11 inputs, 6 outputs, and the lies most house-hack content tells.
Most house-hack content shows you the headline — “your tenant pays your mortgage!” — and then ushers you toward a course, a coaching call, or a comment-section pep rally. What it skips is the part that actually matters: the math. Not vibes about real estate. The actual arithmetic that determines whether a duplex deal works.
I’m an accountant. I bought a duplex with an FHA loan in the Midwest, live in one unit, and rent out the other plus a basement short-term rental. Before I closed on that property, I ran the numbers on hundreds of listings. After I closed on it, I built the calculator on this site so other people could run the same math without rebuilding a spreadsheet from scratch.
This post walks through that math the way I actually do it. Eleven inputs in. Six outputs out. And the five places where most house-hack content quietly lies to you about what those numbers really mean.
If you want to follow along on a real listing, open the calculator in another tab. We’ll use the same fields.
The setup
Let’s use a representative duplex listing — the kind you’d actually find on Zillow in a healthy small-multi market today:
- Price: $350,000
- Property type: Side-by-side duplex, two 2-bed/1-bath units, ~2,200 sqft total
- Condition: Lived-in. Roof is 12 years old. Boiler is original. One unit is currently rented at market; the other will be your owner-occupied unit.
- Location: A working-class neighborhood in a midsize Midwestern city
This is not a glamorous deal. It is a normal one. If you’re trying to house-hack on an FHA loan, glamorous is rarely on the menu.
Now the math.
The 11 inputs that matter
These are the only inputs you need to honestly underwrite a small-multi deal. If a calculator asks you for more, it’s probably padding. If it asks for fewer, it’s hiding something.
Property & financing (7)
1. Purchase price. $350,000 in our example. Use the asking price for a first pass, then re-run with what you’d actually offer.
2. Down payment percentage. With an FHA loan on an owner-occupied small multi, the floor is 3.5%. With a conventional loan, you’re usually at 5–15%. House-hack content often shows the 3.5% example without explaining what that costs you in PMI/MIP for the rest of your life. We’ll get to that.
3. Interest rate. Use the current rate for owner-occupied financing on small multi-units in your area. Rates change weekly, so always pull live numbers, not a number you remember.
4. Loan term. 30 years for almost everyone reading this.
5. Annual property tax. Look it up on the county assessor’s website. Don’t trust the Zillow estimate, which is often a stale number from when the property last sold.
6. Annual insurance. Get a real quote, not a Google average. Multi-family insurance on a property you’ll partially rent is meaningfully more expensive than single-family insurance on a comparable home.
7. Monthly PMI/MIP. On an FHA loan with less than 10% down, MIP runs about 0.55% of your loan balance annually. On a $337,750 FHA loan that’s roughly $155/month — and it’s permanent for the life of the loan. On a conventional loan with less than 20% down, PMI is usually cheaper and drops off when you hit 20% equity.
Rental income (2)
8. Total monthly rent from other units (while you live there). Pull this from current leases if it’s in place, or from Rentometer / actual local listings if you’ll be re-renting.
9. Your unit’s market rent (after you move out). This matters because the deal isn’t only about year one. Most house-hackers move out within 2–5 years. The deal needs to work as a pure rental too.
Operating assumptions (4 — but two are inputs, two are reality checks)
10. Vacancy rate. Use 5% in a healthy market, 8% in a softer one. (Yes, you should model vacancy even if your current tenants seem stable. They will eventually leave.)
11. Maintenance & CapEx reserve. 8% of rent at a bare minimum. 12–15% on older properties. This is where most house-hack content lies the hardest.
(There’s also property management and closing costs — we’ll handle those when we calculate outputs.)
The 6 outputs that actually tell you whether the deal works
You ran the 11 inputs through the calculator. Here’s what comes out and how to read each number.
1. Total monthly housing cost (PITI)
Principal + interest + taxes + insurance + (PMI/MIP if applicable). This is what hits your bank account every month if there were no rental income.
In our $350K example with 3.5% down FHA and current rates, you’re looking at roughly $2,800–$3,000/month all-in. Don’t quote me on the exact number — pull live rates.
2. Your effective housing cost while owner-occupied
This is PITI minus what your tenant is paying you. In a healthy small-multi market, the other unit rents for $1,400–$1,700/month. So your out-of-pocket housing cost is roughly $1,100–$1,600/month — meaningfully less than a comparable apartment in the same metro.
This is the number most house-hack content waves around. It’s a real number. But it’s not the whole picture.
3. Gross monthly rent (after you move out)
Both units rented at market. In our example, two units at ~$1,500 each = $3,000/month gross.
