Would this work for a first time house-hacker?

Question

It is a 3-unit building in Fitchburg, MA consisting of one 3-bedroom/1-bath unit and two 1-bedroom/1-bath units. Currently, two of the units are occupied ($1,800 for 3bd and $1,300 for 1bd) and one unit is being delivered vacant. As you can see from the math in my screenshot, the numbers are pretty tough. Based on an FHA loan with 5% down and a 6.5% interest rate, the total monthly expenses come out to $4,804 against a current total rent of only $3,100. This leaves a monthly deficit of $1,704 and a cash-on-cash ROI of -48.69%.

However, when factoring in market rents (HUD, $2,247 for 3bd, $1,140 for 1bd) and moving out, the cash flow hits $210 after removing PMI ($300/mo custom expenses).

From a first-time house hacker perspective, would you move forward with this deal? Curious how others are evaluating opportunities like this in today’s market. I’d also love to hear what criteria you use when identifying strong beginner-friendly house hacks.

Ethan Dryden · Answer

would you live in the 1bd or 3bd? what's the net impact compared to current housing cost? if living in the vacant unit, is the -$1700/mo less than what you're paying now?

how long do you want to live in the property? while possible, i wouldn't count on pmi dropping if you're trying to move out in 2-3 years.

regardless of what HUD says, run  these numbers based on what is reasonable for 1&3 bedrooms in that area for multis.

Minho Lee · Answer

Thanks for your reply. Personally, I don’t think it’s a deal I’d move forward with, but I still wanted to share it and get some feedback.

Good catch on the PMI — that’s definitely something I’d need to take into consideration. Also, great advice on running the numbers based on what’s actually reasonable for the area.

Matthew Bernal · Answer

You’re doing the right thing by underwriting both current rents and stabilized rents instead of just hoping it works later.

At today’s numbers, the immediate deficit is the bigger issue especially with only 5% down, FHA mortgage insurance, and carrying one vacant unit. Sometimes the deal itself is fine, but the financing structure creates the pain.

If market rents are realistic and you’re comfortable owner-occupying during the transition, it may still be workable as a house hack play rather than a pure cash-flow investment.

I help buyers compare scenarios like this often. Have you also run the numbers with seller credits, a lower purchase price, or conventional 5% down once reserves are factored in?