winner of the Battle of Housing is simply the housing choice that leads to the highest net worth.

Let’s begin with the net worth of Couple #1, who bought their dream home and lived in it for 20 years.

Final Results - Dream Home - 3% appreciation - Housing Battle - Dream Home vs House Hacking

An increased net worth of $410,000 doesn’t seem bad after 20 years, does it? But let’s look at Couple #2, who lived in 2 duplexes before ultimately buying their own dream house after 10 years.

Final Results - Couple #2 - 3 apprec - Housing Battle - Dream Home vs House Hacking

The combined net worth from housing using all three properties is $142,752 + $145,770 + $542,000 = $830,522! This is more than double the net worth increase of Couple #1 for a difference of $420,522.  And this figure does not include any cash savings or rent increases.

So, Couple #2, the house hackers, are clearly the winners of the Ultimate Battle of Housing!

Their first 10 years of hustle allowed them to accumulate three real estate assets instead of only one. As a result, they benefited from more appreciation and cash flow than simply owning the one dream house.

But there is one more scenario to explore. Perhaps someone who buys a dream home in a hot area, like Palo Alto, California experiences much higher appreciation – like 8.38% for example. Would the winner still be the same? Let’s see.

A Second Look at the Winner – Higher Appreciation Rate

With an 8.38% appreciation scenario, Couple #2 still buys their dream home after 10 years. But the difference is their house costs a lot more. So, instead of costing $403,000, their dream home costs a whopping $671,000!

Just like before, Couple #2 saved all of their cash flow from the rental properties during the 7.5 years leading up to the dream home purchase.  So, they once again have $174,000 cash available for a down payment. The purchase financials look like this:

Dream House #2 purchase- 8.38% appreciation - Housing Battle - Dream Home vs House Hacking

Couple #2 again gets to use the cash flow of $1,095/mo from their 2 fully rented duplexes. But this time, their mortgage payment on the dream house is much larger. So, the rental cash flow simply serves to reduce the out of pocket portion on their $2,518 monthly mortgage payment.  To keep comparisons simple, I’ll assume this puts Couple #2 approximately the same as Couple #1 for their out of pocket monthly costs on the dream home.

Now, let’s see who is the winner in this new appreciation scenario.

Let’s begin with the net worth of Couple #1, who bought a dream house and lived in it or 20 years.

Final Results - Couple #1 - 8.38% apprec - Housing Battle - Dream Home vs House Hacking

Wow! $1,368,000 is impressive. That’s the power of owning assets in highly appreciating areas. This will certainly help Couple #1 with their financial goals if they use this equity. But Couple #2 also owned assets in the same area. Let’s see how they did.

Final Results - Couple #2 - 8.38 appreciatio - Housing Battle - Dream Home vs House Hacking


The combined net worth using all three properties is $462,141 + $562,034 + $1,102,000 = $2,126,175! A net worth of over $2 million JUST from housing choices! It’s not quite double the net worth increase of Couple #1 like in the prior scenario, but the difference is still $758,175.  And remember this figure did not include ANY increases in rental cash flow as a result of appreciation. So, the results would have been even more impressive had we included those.

The final, clear result of the Ultimate Battle of Housing is this.  In both cases, the couple who began with house hacking won.  Their net worth and overall financial position were much better in the end.

Conclusion and Commentary

My point in this Battle of Housing isn’t to dissuade you permanently from owning a dream home. Life isn’t only about money, after all. Every day we choose to spend money on things that make us happy but aren’t the best investment. But the long-term financial consequences of your housing choices are incredibly large compared to other financial choices. That’s why you should decide your housing carefully and thoughtfully (especially early on).

And I firmly believe that a choice of financially smarter housing isn’t a choice to “deprive yourself for a long time so you can make more money.”  You’re not giving up life. You’re actually claiming more of it, earlier on. It’s a choice to value flexibility and life options more than a big house early in your life.

My own experience has shown me that smart housing choices can be fun periods of growth when you’re living on purpose. And yes, small children still thrive in smaller, simpler housing for a few years! They won’t miss that extra bonus room or the neighborhood pool.

Most importantly, your friends and family will appreciate that you’re choosing more life options instead of an expensive house. Your smart financial choices mean eventually you can work part time. You can start a career you love (even if it pays less). You can take mini-retirements. And you can achieve financial independence and permanently do what matters in your life.

But it’s still entirely possible that a dream home means more to you than the hundreds of thousands you are giving up. And that’s fine. My hope is that at least you now know what you’re trading off.

So, think carefully about your housing decision. Question the assumptions given to you that owning a dream home is the only path that leads to happiness. And have fun thinking outside the box and using alternative housing choices, like house hacks. I think you’ll be happy with the results.

What did you think of the Ultimate Battle of Housing? Have you bought a dream house or a house hack? How did the financial results turn out for you? If you are new to home ownership, which path will you choose? Why?

I’d love to hear from you in the comments below.

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  1. Your calculations in the final panel are incorrect. You failed to adjust the original price of the dream home from the 3% appreciation scenario to the higher price of $671K vice $403K. Even so, the final outcome would be a net worth for couple #2 of $1,858,175, which still places them roughly $500K ahead of couple #1.

    1. Thanks for catching that, Ron. I changed the original dream house price from $403k to $671k. It was simply a typo. All of the calculations used the correct number – $671k. So, the appreciated value of $1,500,000 is correct. And the final net worth for Couple #2 is also unchanged.

  2. This would work great in an area that has a good supply of duplex-type housing. Unfortunately, in Charlotte, NC where I live, there really are no duplex units…at least not in a decent safe neighborhood that a single woman would live in. But otherwise, this sounds like a good idea.

