Buy now or wait?

[Paulina L.]

I am eyeing a duplex in my hometown (not LA) where I'd put down 10%. I'd have to pay for my LA rent while also paying for the duplex which total to approx 35-40% of my after tax pay. With paying for the duplex it's -$23K in the first year, then -$10K for 4 years. Cashflows at year 5. Based on appreciation it would still do well, but does not account for any potential repairs that arise outside of me buffering 5% repairs, 5% CapEx, and 5% vacancy.

I’d like to get something there as I intend to move back to my hometown in 3-4 years and see it as a place I would be long term. However with the negative cashflow, is it worth it? I also can put 20% down, which would make it cashflow but given it’s my first property I am wary of putting too much down upfront. Would love advice/thoughts or if better to wait when I can house hack instead. 

[Jason Zundel]

In my experience, even for your first investment, go big or go home.  Whether you plan on moving back or not, focus on the investment itself and do you best to be a bit more clinical.  It's always easiest for the first investment to have it close so you can personally manage and support.  Look at the age of the home and the standard costs of repair (even new will always have something dang it) and give yourself a buffer there.  If you can afford 20% and it's a good deal, then dive in.  If you can't afford 20%, then I would be wary about starting your investments with a negative cash flow. Don't get emotionally attached even if it's in a location that you THINK you MIGHT be heading in 3-4 years.  Make the decision if it makes sense NOW.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.