House Hacking in Colorado Springs: Beginner’s Playbook

Thinking about lowering your monthly housing cost while building long-term wealth? House hacking can help you do both, especially in Colorado Springs. With steady tenant demand from military installations, hospitals, and universities, you can live in one part of a property and rent the rest to offset your mortgage. In this beginner-friendly guide, you’ll learn the local options, rules, financing paths, and a clear step-by-step plan tailored to El Paso County. Let’s dive in.

What house hacking means here

House hacking is when you buy a home, live in it as your primary residence, and rent out extra space or units. Common setups include an owner-occupied duplex, renting rooms in a single-family home, or adding an accessory dwelling unit (ADU). Your goal is simple: reduce housing costs while you build equity and learn landlording on-site.

In Colorado Springs, demand for small rentals and rooms often follows the city’s job centers. Tenants include service members, students, healthcare staff, and professionals connected to downtown and the airport. Prices and rents change frequently, so use current market snapshots from local MLS reports and reputable rent trackers when you evaluate deals. Always note the month and year of any data you use.

Best property types in Colorado Springs

Multi-unit homes: duplex to fourplex

• Pros: Separate units make screening and leasing simpler. FHA and VA financing can work on 2- to 4-unit properties when you live in one unit.
• Cons: Smaller multifamily buildings exist but inventory is limited compared to single-family homes. Over 4 units is commercial financing territory.

Single-family homes with room rentals

• Pros: Larger supply across many neighborhoods. Rooms can appeal to tenants near bases, colleges, and hospitals.
• Cons: More day-to-day management and compatibility considerations. Set clear house rules in the lease.

ADUs and basement suites

• Pros: Create a self-contained unit while you live on-site. This can improve long-term value and income potential.
• Cons: Permitting, parking, and utility connections require planning. Budget time and money for the permit path.

Condos and townhomes

• Pros: Lower exterior maintenance and often easier to manage.
• Cons: HOAs may restrict leasing, set minimum lease terms, or ban short-term rentals. HOA dues impact cash flow.

Where to look locally

Colorado Springs offers varied options. Consider the following general patterns as you research, then verify current pricing, rents, and rules:

• Downtown and Old North End: central access and steady rental interest; pricing can be higher.
• Broadmoor, Ivywild, Gold Hill Mesa: sought-after pockets with rental demand; expect a price premium.
• Powers, Briargate, Northgate: near employers and services, with consistent interest in small rentals.
• Fort Carson, Fountain, Cimarron Hills corridors: proximity to bases can produce steady tenant pools.
• Near UCCS, Colorado College, and major hospitals: room-by-room or small-unit demand often remains strong.

Always confirm HOA bylaws, local zoning, and any rental restrictions at the address level before you write an offer.

Financing your first house hack

Favorable financing usually requires you to live in the property. Most programs expect at least 12 months of owner-occupancy.

• FHA loans: Often 3.5% down for qualified buyers. Available for 1- to 4-unit properties you will occupy. Appraisals and condition standards apply.
• VA loans: Eligible veterans and active-duty buyers can use VA benefits to purchase 1- to 4-unit properties as a primary residence, often with no down payment.
• Conventional loans: Available for owner-occupied 2- to 4-unit properties, with higher down payments than single-family purchases depending on your profile.
• USDA loans: For qualifying rural areas. Portions of El Paso County outside city limits may qualify; most in-city addresses will not.
• Renovation loans: FHA 203(k) and conventional renovation products can combine purchase and rehab, which is useful if you plan to finish a basement or create an ADU.

Pro tips:

• Get pre-approved with a lender experienced in 2- to 4-unit and renovation loans in the Pikes Peak region.
• Build a detailed rehab budget, including permit and utility work.
• Ask about insurance requirements for owner-occupants who rent rooms or units.

Insurance, taxes, and ongoing costs

• Insurance: If you rent rooms or a unit, your carrier may require a landlord or rental endorsement instead of a standard homeowner policy. Ask about liability limits, loss-of-rent coverage, and an umbrella policy.
• Property taxes: Consult the El Paso County Assessor and Treasurer for assessment and mill levy details at the parcel level.
• Operating costs: Include HOA dues, special district fees, utilities you pay, and any local sales or lodging taxes if you pursue short-term rentals.
• Income taxes: Rental income is taxable, but many expenses and depreciation may be deductible. Your owner-occupant status can affect mortgage interest and potential capital gains exclusions. Consult a CPA for personalized guidance.

Zoning, permits, and rental rules

In the Pikes Peak area, rules differ by jurisdiction and by neighborhood.

• City vs. county: Check the City of Colorado Springs Planning & Development Services for zoning, occupancy limits, parking requirements, ADU standards, and building permits. For unincorporated El Paso County, contact Planning & Community Development for county rules.
• ADUs: Confirm whether ADUs are allowed by right at your address, and what size, height, parking, and utility connection standards apply. Ask about permit timelines and fees before you buy.
• Short-term rentals: Colorado Springs requires licensing and compliance for STRs. Expect safety standards, registration, and transient lodging taxes, along with limits in certain zones. HOAs may be more restrictive than the city or county.
• Landlord-tenant law: Colorado law sets rules for deposits, notices, habitability, and eviction procedures. Review applicable Colorado Revised Statutes, and consider consulting a local attorney for leases and compliance.
• HOAs: Always obtain CC&Rs and bylaws early. Many associations regulate leasing terms or prohibit STRs.

