3 Smart Strategies Young People Are Using to Buy Homes in San Diego

By Sean Zanganeh

Are you finding it tough to break into the San Diego real estate market? You're not alone. With home prices averaging nearly $1 million and competitive demand making homeownership seem out of reach, many young people feel locked out of the market entirely.

But here's the good news: smart, resourceful buyers are finding creative ways to make San Diego homeownership a reality. Today, I'll share three proven strategies that young people are successfully using to buy homes in San Diego, from leveraging low down payment programs to creative co-ownership arrangements.

These aren't theoretical concepts—these are real strategies I've helped clients implement to navigate our competitive market with confidence and make the most of their resources. If you're ready to make San Diego your home, let's dive into the strategies that are actually working.

Strategy #1: Low Down Payment Programs - Your Gateway to Homeownership

The Challenge: The biggest barrier for young buyers isn't always the monthly payment—it's saving for that massive down payment. In San Diego, the average down payment is $85,714, ranking among the highest in the nation.

The Solution: Multiple programs exist specifically to help first-time and young buyers with minimal cash reserves.

San Diego Housing Commission (SDHC) Programs

The SDHC offers several programs that can dramatically reduce your upfront costs:

Low-Income Program:

• Deferred loan up to 25% of purchase price at just 3% interest
• Up to $10,000 in closing cost assistance grants
• Available for buyers earning up to 80% of Area Median Income

Middle-Income Program:

• $40,000 deferred down-payment assistance loan
• $10,000 closing costs assistance grant
• Available for buyers earning between 80% and 150% of Area Median Income

Since 1988, SDHC has helped more than 6,100 families and individuals buy their first homes in San Diego.

California Dream For All Program

This state program provides:

• Shared appreciation loan for down payment assistance
• Works with conventional financing
• No monthly payments on the assistance loan
• Repayment occurs when you sell, refinance, or pay off the primary mortgage

FHA and VA Loans: The Young Buyer's Best Friend

FHA Loans:

• As little as 3.5% down payment
• Credit scores as low as 580 accepted
• Loan limits up to $1,077,550 in San Diego County
• Seller can contribute up to 6% toward closing costs

VA Loans (for eligible veterans and service members):

• $0 down payment required
• No private mortgage insurance (PMI)
• Competitive interest rates
• No prepayment penalties

Real-World Example

Sarah, a 28-year-old teacher, used the SDHC Middle-Income Program to buy a $650,000 condo in Hillcrest. With the $40,000 down payment assistance and $10,000 closing cost grant, she only needed to bring $20,000 of her own money to closing instead of the typical $130,000. Her monthly payment of $3,200 was actually less than what she was paying in rent.

Action Steps:

1. Contact SDHC at (619) 578-7788 to discuss program eligibility
2. Get pre-approved with an FHA or VA-approved lender
3. Complete required homebuyer education courses
4. Start shopping with realistic price ranges based on total assistance available

Strategy #2: House Hacking - Live for Free While Building Wealth

The Concept: House hacking involves buying a multi-unit property, living in one unit, and renting out the others to cover your mortgage and expenses.

Why It Works in San Diego: Despite high purchase prices, rental demand is extremely strong, making it possible to generate enough income to cover most or all of your housing costs.

The Numbers That Make Sense

Example Property: A duplex in Normal Heights for $850,000

• Your unit: Live in the 2-bedroom side
• Rental unit: Rent the other side for $2,800/month
• Your mortgage payment: Approximately $4,200/month with 5% down
• Additional rental income: Rent out your spare bedroom for $800/month
• Total rental income: $3,600/month
• Your net housing cost: $600/month

Types of House Hacking in San Diego

Multi-Unit Properties:

• Duplexes: Most common and easiest to manage
• Triplexes: Higher income potential but require more management
• Fourplexes: Maximum units allowed with owner-occupied financing

Single-Family House Hacking:

• Rent by the room: Live in master bedroom, rent 2-3 other rooms
• ADU opportunities: Live in main house, rent accessory dwelling unit
• Basement or garage conversions: Create separate rental space

Financing Advantages

Owner-Occupied Loans:

• Lower down payments: FHA allows 3.5% down on up to 4 units
• Better interest rates than investment property loans
• VA loans: $0 down for eligible veterans on up to 4 units

Rental Income Consideration:

• Lenders count 75% of expected rental income toward qualifying
• Increases your buying power significantly
• Easier qualification than traditional investment properties

Real-World Success Story

Mike, a 26-year-old software engineer, bought a triplex in City Heights for $750,000 using a VA loan with $0 down. He lives in one unit and rents the other two for $2,200 and $1,800 respectively. His total housing expenses are $3,200/month, but he collects $4,000 in rent, meaning he lives for free and makes $800/month in cash flow.

House Hacking Action Plan:

1. Get pre-approved for owner-occupied multi-unit financing
2. Research neighborhoods with strong rental demand
3. Analyze properties using the 1% rule (monthly rent ≥ 1% of purchase price)
4. Consider management requirements - are you ready to be a landlord?
5. Plan your exit strategy - will you keep as investment when you move?

Strategy #3: Multi-Family Partnerships and Co-Ownership

The Reality: Sometimes the best strategy is to combine resources with family or trusted friends to access properties that would be impossible to afford alone.

How It Works: Multiple buyers purchase a property together, each owning a percentage and potentially occupying different units.

