House Hacking for Less Than Mortgage Payment

[Chris Frey]

Hi all! I've been a lurker here for a while, but I've come across a property that piques my interest and wanted to get some feedback on the situation.

My girlfriend and I are moving in together, and we're looking at houses to purchase (under my name only).  We found one that is beautiful, in a good location, has the amenities we want (yard for dogs etc), but is huge.  It's 2,000+ SF and neither of us need that amount of space.  The house was built in 1900 (renovated), and for whatever reason there is a side entrance that leads upstairs to the second level. 

We were thinking about adding a small kitchen up there, and using the rooms to rent out the level as a 2BR/1BA apartment.  We would occupy the downstairs, and the tenants would get the whole upstairs (we'd keep the yard access etc).  

I've been looking around at 'comps' a bit though no one seems to be doing what we are thinking, especially with the level of finish this house has.  Trouble is, based on what else seems to be up for rent in town, I'm not quite sure we would get enough money to cover all the mortgage/utilities for the place.  That in itself doesn't really bother me, as we'd be living mostly free in around 1,000 SF of living space, and a huge backyard.

Have any of you had an experience where you went in knowing that you'd still have to pay a little bit for the mortgage/utilities?  I know often people look at positive cash flow only, but I'm thinking if between my girlfriend and I, we have to pay ~$200 a month in housing expenses (plus saving some for repairs etc), then that would be a lot better than living in a crappy house for a little more, or my current apartment which is about $1100/mo.

I'd love to hear of your experiences, or even words of wisdom!