What this calculator is comparing
House hacking means living in one unit of a small multifamily property and renting the others, so the test is not whether the property cash flows but whether it costs you less to live there than to rent somewhere else. This page answers that directly: it works out your net monthly housing cost after the tenants' rent, then compares it against what you would otherwise pay in rent.
It also answers the question that arrives later. Owner-occupied financing is temporary — eventually you move out and the property becomes an ordinary rental. So the page runs a second scenario with every unit rented at market, which is the deal you will actually own in a few years. The two answers are frequently very different, and the second one is the one that determines whether this was a good purchase.
Reading the example this page loads with
The defaults describe a three-unit property bought with a low down payment. These figures are illustrative — a teaching example, not market data for any particular city.
| Input | Value |
|---|
| Purchase price · closing costs | $420,000 · $9,000 |
| Units · down payment | 3 · 5% |
| Rate · term · monthly PMI | 7.0% · 30 yrs · $180 |
| Rent from other units | $2,400 |
| Your unit's market rent | $1,500 |
| Taxes · insurance (annual) | $5,200 · $2,200 |
| Maintenance · CapEx | 5% · 5% |
Five percent down on $420,000 is $21,000, leaving a $399,000 loan that costs $2,655 a month in principal and interest. Add $433 of taxes, $183 of insurance and $180 of mortgage insurance and the full payment is $3,451. The other units bring $2,400 less 5% vacancy, or $2,280, and reserves on that rent run $240.
So your net housing cost is $1,411 a month. Against the $1,500 you would pay to rent, that is a saving of $89 a month — and the cash required to get there was $30,000.
Why $89 a month is the honest headline
Most accounts of house hacking stop at "the tenants pay your mortgage," and on these numbers they very nearly do — $2,280 of rent against a $3,451 payment covers two-thirds of it. But the comparison that matters is against your alternative, not against zero, and measured that way the advantage is $89 a month, or $1,068 a year on $30,000 deployed.
That is not nothing, and it is also not the whole case. What the $89 leaves out is principal paydown, which on this loan runs roughly $4,050 in the first year and rises after that, and any appreciation, and the tax treatment of the rented portion. What it also leaves out is that you are now a landlord living above your tenants, with the maintenance calls and the vacancy risk attached to where you sleep. The financial case here is real but modest; the rest of the case is about whether you want that arrangement.
The scenario that decides whether this was a good purchase
Switch your attention to the fully-rented figures. With all three units at market — $2,400 plus $1,500 for yours, less vacancy and reserves — the property produces net operating income of $2,698 a month against a $2,655 payment plus $180 of mortgage insurance, which is monthly cash flow of -$136 and a cash-on-cash return of -5.45%.
Read those two results together, because they are the whole point of the page. As housing, the property works: it saves you money every month you live in it. As a rental, at this price and this loan, it loses money. That is the characteristic house-hacking trap — a purchase justified by the owner-occupied math that becomes a liability on the day you move out, financed at a low down payment precisely because you were living there.
The mortgage insurance is part of that story and is usually temporary; it typically falls away once the loan reaches a sufficient equity position, which removes $180 a month and brings the fully-rented figure close to break-even. Rent growth does the rest, or it does not. The question worth answering before you buy is how long you would have to hold before the property stands on its own, and whether you are prepared to own it in the meantime.
What the low down payment really costs
Five percent down is what makes this work and what makes it fragile. It keeps the cash required to $30,000 instead of the roughly $114,000 a 25% investor down payment would demand, which is the genuine advantage of buying a property you will occupy. It also produces a $399,000 loan on a $420,000 property, so there is almost no equity cushion, and it adds mortgage insurance on top of a payment the rents already struggle to cover.
The practical consequence is that the exits are narrow for a while. Selling early into transaction costs of six or seven percent would likely cost money, and refinancing requires equity that will take time to accumulate. This is a strategy that rewards staying put.
The inputs worth checking twice
Your own unit's market rent is the input people guess at, and it is load-bearing in the fully-rented scenario — every $100 of error moves that result by about $85 after vacancy and reserves. Price it the way you would price a unit you were listing, not by what feels fair.
Maintenance and capital reserves are taken here only against the rented units in the owner-occupied scenario, which is the right treatment for the rent you collect, but the roof covers your unit too. An owner-occupier who budgets reserves only on the rented share will meet the rest of that cost out of their own pocket, and should hold it in mind as part of the housing cost rather than treating it as absent. Our article on house hacking covers the strategy in full, and the real cost of vacancy covers why turnovers cost more than the empty weeks.
When you are ready to test the post-move-out version properly, run the property through the rental analyzer or, for three units and up, the multifamily calculator, which adds the operating lines a building accumulates once nobody living there is covering them for free.