Guide to House Hacking in San Jose, California

Thinking about house hacking San Jose, California? For many this is the best strategy to acquiring their first property in the popular city.

California can be a challenging market, but there’s a reason that so many young millionaires have come out of the state of California. Real estate values there in many cities are disproportionately higher than other parts of the country – but that means a lot of opportunity for property owners. House hacking can be the perfect way to break into an otherwise overly expensive market.

This article will guide you through everything you need to know including whether the city and sate are tenant or landlord friendly, what options exist for financing, special concerns when looking at San Jose specifically, and the best strategies for house hacking this city.

Let’s get started!

San Jose: Tenant Friendly, or Landlord Friendly?

From the state level, California is definitely more tenant-friendly than landlord-friendly. This is due to California being one of the few states that has statewide rules on rent control, how much can be charged for application fees, how screening tenants can be done, and provides above average eviction protections to tenants.

This definitely increases the risk to investors because there is far more likely to be severe restrictions on how much rent can be increased regardless of local demand, and it increases the chances of a problem tenant that you will have difficulty removing if they decide to stop paying rent.

San Jose doesn’t add on many additional protections, but just by staying on par with California law, they are strongly tenant-friendly as opposed to landlord-friendly.

For many people this would make it too tenant-friendly to invest. For others, the low property tax rates on valuable properties and high potential rent, even if it is controlled, is too much to ignore. You will need to measure the pros/cons for yourself and decide:

  1. What is your risk tolerance?
  2. Is the deal good enough to take the chance with the California market?

Answering these questions will help you to determine if a San Jose deal makes sense for you or not. Read through this article and all the information we’ll lay out to help you make that decision to see if the San Jose house hack makes sense for you or if you will want to look at another market that fits your specific needs.

San Jose Demographic Data Analysis

First, we’re going to look at our core 6 demographic data points that help us determine if a market is even worth looking at or not. So let’s take a look at how San Jose stands up to our benchmarks when looking at the combination of population growth, income growth, property value growth, crime level, crime change, and job growth.

When it comes to these six metrics, this is how San Jose compares to our benchmarks:

Data PointBenchmark (since 2000)San Jose
Population Growth20%14.2%
Income Growth30%64.9%
Property Value Growth40%166%
Crime Level< 500277
Crime Change0% or declining– 1%
Job Growth> 1%4.96%

Overall, a San Jose house hack looks like it has quite a bit of potential based on the six metrics we use to measure a real estate market. The population growth isn’t there. That’s the one metric that has missed completely.

However, income growth is double what we want to see, while property value growth is over 4x the 40% growth we wanted to see. Crime falls well within the levels that work and is declining while job growth is healthy.

In other words based on the metrics alone we’re 5/6 with some good enough signs from the others that the population growth doesn’t necessarily scare us away from this market. The property value growth alone makes it hard to walk away, and since most of the others fall in line, investors with a higher risk tolerance may want to give San Jose a try.

It’s fully possible that part of the reason the population growth is lower is because property values soared so much over the past 20 years. While we can’t just make that assumption, there’s still enough to like here to give a San Jose house hack a chance if you are willing to buy in the California market.

6 Strategies for House Hacking San Jose California

San Jose is a great city with plenty going for it. Here are six strategies for finding a winning property for house hacking.

Look at Multi-Unit Property Options

The mean price for a conventional one family house in San Jose is much higher than average, even by California standards. This can make it much harder to find a good deal on one of these properties and that means the best affordable solution to make the numbers work could be with multi-unit properties.

When looking specifically at San Jose numbers Detached houses, townhouses, and 2-unit structures are all priced fairly similar at the high end of real estate prices. These are mean numbers, so there will always be some much cheaper and some much more expensive, but that means the demand is pretty high in the city for duplexes and townhouses, as well.

Moving to 3, 4, or even 5 unit structures is where the first major dip in price seems to take place on average, which suggests that this is where many of the best deals are likely to be found. Some of this could be because such housing is much more common in working class neighborhoods or neighborhoods that tend to be in less demand, but that’s not always the case.

Looking at multi-unit listings in San Jose is going to make it easier to find a house hack where rents cover the full mortgage or even cash flow after expenses.

Consider Properties with Airbnb & Short-Term Rental Options

San Jose is surprisingly friendly when it comes to short-term rentals. Unlike many cities in states like Texas that are known for being landlord friendly but don’t like Airbnb, San Jose is very friendly to STRs. This means looking at properties with Airbnb in mind, or that may offer a combination of long-term rent and short-term Airbnb potential is a very good strategy.

Expand Your Search Beyond The Top Neighborhoods

Some investors like to only search the top neighborhoods, and while this does limit options it does offer the benefit of looking at properties that you know are likely to remain in high demand. However, when some neighborhoods have average prices well over $1 million, chances are you will need to widen the net to find a house hack that will work.

There are deals to be found in most neighborhoods and in-depth research on the ground looking locally for growing areas of town, area that is open to expansion, or neighborhoods being built up and revitalized are all good signs for finding a property that may gain value as the surrounding area improves in the upcoming years.

Because San Jose did not meet the population growth we want to see, chances are that looking at neighborhoods that are on the upswing or see a lot of existing properties being renovated is a better bet than empty or sparse land on the edge of town since the overall demand for new development is less pressing here.

Sleep in Living Room Method

This isn’t right for everyone, but if you’re racing right out of college, or are still in college, and don’t have that much and have friends who can pay rent (or get funding for housing via college aid) why not rent out all the bedrooms and get more rent coming in to pay off that mortgage?