4. Net monthly cash flow (after debt service)
Gross rent, minus vacancy reserve, minus maintenance & CapEx, minus property management, minus PITI = your actual monthly cash flow.
On our example, full rental mode probably nets you $0 to $300/month in cash flow. Maybe negative in year one if you hit a big repair. That’s normal for a house-hack-to-rental conversion in a current-rates environment, and it’s why owner-occupied financing is the lever that makes this category work — you’re banking the housing-cost savings during your live-in years, not the cash flow.
5. Cash-on-cash return
Annual cash flow / total cash invested (down payment + closing costs). On a house-hack deal you can move into for 3.5–5% down, this number is often unimpressive in year one and gets better as rents grow. Don’t fixate on year-one cash-on-cash — it doesn’t capture the housing-cost arbitrage.
6. Cap rate
Net operating income (annual rent minus operating expenses, before debt service) / purchase price. This is the “if I bought this property with cash, what return would I get from operations alone” number. For small multi-units bought with FHA today, you’ll typically see cap rates in the 4–7% range. Below 4% and the deal needs to lean hard on appreciation or rent growth. Above 7% and you should be asking why it’s that high — there’s usually a reason, and it’s usually a reason that costs money.
The five lies most house-hack content tells
This is the part you won’t find in the influencer version.
Lie #1: “Vacancy is rare, so you can skip the reserve.”
Vacancy is rare until it isn’t. A 5% vacancy reserve costs you $75/month on a unit that rents for $1,500. Skipping it doesn’t make your deal better — it just hides what your deal actually does. Build the reserve in. If you never use it, congratulations: you have a vacancy fund. If you do use it, you’re not surprised by a $1,500 month with zero rent.
Lie #2: “Maintenance is minor on a starter property.”
Anything you can buy with FHA money in a normal market is at least 30 years old, and usually older. The roof has a date on it. The boiler has a date on it. The water heater has a date on it. The electrical panel has a date on it. The math doesn’t care if you’re a first-time investor. Use 10–15% of rent for maintenance and CapEx if the property has any age on it, and don’t apologize for it.
Lie #3: “I’ll manage it myself, so management is free.”
Fine. While you live there, it’s basically free. But model what your cash flow looks like with 8–10% of rent going to property management — because the day you move out and don’t want to take 3 a.m. phone calls is the day this expense becomes real. A deal that works on paper only because you’re working a second unpaid job isn’t a deal. It’s a job.
Lie #4: “PMI drops off after a few years.”
On a conventional loan, sure. On FHA with less than 10% down, MIP is for the life of the loan, full stop. You can refinance out of it eventually, but only if rates cooperate and your equity has grown. Model MIP as permanent in your underwriting. Be pleasantly surprised if you can refi out of it later.
Lie #5: “Just look at gross rent.”
Gross rent is not cash flow. Net rent is not cash flow. Cash flow is net rent minus your debt service. You will see gross rent quoted on Instagram all the time. You will rarely see actual cash flow quoted, because actual cash flow on a first-year house hack is almost never the headline number.
Walking through the example
Plug the $350,000 / 3.5% FHA / current-rate / $1,500-and-$1,500-rent example into the calculator. Use a 5% vacancy rate, a 12% maintenance reserve, a 9% management assumption, and 3% closing costs.
Here’s what you’ll see:
- Effective housing cost while owner-occupied: something well below market rent in your metro. This is the actual win in year one — you’ve turned your rent into mortgage principal you own.
- Cash flow after move-out: small. Possibly negative depending on rates. This is fine if you bought the property primarily to live in.
- Cash-on-cash return: unremarkable in year one. Improves as rents grow and as you can refinance.
If those three numbers tell a story you can live with, the deal is real. If the calculator shows you a strongly positive cash flow on year-one assumptions, double-check your inputs — you’re probably underestimating something.
What to do with this
- Pick a real listing on Zillow. Not one in your dream market. One in a market where you’d actually move.
- Run it through the calculator. Use real rates, real tax data, real insurance quotes. Not estimates.
- Run it again with worse assumptions. Lower rent by 10%. Raise rate by 1%. See if the deal still holds.
- If it survives both passes, dig deeper. Order an inspection. Verify the boiler. Look at comparable sales.
- If it doesn’t survive, move on. The next listing is a click away.
Prudent House Hackers will run 40+ deals through the math before they pulled the trigger on one. People can get it wrong on one deal and fall in love with the headline number.
The math doesn’t care which group you’re in. Be the first group.
Next post in this series: I’ll show you my own duplex deal — the actual purchase price, the actual rent, the actual repairs, and what I’d do differently. Subscribe to the blog or reach out if there’s a specific scenario you want me to run.