Don't hesitate to offer significantly above the asking price, as you always have the option to negotiate it down later.

Some banks offer better options versus lenders and credit unions. 

Its not as polished as other options though. 

I've never gotten more snail mail in my life (mortgage statements, bank statements, invoices, etc.) and it seems like every time we turn it to "paperless" options, the mortgage is sold and then I get all new mailed statements to turn off again.

Are there specific neighborhoods, market conditions, or opportunities that make house hacking viable in the Phoenix area?

Classic path of progress stuff in a close-ish market.The other option ( which could be very unpopular) is to sell both and preserve the down payment funds. 

I'm sure you have heard about FHA loans, they are great for house hacking, and you can get a better understanding of your next steps by hearing their recommended options as well.

well if you're interested in speaking about the furnished rental option, let me know!

Is there not a viable in between?

If you have bad credit an FHA 3.5% down loan can be a good option.