    1. Thanks for reading and commenting, Deb. I actually helped someone buy a duplex in a very nice, safe part of Charlotte (near South Park) one time. So, you might be surprised there are more small multiunits than you think. Even so, you can also look for smaller houses with basement apartments and guest houses to rent out. That works too.

  3. I really wish I would have understood this when I was younger! Oh well, we can only do better when we know better, right? We’re trying to figure out where to go from here. We’re considering starting with one small rental property in addition to our own house. I wish we had started with the house hack when we didn’t have school age kids!

    1. Simply starting with a rental property works too. So, that sounds like a good first step. It doesn’t take advantage of owner occupant financing like house hacking, but with good credit and income you can still get fantastic financing on a rental property even when you don’t live in it.

      And this may not apply to you, but some people figure out a way to use AirBnb to rent a basement apartment, garage apartment, etc to earn extra income on their home and turn it into a house hack! It’s fun to get creative.

  4. Excellent article Chad!
    Thanks for sharing your knowledge and helping young families understand the financial trade-offs of their real estate decisions at an early stage in their careers. We followed you example and we purchased a small unit in a multi-family property in Clemson 2 years ago and hopefully in a year (or two) we will move to larger unit and continue building our equity.

    1. Gracias, Matias! I can’t wait to see the next steps you take with your own housing. Just 1 or 2 moves and you can have a nice portfolio that will support you for life. I hope you, Mercedes, and the kids are doing great!

  5. Chad, awesome article and completely spot on! (but then again, take what I say with a grain of salt being that my family and I are house hackers ourselves 😉 Keep it up, you are getting people awesome content that can really help put them on the right financial path.

  6. Another epic article Chad!

    As a fellow house hacker, I definitely know the power of this concept. The key is delayed gratification and not succumbing to peer pressure.

    I house hacked a triplex in the beginning and then moved into a bigger and nicer duplex 2 years later. I then bought the dream home while continuing to add to my rental portfolio.

    Later on, I sold the “dream home” and purchased my dream duplex. After house hacking, I kept looking at my mortgage on that dream home as a waste of money since the house became a liability versus an asset.

    Today, my dream duplex is in a great neighborhood and my tenants cover all my housing expenses. Plus, I took some equity from my original rentals and bought the property with no cash out of my pocket.

    Fascinating watching you write an article on my exact journey.

    Oh, the kids didn’t mind house hacking either.

    1. Thanks for stopping over to comment, Corey! Your journey is really cool to hear about. I’m totally with you on getting used to not having a payment. And that’s awesome to hear you found a dream duplex in a solid area that lets you live for free! Beautiful.

      I appreciate you sharing your story.

  7. I’m so glad I discovered this concept at a young age! Thanks for explaining everything so clearly Chad!

  8. Chad – great post. You really made this topic very simple to understand. I hope readers will decide to delay the dream home purchase to house hack.

    I have been house hacking for the last few years (in my 20s) and its done wonders for my financial well being. I highly encourage everyone to house hack in some way shape or form.

    1. Thank you for sharing, Erith. Very interesting to see 40 years of personal housing statistics, and I am definitely not as familiar with UK stats.

      But my point was not to say renting was better. I was saying if you choose to own, house hacking is more profitable. In your case, for example, you would have reduced your mortgage costs even more by renting out extra bedrooms or owning a home with extra rental units. And appreciation would have benefited you even more by owning multiple assets in the rising market. I hope I understood your comment right. Thanks for stopping by!

  9. There’s a relevant third option I chose just last year when I bought my first home: Get your dream home, but make that dream a reasonable one. We’d be happy to stay in our first house forever, but our first house is also about half the house we could have bought if we really wanted to stretch our incomes. Best of both worlds, I figure! (Except missing out on rental income, but hey I’m happy to have tax savings and investment returns on my pre-tax income, instead!)

    1. To each his/her own for sure! I definitely did not intend these to be the only two options. Encouraging people to be more investment-minded in general with housing is my goal.

      I don’t know your numbers, but it sounds like my first house after moving on from house hacking. Because it was more affordable, we later turned it into a rental (aka Live-In-Then-Rent)

      Thanks for sharing your story!

  10. Complete agree with the concept of house-hacking, and my husband and I are planning to do exactly that- searching for the right place for our family right now!

    Quick comment on your math in the second scenario with higher appreciation- it has been my observation that houses in less desirable neighborhoods do not appreciate nearly as much as houses in very desirable neighborhoods. In other words, if the two duplexes were in working-class neighborhoods, it is unlikely that they would have appreciated at 8.38% like the dream home did. Maybe higher-than-average (5 or 6%) if you assume California or New York, but still unlikely to be at the same level as dream home material. Of course, the main point of the article stands, nonetheless.

    1. Thanks for reading and commenting, Patsy! Good luck with your own house hack search!

      I think your point about appreciation differences could definitely be valid in many situations. I do assume that most people debating this choice won’t live in a house hack location that’s too awful. And ideally they’d find one in a older, up-and-coming neighborhood where prices may appreciate even more than normal.

      But to your point – it certainly depends upon the MICRO-location within a larger MACRO-location. So, thank you for bringing up that good point.

      Best of luck!

  11. Thanks Chad for another helpful share! I have read some of article from your blog…the content is really helpful for home buyers..and real estate investors. Hope to learn more from your website.

  12. I recently retired and wish to have $10,000 per month income. I wish I had known these house hacking ideas then. Anyhow, I’m 61 and wondering where to start. I do own a home but still have a mortgage.

    I don’t want to risk my home unless there is a guaranteed return and have an excellent credit rating. Your stories seem geared towards people in their 20’s and 30’s.

    I’m too old to start over. What are excellent options to minimize risk and have the returns mentioned in 2 years.

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