House-hacking a Denver duplex into a free mortgage

A friend of mine, 24, just closed on a duplex in Sloan's Lake (Denver) for $485,000. She put 3.5% down via an FHA owner-occupied loan, lives in one unit, rents the other for $2,400. Her net housing cost — after the rent check from the other side — is about $780/month, all-in, for what was previously a $2,000/month 1BR apartment in the same neighborhood.

Here's the full math, because the house-hack mythology online skips the ugly parts.

Purchase price: $485,000. Down: $16,975 (3.5%). Closing costs (lender + title + inspections): $11,200, mostly seller-credited but $4,800 out of pocket. Total cash to close: $21,775.

Required: FICO 620+ (she had 728), 2 years of W-2 income (1 year of self-employment qualifies in some lender markets), and 3-month reserves. She had $35k saved going in, so this used most of it.

Mortgage: $468,025 at 6.85% on a 30-year. Principal + interest: $3,065. Property tax: $295/mo (Denver assessor). Insurance: $145/mo. PMI (required at <20% down on FHA): $375/mo. Utilities (whole building, she pays): $300/mo split between the units, $150 her share.

Total monthly carrying cost (her side): $3,030. Rent collected from the other unit: $2,400. Net: she pays $630 for the equivalent of a 2BR + yard + garage in a $2k/mo neighborhood.

Liquidity — most of her savings is now equity. Mobility — she's signed onto a property for at least 12 months to satisfy FHA owner-occupancy. Tenant headache risk — if her tenant defaults or trashes the unit, the math falls apart. Maintenance — she just bought a 1960s building, the HVAC will eventually be a $6,000 weekend.

What she gains: a fast-compounding asset (equity buildup of ~$650/mo from year 1, increasing over time), the ability to refi out of PMI once she hits 20% equity, and the option to rent out her side too and move to the cheap unit in another duplex if she wants to do it again.

It's not for everyone. You need 20–25k in cash, a stable W-2, comfort with being a landlord, and a willingness to live in a 100-year-old house with someone you don't know on the other side of a shared wall.

If you check those boxes, FHA + duplex is the largest legal arbitrage in the US housing market for first-time buyers. It existed in 1985 and it exists now.