Just remember to do the numbers so when you do want to reclaim a room, or if some leave in summer, that you have the ability to make up the numbers. This is more for the college-aged young but it is a viable method.

The same could be done with sleeping in a cot in the garage as you renovate it into a live-in apartment. Stay there while renting out all the in-house rooms.

Host Foreign Exchange Student

House hacking doesn’t just have to be for the young. Did you know there are programs that pay an often generous monthly housing stipend for offering housing for exchange students?

This can be a great way to learn about other cultures, offer housing to students eager to come to the U.S. on exchange, and get paid after all the kids move out of the house.

Rent Out Storage Space

This will never make nearly as much as a renter, but if you have a garage you don’t use, a stand alone backyard office or shed you don’t use, these can be rented as storage. It’s a little extra something, they have keys to those spots but not your house, and there is very little to no maintenance as monthly payments come in.

Securing Financing for Your First San Jose House Hack

Securing financing can be a challenge depending on what neighborhood of San Jose you’re looking at. The mean prices for housing units in the city are:

  • Detached Housing Units: Over $1 million
  • Townhouses or Attached Units: $834,379
  • 2-Unit Structures: $984,343
  • 3 & 4-Unit Structures: $598,822
  • 5 or more Unit structures: $648,675
  • Mobile Homes $210,870

The median rent in the city is $2,223 per month, showing just how far a few rent checks can go to helping cover what is going to be a pretty hefty mortgage payment at those numbers.

Specialty Loans

These would be loans that are available to small groups that offer better terms but require you to meet certain criteria to qualify. The most common examples would be VA Loans which can be used for house hacking and investment properties as long as certain conditions are met, or the popular FHA loans that only require a 3.5% down payment

There are various housing loan programs out there and it can be worth doing some digging to see which ones you can take advantage of to lessen the burden of a down payment, bad credit score, interest rates, or possibly even all of the above.

Conventional Loans

If you can qualify for a conventional bank loan for a mortgage, that is a great way to go. Don’t forget that for multi-unit properties you can often take 70% of the expected rent and have that added to your current income to give you eligibility for larger loans and thus more properties.

It’s a house hacking trick that you want to make sure to take advantage of so you don’t miss out on a San Jose property you would otherwise think is just out of your budget.

Creative Financing

Sometimes you can use your handyman skills and negotiating power to make a creative deal. If there’s a property that has serious potential but clearly needs work, you may be able to work out a deal with the current owner to finance the sale themselves.

You can negotiate a better deal since you’ll be doing work to the property, and they take the place of the bank getting steady payments (and the interest the bank would get) while you get ownership of the property and can begin collecting rent and doing the necessary work.

Should You House Hack Airbnb in San Jose?

San Jose can be a potentially excellent option for turning to Airbnb and other short-term rental services for house hacking free space in your property. Why? San Jose is unusually friendly to Airbnb compared to most California cities.

There are very few restrictions, with minimal up-front cost. The city of San Jose permits Airbnbs in single-family (this is especially rare in cities with special rules about STRs), two-family, and multi-family dwellings, mobile homes, live/work units, and guest houses. In other words, most types of housing that you can think of, though it is important to note that they do not allow Airbnbs in accessory dwelling units.

The annual limit on short term rental stays is 180 days per calendar year if there is no host is present but since you’re house hacking, you can rent out all 365 days of the year with no further restrictions.

You will need to buy a business license and pay some upfront taxes, but no special permit is needed beyond that.

San Jose Neighborhood Real Estate Information

Understanding the neighborhoods in a city is important when looking at house hacking. One thing that really stands out about San Jose is that residents generally agree that even the worst or sketchiest areas of San Jose are incredibly safe compared to cities with true slums or scary places.

Smart Asset even listed San Jose as one of the 10 Safest Cities in the United States in 2021. That said, every city has some areas that are at least sketchy or require basic precautions.

The safest neighborhoods in San Jose (ignoring the many, many answers of “pretty much all of them”) are:

  • Berryessa
  • Blossom Valley
  • West San Jose
  • Evergreen
  • Cambrian Park

The sketchiest areas of San Jose that require more investigating before investing include:

  • Downtown (especially “Fountain Alley)
  • Fairgrounds
  • Santa Clara
  • Seven Trees
  • Some areas around the fringes of San Jose University

Keep this in mind, and Google Maps open, when looking at listings around the city of San Jose. Overall, because so much of San Jose is at least relatively prosperous, most of even the “sketchy” neighborhoods will have areas that are relatively find and/or have good opportunities in them for investment.

Should You House Hack San Jose California?

This all comes down to risk management. There are very high prices in San Jose but incredible appreciation. You will have to work with California’s extremely tenant-friendly rules, which when combined with the lower than wanted population growth might cause many investors to pass.

If you think the potential greatly outweighs the potential risks, then you should give it shot by using the strategies and ideas presenting in this article all about successfully house hacking San Jose. Overall, San Jose is a great city that does have a lot going for it.

Make sure to check out our free house hacking calculator to be able to pop in all the numbers, analyze your potential deals, and have the numbers and information you need to make it work.

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Analyzed by: Shane Dayton
Whether it was helping a friend build a cabin from scratch in central Alaska, scouting & analyzing Austin Texas neighborhoods, or exploring rural Iowa Airbnb potential, the variety of opportunities real estate offers have caught Shane's attention. After years of this, he brings his experience and passion for real estate to Everything House Hacking.

Learn more here.