Will house hacking a duplex cash flow? How to check before you buy

Short answer: Often not at rates around 7%. Estimate the other unit’s rent from active rental comps, add every monthly cost, then test two cases: you live in one unit, and both units rented. In the sample below, both cases lose money, and the numbers show by how much.

How much rent will the other unit bring in?

Start with nearby active rentals of the same type, bedroom count and condition. Take the median asking rent, not the highest. Then adjust it:

• Effective rent: if listings offer weeks free, spread the discount over the lease to get what a tenant really pays.
• Vacancy: hold back a share of rent for empty months. The example uses 5%.
• Stale listings: a rental that sat for months is asking too much. Ignore it.

The matching rules are in how to estimate rent with rental comps. Asking rents are not signed leases. If the listing reports current rents, compare them with the comp median. A tenant already in place may pay less than the market, and you may not be able to raise the rent until the lease ends.

What does a duplex cost each month?

Count every line, not just the mortgage:

• Principal and interest on your loan, plus mortgage insurance if your down payment is small.
• Property tax after reassessment. The tax on the listing is often the seller’s bill. Recompute it from your price: how to estimate property tax and insurance.
• Insurance for a two-unit building.
• Maintenance reserve for repairs on a building that now has a tenant.
• Utilities you pay, which in a duplex often include shared meters.

Will the duplex cash flow? A worked example

Say a duplex is listed at $700,000, with two 2-bed units. Rental comps give a median of $2,300 for a 2-bed. You put 5% down on an owner-occupied loan at an illustrative 7% for 30 years. Other inputs are assumptions: property tax at 1.25% of price, insurance $200 a month, mortgage insurance at 0.6% of the loan a year, maintenance reserve $350, utilities $250, vacancy 5%.

Live-in case. After the other unit’s effective rent, you pay $4,101 a month to live there. If you rent a similar 2-bed today for $2,600, that is $1,501 more than you pay now, though part of the payment builds equity.

Fully rented case. Operating costs without the loan are $1,529 a month, so NOI is $34,090 a year. On $700,000 that is a 4.9% cap rate. Debt service on the loan is $53,091 a year in principal and interest, so DSCR is about 0.64 and cash flow is about -$22,991 a year on $35,000 down. A cap rate that low against a loan costing about 7.98% a year is negative leverage; this guide explains why.

With 3.5% down instead, the loan is $675,500, principal and interest is $4,494 and mortgage insurance is $338, so the live-in cost rises to $4,176 a month.

The mortgage insurance in this example is a round illustration. On an FHA loan, the annual premium depends on the loan size, down payment and term, and there is also an upfront premium of 1.75% of the loan, usually added to the loan balance. Get the exact figures from your lender.

What would have to change?

To break even fully rented, the two units would need about $6,617 a month in gross rent, roughly $3,308 each, against $2,300 from the comps. That gap says the price, the rate or the down payment has to move, not the rent estimate. Try a lower price, a larger down payment, or a rate you can buy down. Also test the unit you live in: if you moved out, would it rent for the comp median?

Occupancy rules, minimum down payments and how much of the other unit’s rent a lender counts all vary. Owner-occupied loan rules differ by program and lender, so check with a lender before you rely on any of this.

What should you run before making an offer?

1. Pull the median rent for each unit type from active rental comps.
2. Recompute property tax and insurance from your own price and location.
3. Fill in the live-in and fully rented columns with your own loan terms.
4. Compare the live-in cost with what you pay in rent today, and the cap rate with the loan constant.
5. Ask a lender what your program requires and how it treats the other unit’s rent.

Do it faster with Caza

Caza is a Chrome extension that works on Zillow listings. Its rental comps show nearby active asking rents, so you can read the median for each unit type without a second search. Its investor numbers show cap rate, monthly cash flow and DSCR with property tax and insurance prefilled and editable. With the FHA house hack profile on a 2–4 unit listing, you pick the unit you live in and the cash-flow view counts it as $0 rent, while cap rate and GRM stay on every unit’s rent. FHA mortgage insurance (MIP) is not included, and the profile says so, so add your lender’s figure. GRM appears only when the listing reports gross income. Treat every figure as a starting point, not an appraisal.

FAQ

Caza is independent and not affiliated with Zillow. Zillow’s menus and features change, so check the current page. Any example numbers are sample data, not a real listing, and not lending, tax or investment advice.