You found a triplex. The numbers work. But now you're staring at the floor plan trying to decide which unit to live in. The conventional wisdom says take the worst one, rent out the best ones, and maximize your income. But is that actually the right move?
I've seen investors torture themselves over this decision, sometimes losing good deals while they obsess over which unit to occupy. The math matters, but it's not the only thing that matters.
The Basic Logic Behind the Worst Unit Strategy
The theory is straightforward: if you live in a 3-unit building, the two units you rent out generate income. The unit you occupy generates nothing (or rather, it saves you from paying rent elsewhere). So you should occupy the unit with the lowest rental value and rent out the higher-value units.
On paper, this makes perfect sense. If Unit A rents for $1,400, Unit B rents for $1,200, and Unit C rents for $900, you'd collect $2,600/month by living in Unit C versus $2,100/month by living in Unit A. That's $500/month or $6,000/year in additional income.
> The Worst Unit Premium = (Highest Rent Unit) - (Lowest Rent Unit) × 12
In this example, $1,400 - $900 = $500/month = $6,000/year
That number represents what you're "paying" to live in a nicer unit. Whether that's worth it depends on more than just the math.
What "Worst" Actually Means
The worst unit isn't always obvious. Sometimes it's the smallest. Sometimes it's the one with the awkward layout, the north-facing windows, or the unit above the boiler room. Here's what typically makes a unit less valuable:
Size differences are the most common factor. A 2-bedroom versus a 1-bedroom, or a 900 sq ft unit versus a 650 sq ft unit. These create the clearest rent differentials.
Location within the building matters more than people think. Ground floor units often rent for less (noise, security concerns, less light). Top floor units command premiums (views, no upstairs neighbors) but also mean you're hauling groceries up three flights.
Condition and updates can vary unit to unit. Maybe the previous owner lived in one unit and let the others deteriorate. Maybe one unit was recently renovated.
Layout quirks like a bedroom you have to walk through to reach another room, a kitchen without counter space, or a bathroom only accessible through a bedroom.
I've seen duplexes where the "worse" unit was actually the better choice because it had a private entrance, a small yard, and a garage. The "better" unit had more square footage but shared a wall with the laundry room and had street parking only.
A Worked Example: The Triplex on Maple Street
Let me walk through a real analysis. This is based on a deal I helped someone evaluate last year.
Property Details:
The Units:
| Unit | Beds/Baths | Sq Ft | Market Rent |
|---|---|---|---|
| A (main floor) | 2BR/1BA | 950 | $1,450 |
| B (upper) | 2BR/1BA | 900 | $1,350 |
| C (basement) | 1BR/1BA | 600 | $950 |
Scenario 1: Live in Unit C (Worst Unit Strategy)
Rental income: $1,450 + $1,350 = $2,800/month
Net housing cost: $3,184 - $2,800 = $384/month
You're effectively paying $384/month to live in a 600 sq ft basement apartment. That's pretty good.
Scenario 2: Live in Unit A (Best Unit)
Rental income: $1,350 + $950 = $2,300/month
Net housing cost: $3,184 - $2,300 = $884/month
You're paying $884/month for a 950 sq ft main floor unit with a yard.
The Difference:
$884 - $384 = $500/month = $6,000/year
So the question becomes: is living in the basement worth $6,000/year to you?
When the Worst Unit Strategy Makes Sense
The rent differential is significant. If you're only saving $150/month by living in a cramped studio, that's $1,800/year. Probably not worth the lifestyle sacrifice. But $500/month ($6,000/year)? Now we're talking about real money that compounds over time.
You're young and flexible. A 25-year-old with no kids can handle a 550 sq ft basement unit for a few years. A family of four cannot.
You have a short time horizon. If you're planning to move out in 18-24 months and convert your unit to a rental, suffering through a smaller space makes more sense. You're optimizing for cash flow during a limited window.
The worst unit isn't actually that bad. I've seen "worst" units that were perfectly nice, just smaller. A well-designed 700 sq ft 1-bedroom can be more livable than a poorly designed 1,000 sq ft 2-bedroom.
When You Should Take the Better Unit
The rent differential is small. If Unit A rents for $1,300 and Unit C rents for $1,200, you're sacrificing quality of life for $100/month. Not worth it.
