Take a close look at separate sunroom entrances which can act as a second front door for your tenants.

So, if you can find a house with a basement large enough for a kitchenet and seperate entrance that would be money!

Our plan is to live upstairs with a potential roommate and have a separate entrance to the basement for a STR. 

The strategy I'm suggesting lately is buying a single family with an in law suite, for $700-$850,000 using 5% down primary residence financing and since its a part of your residence you can still register the basement as long as it has a separate entrance as a short term rental with no restrictions!

Although the owners never rented the top unit out nor made adjustments (permits) since the addition, we are now confused as to whether it is a legal two flat or just a large single family with separate entrances. 

Purchase price: $425,000 Cash invested: $550,000 House hacked my personal residence with a 3 bedroom 2 bath ADU in the basement with it's own entrance.

There are other cities in the Midwest where the entrance price is still fairly low, especially compared to California. 

Sweat equity - built a kitchen from scratch in the basement and did most of the other miscellaneous work (adding washer/dryer hookups, adding interior doors to create separate entrances, etc.) myself, saving tons of time and money (contractors were booked way out, expensive, and extremely hard to find).

We live upstairs and have a bottom room with full bathroom and kitchen that I rent out with a private entrance-all permitted.

The basement already had its own separate entrance and full bathroom, so I added a temporary wall to give the guest their own private space for their stay.