Partnership Structures That Work

Family Partnerships:

• Parents and adult children co-purchase duplex or triplex
• Siblings pool resources for larger multi-unit property
• Multi-generational living with separate units for privacy

Friend/Colleague Partnerships:

• Two couples buy a duplex together
• Professional colleagues in similar income brackets
• College friends who want to stay connected

Legal and Financial Considerations

Ownership Structure Options:

• Tenants in Common: Each party owns a specific percentage
• Joint Tenancy: Equal ownership with right of survivorship
• LLC Formation: Create business entity to own property

Essential Agreements:

• Purchase and ownership percentages
• Monthly expense responsibilities
• Exit strategies and buyout procedures
• Decision-making processes for repairs and improvements
• Rental income distribution (if applicable)

Real-World Partnership Success

Emma and Josh, both 29, partnered with Emma's brother Alex to buy a triplex in Kensington for $1.2 million. Each contributed $40,000 toward the down payment and split ownership equally. Emma and Josh live in one unit, Alex in another, and they rent the third for $2,600/month. The rental income covers most of the common expenses, and each person's housing cost is about $1,400/month—far less than they'd pay for similar individual rentals.

Making Partnerships Work

Choose Partners Carefully:

• Similar financial situations and credit scores
• Compatible living styles and expectations
• Shared long-term goals for the property
• Strong communication skills and conflict resolution abilities

Professional Guidance Essential:

• Real estate attorney to draft partnership agreements
• Accountant to structure ownership and tax implications
• Insurance agent to ensure proper coverage
• Lender experienced with multi-borrower transactions

Partnership Action Steps:

1. Discuss goals and expectations thoroughly with potential partners
2. Get pre-approved together to understand combined buying power
3. Draft partnership agreement with legal counsel
4. Establish property management responsibilities
5. Create exit strategies before problems arise

Combining Strategies for Maximum Impact

Strategy Stacking: The most successful young buyers often combine multiple approaches:

Example Combination:

• Use SDHC down payment assistance to minimize cash required
• House hack a duplex to reduce living expenses
• Partner with family member to access larger property

Timeline for Success:

1. Months 1-2: Research programs, get pre-approved, find partners
2. Months 3-4: Complete education requirements, finalize partnership agreements
3. Months 5-6: Active property search and offer negotiations
4. Month 7: Close on property and begin rental income generation

Common Mistakes to Avoid

Program-Related Mistakes:

• Not completing required education courses early enough
• Misunderstanding income limits and asset restrictions
• Failing to maintain pre-approval during property search

House Hacking Pitfalls:

• Underestimating management responsibilities
• Inadequate screening of tenants
• Insufficient emergency reserves for repairs and vacancies
• Violating owner-occupancy requirements

Partnership Problems:

• Inadequate legal documentation
• Mismatched expectations about property use
• Poor communication about financial responsibilities
• No exit strategy planning

The Market Reality Check

Current San Diego Market (2025):

• Median home price: ~$1 million
• Average days on market: 20-25 days
• Cash offers: Still common but not required with strong financing
• Inventory: Slowly improving but still limited

Why These Strategies Work Now:

• Rental demand remains extremely strong
• Interest rates have stabilized around 6.5-7%
• Programs are underutilized by many potential buyers
• Creative solutions are becoming more accepted by sellers

Your Next Steps to Success

Week 1-2: Research and Planning

• Contact SDHC to discuss program eligibility
• Research neighborhoods for house hacking potential
• Identify potential partners if considering co-ownership

Week 3-4: Financial Preparation

• Get pre-approved with multiple lenders
• Complete required homebuyer education courses
• Gather documentation for assistance programs

Week 5-6: Team Building

• Find experienced real estate agent familiar with these strategies
• Connect with attorney for partnership agreements
• Establish relationships with property managers

Week 7+: Active Search

• Begin property search with clear criteria
• Analyze deals using house hacking formulas
• Submit competitive offers with proper financing

The Long-Term Vision

Why This Matters: These strategies aren't just about getting into your first home—they're about building long-term wealth and financial freedom.

Five-Year Outlook:

• Property appreciation in San Diego historically outpaces inflation
• Rental income increases with market rents
• Equity building through mortgage paydown
• Tax advantages of property ownership
• Platform for future investments

Building Your Real Estate Portfolio: Many young buyers use their first house hack as a stepping stone to larger real estate investments, keeping the original property as a rental when they're ready to move up.

The Bottom Line: It's Possible, But It Takes Strategy

Breaking into the San Diego real estate market as a young buyer isn't easy, but it's absolutely possible with the right approach. The key is leveraging every available resource and thinking creatively about ownership structures.

Remember:

• Programs exist to help you - but you have to know about them and take action
• House hacking works - but requires willingness to be a landlord
• Partnerships can be powerful - but need proper legal structure
• Professional guidance is essential - don't try to navigate this alone

The young buyers who succeed in San Diego are those who educate themselves, think creatively, and take action despite the challenges. With median home prices approaching $1 million, waiting for the "perfect time" or hoping prices will drop significantly isn't a viable strategy.

Your time is now. Start with one strategy that fits your situation, build your knowledge and resources, and take the first step toward San Diego homeownership.

Ready to explore these strategies for your specific situation? I specialize in helping young buyers navigate San Diego's challenging market using these proven approaches. Contact Sean Zanganeh today to discuss which strategy might work best for you and start building your path to homeownership.

Learn more: mysddreamhome.com

Don't let San Diego's high prices keep you on the sidelines. With the right strategy and professional guidance, your homeownership dreams can become reality.