As an agent and 2x house hacker in Los Angeles, there are a three of questions to think about:What do you qualify for? 

I get this question all the time right now with my house hacker clients in Colorado Springs.

I started as a house hacker with my duplex and appreciate how it makes me able to live for free while improving a rental property.

.#2 FHA loans make you pay PMI for the life of the loanConventional loans start at 5% for 30 years fixed with PMI and I have a lender here in Milwaukee that will do 5% down with NO PMI on a 5 year ARM portfolio (in house) loan, which is what most of our houe hackers choose.From a sellers point of view there is not that much tangible difference between an offer with a conventional loan and a cash offer, as long as the pre-approval is solid and not just self reported income. 

Since in most cases converting a garage/basement into a bedroom doesn't give much of a value boost, I just have to decide if the extra rent I could collect as a house hacker would be worth the rehab cost and time. 

My team primarily works with new investors/house hackers/etc and the lending team I use does this all the time.