As part of a one-year Department of Defense demonstration project, proton exchange membrane fuel cell systems have been installed at three residences to provide electrical power and waste heat for domestic hot water and space heating. The capacity fuel cells operate on reformed natural gas. These systems operate at preset levels providing power to the residence and to the utility grid. During grid outages, the residential power source is disconnected from the grid and the fuel cell system operates in standby mode to provide power to critical loads in the residence. This paper describes lessons learned from installation and operation of these fuel cell systems in existing residences. Issues associated with installation of a fuel cell system for combined heat and power focus primarily on fuel cell siting, plumbing external to the fuel cell unit required to support heat recovery, and line connections between the fuel cell unit and the home interior for natural gas, water, electricity, and communications. Operational considerations of the fuel cell system are linked to heat recovery system design and conditions required for adequate flow of natural gas, air, water, and system communications. Based on actual experience with these systems in a residential setting, proper system design, component installation, and sustainment of required flows are essential for the fuel cell system to provide reliable power and waste heat.