House Hacking ROI Calculator
Living there
$1,665 a month to live there
$135 a month less than renting a comparable place for $1,800.
- Cash to close
- $33,800
- Return on cash, savings only
- 4.8%
- With year-1 principal paydown
- 21.4%
- If you move out
- −$114/mo cash flow
Monthly costs and rent
| Principal and interest | $3,172 |
|---|---|
| Property tax and insurance | $720 |
| Mortgage insurance | $230 |
| Repairs and reserves | $495 |
| Utilities and other | $150 |
| Total cost of the building | $4,767 |
| Rent from 2 units after 6% vacancy | −$3,102 |
| Your net housing cost | $1,665 |
Owner-occupied loans usually require living in one unit for at least a year. Not included: appreciation, tax effects (rental income is taxable, depreciation offsets some of it), your time as a landlord, and FHA's up-front mortgage insurance premium, which is usually financed.
Work out what it really costs to live in a 2–4 unit property while renting out the other units: the full monthly cost with mortgage insurance, taxes, vacancy and repair reserves, your net housing cost against renting elsewhere, the return on the cash you put in, and what happens if you move out.
Formula
Worked Example
Two units bring in $3,102 after vacancy against $4,767 of costs, so living there costs $1,665 a month, $135 less than renting. That saving is a modest 4.8% on the cash invested; adding the $5,609 of principal paid down in year one lifts it to 21.4%. Moved out, the building would run slightly negative at today's rents.
Frequently Asked Questions
Is house hacking always profitable?
No. With low down payments the mortgage, mortgage insurance and reserves can exceed what the other units bring in, as in the example. The win is usually living for less than market rent while building equity, not monthly cash flow.
Why include repairs on my own unit?
Roofs, boilers and plumbing serve the whole building. Reserving 8–15% of rent for every unit, including yours, is the most common thing optimistic house-hacking spreadsheets leave out.
What loans allow it?
Owner-occupied FHA loans (3.5% down) and conventional loans (5% down for 2–4 units) both allow it if you live in one unit, typically for at least a year. FHA adds mortgage insurance for the life of most loans.