House Hacking in Brooklyn, NY—is it worth it?

[Maggie Blackburn]

Hi all, I'm looking to house hack in Brooklyn, NY and looking for 2 bedroom condos to rent out the 2nd room. Looking at Bed Stuy / Crown Heights primarily as I can get a 3.75% interest rate from First Republic as it's my first time home. I plan to live in the home for at least 2 years to get the tax benefits but possibly longer, then possibly do a cash out refinance to invest in another property.

Scenario 1: Current Rent

- $3000/month 

Scenario 2: House Hack and rent out spare bedroom

- If I rent out a 2nd bedroom, I'd still likely pay around $2600-3200/month on mortgage, taxes, HOA, CapEx & Maintenance (est. 8-10% depending on age of bldg)

- The properties likely would break even around Year 5 or 6, so I may lose money each month if If I decide to move out before Year 5 or 6

All of the advice I've read on house hacking was it's a good strategy to use if you can reduce your living expenses but a lot of the homes in Brooklyn mean I'd be paying about the same or more on rent each month. I have a stable W2 income so can afford to lose some $$ when I move out, but I also don't know if this is a good financial decision if my longer term goal is financial freedom.

What factors should I consider when investing in a more expensive market? Do you think house hacking still a good idea to try and get tax benefits, potential appreciation, loan pay down, etc?