25y/o North County San Diego, build or house hack?

3 Replies

Hello and thanks for reading!

To get straight to the point, I'm currently living with my in-laws (not totally for free) & saving for a house with my fiance. (a licensed agent) We are both in our twenties. We currently average about $4500/mo in savings and gross $110k/year between both of us, and we plan to live here for two years.

My father in law builds spec homes, so with the high price of $450-600k for a SF home in our area, we plan to build an average sized house, (+/-2200sqft) on a +/-1acre lot in the Fallbrook/Bonsall/Rainbow area for $450k or less (including land.) We are hoping to get more for our money, + appreciation. 

I'm very intrigued in the buy-and-hold rental strategy, house hacking, as well as airbnb strategy.

I have researched duplexes, triplexes, quads in my area and they run at least $600k and well,

1. We probably wont qualify/cant afford renovations 2. They are in scummy areas that are over an hour from my job.

I'm asking for your opinions! What would you do?

Options that seems do-able to me:

1. Keep scouting for that existing home "good deal" (will prices be this high when the time comes?)

2. Build with an additional dwelling (detached casita/studio or in law suite)

3. Build smaller and invest in another separate property later down the road.

Any input is greatly appreciated!

Keep scouting for existing homes. You can buy an existing home using FHA financing for just 3.50% down payment. That puts you in a property now if you've got the down or can get a gift from family.

Alternative is saving to buy the land for cash (very few land lenders) or ask to have a seller carry. Your future in-laws may have the connections to get a construction loan and a  take out loan after the fact but it may be years before a decent, vacant lot becomes available.  

do you know and understand the CA ADU rules. Local jurisdictions cannot be more restrictive than allowed by the Ca rules.

Here is my thought. Use a low down loan such as fha to purchase a property in the areas you listed with the large lots you listed. Then value add an ADU (as large as you can build - 1200' + giant garage (4 car: think repurpose later) for instant increased equity. Refinance hoping to get all of your initial investment back out via the refi. House hack the ADU. Consoder if a market exists in one of the areas for STR but if not then LTR the ADU.

Ideally when complete you have a property with zero money into it and a tenant (or multiple short term tenants) helping pay your mortgage.  Because you have nothing into it you would then have money for your next investment having achieved infinite return. 

To me the holy grail is the infinite return.  We have pulled it off multiple times but so far only when assisted by market appreciation. 

Good luck.