You're going to be there a while. Planning to live in the property for 5+ years? Your daily happiness matters. The financial optimization loses value when spread over a longer period.
The worst unit has real problems. Basement units with moisture issues, units with no natural light, units where you can hear every footstep from upstairs. Some things aren't worth enduring regardless of the math.
You'll be more productive in a better space. If you work from home, a cramped apartment with bad lighting might actually cost you money through reduced productivity. This is hard to quantify but real.
You're already financially comfortable. If you have solid income and savings, optimizing for an extra $400/month might not be the best use of your mental energy.
The Hidden Costs of the Worst Unit
The financial analysis above assumes living in the worst unit costs you nothing beyond the obvious. That's not always true.
Storage and lifestyle costs add up. If your unit is too small for your furniture, you might rent a storage unit ($150/month). If you eat out more because your kitchen is terrible, add that. If you need a gym membership because there's no room for workout equipment, count that too.
Relationship stress is real. I've watched couples fight about house hack living arrangements. If living in a cramped unit creates tension, that has costs you can't put on a spreadsheet.
Opportunity cost of your time. A longer commute from a different property, more time spent on maintenance because you're on-site in the worst unit, less energy for side projects. These matter.
Tenant relations can get weird (and you must follow the [Fair Housing Act](https://www.hud.gov/program_offices/fair_housing_equal_opp/fair_housing_act_overview)). Living in the smallest unit while collecting rent from people in nicer apartments creates an odd dynamic. Some tenants will be fine with it. Others will be weirdly resentful.
What About Renovating the Worst Unit?
Some investors try to have it both ways: live in the worst unit, renovate it while living there, then either move out (and rent it at the improved rate) or stay in a now-nice unit.
This can work, but understand what you're signing up for:
If you're genuinely handy and have realistic expectations, renovating your unit can add value. But don't use "I'll fix it up" as an excuse to buy a property with a unit you'd never actually want to live in.
Running the Numbers Yourself
Here's how to decide for your specific situation:
Step 1: Get accurate rent estimates for each unit. Use Rentometer, Zillow rent estimates, and local Craigslist comps. Be honest.
Step 2: Calculate your total housing cost (mortgage, taxes, insurance, utilities you'll pay).
Step 3: Run the math for each scenario. What's your net cost living in Unit A? Unit B? Unit C?
Step 4: Calculate the annual premium for living in a better unit.
Step 5: Ask yourself honestly: would you pay that amount to upgrade your living situation if it wasn't tied to an investment?
If your worst unit scenario gives you free housing, but your best unit scenario costs $600/month, that's $7,200/year. Would you pay $7,200 for that upgrade? Some people would, some wouldn't. Neither answer is wrong.
Common Mistakes in This Analysis
Overestimating rent for the units you'll occupy. People tend to be optimistic about what their units will rent for. If you're living in Unit C and assuming Units A and B will rent for top-of-market rates, you might be disappointed.
Ignoring vacancy between tenants. Even well-managed properties have turnover. Budget for at least one month of vacancy per unit per year.
Forgetting about maintenance reserves. That extra $500/month from living in the worst unit looks great until the roof needs repairs. Make sure you're still setting aside 5-10% of rent for maintenance and CapEx.
Not touring the units in realistic conditions. Visit the basement unit on a rainy day. Visit the top floor unit on a hot summer afternoon. The 10am showing on a nice spring day might not represent reality.
Assuming you'll definitely move out in 2 years. Life happens. Partners, jobs, kids, all kinds of things can extend your timeline. Don't commit to a living situation you can barely tolerate based on an assumption you'll definitely leave soon.
Making Your Decision
The worst unit strategy is a tool, not a religion. It works well for some investors in some situations. For others, taking the better unit and accepting lower cash flow is the smarter choice.
Run the numbers, be honest about your preferences, and make a decision you can live with (literally). The best house hack is one where you're happy enough to stick with the plan.
The [house hack calculator](/tools/house-hack) can help you compare different scenarios side by side. Plug in your numbers, toggle between which unit you'd occupy, and see exactly how each choice affects your monthly cash flow and long-term returns.