Selfhosted

I did it for a year or so, exactly the same thing, I have a bunch of websites and other services like matrix, mastodon, peertube running on that server.

I found out the hard way that Lemmy is really not optimized for single user instances on a small VPS. In the beginning it was OK but the more they optimized for big instances like Lemmy.world and .ml the word it ran with few resources.

In the end it was so bad that it would Hogg all the servers resources and bring the whole server down every couple of hour so that I had to hard reboot it.

The worst part was that this impacted alł my other services and websites which went down with it every couple of hours. I tried to get a beefier server but that only helped until the next update.

In the end I switched to Piefed and couldn't be happier. It uses a lot less resources as a single user instance so I could downgrade the server again and it's written in python so I can much easier help working on it, no need to compile anything, etc. And it has a cool template engine which let's you easily modify how it looks and feels.

If you want it to not affect other systems, a container is the obvious choice.

It just comes down to personal preference.

We run ours using the Docker "method", but I sort of wish we had gone the Ansible route. What we have works, but the documentation isn't up to snuff. To do things in Docker (without ansible) you basically still have to reference the Ansible repo and use their lemmy.hjson and their Docker Compose, but they have lots of environmental variables that you have to change yourself instead of Ansible doing it.

I do enjoy just using my normal workflow, which is using Dockge/Portainer as much as possible, but it's a bit of work trying to figure out what Lemmy wants.

Docker is generally the easiest to install and update, and won't disturb other existing applications.

First of all: Get the Instance it's own VPS - Lemmy instances are very very fluid with their resources requirements and you don't want the instance to bog down other services you use. Use another cheap VPS instance for your other services and link them up within Hetzner if needed.

This is even more the case if you host a public instance. I would even consider using separate accounts (even though Hetzner does officially not allow that) for that. Because if one of your users does something Hetzner finds ban worthy they will,under ideal circumstances, at least stop your VPS/quarantine it. (Been there) If you are really unlucky (CSAM material posted or federated in your instance) you will get your whole account banned. Which means all your other services are gone,too. (happened to someone I know)

Don't get me wrong,Hetzner is great, I love them. But be aware of these points. They are very proactive when it comes to these points.

Beside that: Use Docker.

Your use-case and situation seems very close to mine except I specifically do not host communities.

First of all, you can run as many services from single nginx as you want (or can handle), usually you do this by having each service on it's own (sub)domain and routing it all to the same IP, nginx then proxies the requests to the corresponding service running locally on a given port (see nginx reverse proxy).

I would definitely recommend docker images unless you have specific needs, afaik the ansible recipe installs and manages a docker compose project too (unless they also added official bare-bones ansible setup). Might be wrong here, I do docker and manage it myself, updating is usually a file edit and two commands away.

About the VPS being enough - from my monitoring, every foreign subscribed community increases the load, with bigger/more active communities increasing it more.
The main limiting resource for my setup is disk space, sometime ago I've calculated my database size is increasing about 1G per month with about 500 subscribed communities and that's only the postgresql database size without any media. The stats from my s3 provider (you can host images locally too), hint that I am gaining 1-5GBs of media per month.

I don't have any metrics how much the amount of active users drains the server as my instance is intentionally small, but I can imagine that having 10-100-1000 active users at the same time would drastically increase the load of at least postgres as well as increase the bandwith.

And about my setup for comparison, I am renting a dedicated server from Hetzner (AX41-NVMe) running a bunch of other services as well (minecraft server, factorio server, file sharing service, ...) and as of the last 30 days my monitoring reports the "average" load average (same for all 1/5/15m) being around 1 core (out of 12 core processor, 6*2 smt).
Memory is sitting at about 50% month average out of 64G.
Though, most of the services are really under-utilized (minecraft) or don't require much (factorio).

Rule of thumb, if your users subscribe to a lot of outside communities expect at least increased disk space consumption, at worst also increased bandwidth and load.
If any of your hosted communities get popular on the wider fediverse, definitely expect increased bandwith and load - more servers hitting your server with more data (upvotes, comments, edits...) means nginx, lemmy and postgres also need to process more.
At baseline there will be a lot of a spiky but small chatter from other instances and the biggest resource drain will be postgres.

I wouldn't personally go into this with anything less then 4 vCPUs, 32G of RAM and non-shared/virtual storage (disk latency kills postgres performance).

I would reccommend docker (or k8s if u already have that set up). And do ur nginx with a sperate file for each service instead if everything in nginx.conf. lemmy docker has its own nginx instance so i would simply reccommend doing ssl with ur existing nginx and forwarding that to the lemmy nginx instance.

EDIT: lmk if u want me to publish my setup on git so u can simply clone and be up and running quickly.