Before you go under contract, verify at the address level:

• Zoning and permitted uses, including unrelated occupant limits.
• HOA leasing restrictions and lease-term minimums.
• ADU feasibility, parking, and utility requirements.
• STR licensing eligibility, taxes, and inspections if relevant.
• Utility metering or a clear plan to allocate shared utilities in the lease.

How to run the numbers

Start with realistic assumptions rooted in current comps. Double-check your rent estimates with multiple sources, and confirm condition and amenities comparisons.

Key inputs:

• Purchase price, down payment, interest rate, loan term
• Property taxes, insurance, HOA dues, utilities you cover
• Gross monthly rent from rooms or units
• Vacancy allowance, often 5 to 10 percent
• Maintenance and reserves, often 5 to 10 percent
• Property management fee if you will not self-manage

Simple framework:

• Net Operating Income (NOI) = Gross Rent minus Vacancy minus Operating Expenses
• Cash Flow = NOI minus Debt Service (your mortgage principal and interest)
• Cash-on-Cash Return = Annual Cash Flow divided by Cash Invested

Quick screens like the 1 percent rule can help you filter options, but rely on detailed comps and a full expense budget to make decisions in an appreciating market.

Step-by-step workflow

1. Define goals: target monthly housing cost, expected time commitment, rehab tolerance, and timeline.
2. Get pre-approved: work with a local lender who understands 2- to 4-unit and renovation loans.
3. Choose target areas: focus on proximity to bases, colleges, hospitals, downtown, and major employers.
4. Run comps: sales comps for your purchase and rent comps by unit or bedroom count; include vacancy and realistic operating expenses.
5. Inspect and budget: obtain bids for repairs, finishes, and any code-required upgrades; include permit and utility connection costs.
6. Verify rules: confirm zoning, HOA, ADU, and STR permissibility before you waive contingencies.
7. Write offers: use contingencies for financing, inspection, and verification of rental legality.
8. Close and set up: finalize insurance, licensing or registrations, advertise for tenants, and complete move-in checklists.

Tenant sourcing and management

• Sourcing: Consider local military housing boards, university housing boards, reputable rental platforms, and local property managers.
• Screening: Use written criteria that comply with Colorado and federal law, including income verification, credit and background checks where allowed, and references.
• Leases: Use a written lease that covers deposits, rent due dates, utilities, house rules, parking, pets, and subletting. Follow Colorado timelines and rules for notices and deposit handling.
• Safety and habitability: Confirm smoke and CO detectors, egress, and HVAC functionality. Handle repairs promptly to maintain compliance.

Common pitfalls to avoid

• Underestimating rehab and permitting timelines. Build a contingency budget and schedule.
• Ignoring HOA rules. Some associations restrict or prohibit leasing or STRs.
• Overestimating rent. Validate with multiple comps and property manager input.
• Overleveraging. Maintain strong reserves to handle vacancy or repairs.
• Unclear utilities. Separate meters or clear lease terms reduce disputes.
• Short-term rentals without a license. If you plan STRs, secure the required license and pay applicable taxes.

Local resources checklist

Use these agencies and data sources during due diligence and after closing:

• City of Colorado Springs Planning & Development Services: zoning, building permits, ADU standards, STR licensing
• El Paso County Planning & Community Development: zoning and permits for unincorporated areas
• El Paso County Assessor and Treasurer: property tax assessments and bills
• Pikes Peak REALTOR Services: local MLS market reports for El Paso County
• Colorado Housing and Finance Authority (CHFA): down payment assistance and first-time buyer programs
• HUD and VA: program guides for FHA and VA loans, including 1- to 4-unit owner-occupant rules
• Colorado Revised Statutes and Colorado Division of Real Estate: landlord-tenant law and consumer information
• Reputable rent comp sources: use multiple tools and local property manager input

Ready to get started?

If house hacking is on your radar, you do not have to figure it out alone. The Daniels Team has helped buyers across the Pikes Peak region analyze deals, navigate financing, verify zoning and HOA rules, and close with confidence. Reach out to The Daniels Team to Schedule a Free Consultation and build a plan tailored to your goals in Colorado Springs.

FAQs

What is house hacking in Colorado Springs?

• It means you buy a home, live in it as your primary residence, and rent extra space or units to reduce your housing cost and build equity.

Can I use FHA or VA to buy a duplex and rent the other unit?

• Yes, both FHA and VA commonly allow 2- to 4-unit owner-occupied properties, as long as you live in one unit and meet program requirements.

Are short-term rentals allowed for house hackers in the city?

• Short-term rentals require city licensing, compliance with safety and zoning rules, and payment of lodging taxes, and HOAs may be more restrictive.

How much down payment do I need to start house hacking?

• FHA often requires 3.5 percent for qualified buyers, VA can be zero down for eligible borrowers, and conventional multi-unit loans typically require more.

Which neighborhoods are popular for renting rooms or small units?

• Areas near military bases, downtown, colleges, and hospitals often see steady demand, but always verify current rents, pricing, and local rules before you buy.