Buy Personal Residence or Start BRRRRing Out of State?

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Buy Personal Residence or Start BRRRRing Out of State?

Damian DelSignore
Rental Property Investor · Austin, TX · Member since 2017 · 5 posts · 0 votes

Hi Everyone,

I’ve been a long time listener of the podcast and have been saving up money to begin my real estate investing career. I currently am 25 with about $50k in cash saved up.

I live in Austin, TX, where tons of companies and people are constantly moving to. Originally, I planned on buying a small multifamily here to househack, but then realized that it’s very difficult to find a multifamily that will cash flow (even if I rented the whole thing out).

I’ve also started reading David Greene’s book on out of state investing (among other investing books) and it seems like BRRRRing out of state could be a good option as well.

So my question is, should I focus on saving money to 1) buy a primary residence in Austin, where companies/ people are constantly moving to (since prices are expected to keep increasing), or 2) should I use my money more efficiently and BRRRR out of state?

My long term goal is to be a buy and hold investor, while still working my full time job.

I appreciate your responses and thanks for reading this lengthy post.

Thanks,

Damian

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Jordan MoorheadBusiness Member
Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
7y

@Damian DelSignore you can find a property to househack in Austin, I did. It’s just a lot of work and difficult.

I’d start with househacking and then look at markets close to you like Killeen or Temple.

Out of state sounds sexy but in all reality you’re better off being able to drive to your properties and there’s opportunity close to you.

[email protected]512-888-9122
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  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    7y

    @Damian DelSignore you can find a property to househack in Austin, I did. It’s just a lot of work and difficult.

    I’d start with househacking and then look at markets close to you like Killeen or Temple.

    Out of state sounds sexy but in all reality you’re better off being able to drive to your properties and there’s opportunity close to you.

    [email protected]512-888-9122
    The Moorhead Team5140 Reviews
    WebsiteView Page
    2Reply
  • Aaron Gordy
    Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes
    7y

    Its better to buy here and lease out the other rooms either in a duplex, condo or a single family house. I assume that you are renting and every month that you are making someone richer by paying rent. So, if the trade-off is paying rent, house hacking locally or brrring out of state (which is a difficult process altogether) then hands down house hacking locally. Austin metro is sitting at 2.7% unemployment which is incredible! Its one of the fastest growing metros in the U.S. Its a great place to invest. 

    Welcome to BP Damian

    1Reply
  • Blake Edwards
    Real Estate Agent · Brentwood, CA · Member since 2018 · 285 posts · 225 votes
    7y

    @Damian DelSignore - Congratulations on taking action to do your DD and research.  I would agree that House Hacking is an awesome way to not only dip your toe in the investing world, but it is great for an expensive area (like where we are, The SF Bay Area California), and Austin as well.  If you bought one House Hack property, lived in it, then took that equity somewhere else, you could feasibly end up buying multiple properties a year thus creating massive wealth.  Good luck out there!

    1Reply
  • Damian DelSignore
    OP
    Rental Property Investor · Austin, TX · Member since 2017 · 5 posts · 0 votes
    7y

    @Jordan Moorhead

    Thanks for your quick response!

    I agree that house hacking is a good choice, and I was completely sold on it. However, when I started looking I couldn’t find anything close to 1% (seeing closer to .5%). If you don’t mind me asking, what we’re the numbers on your house hack here, and how did you find your property?

    Also, when I mean out state, I really meant out of my current city, since it’s easier to find better cash flows than in Austin. Ill definitely make sure to check out Killeen and Temple. Texas is a great market, so I probably don’t need to go that far.

    0Reply
  • Damian DelSignore
    OP
    Rental Property Investor · Austin, TX · Member since 2017 · 5 posts · 0 votes
    7y

    @Aaron Gordy

    Thanks for the response!

    Renting out a room in a house or condo would definitely be something I'd look into. However, I'm about to get married, and my fiancé does not feel comfortable having someone else live in the house with us. She's open to the duplex idea, but as I told Jordan, I wasn't having any luck finding properties close to 1% in Austin. Currently, we're looking up north by the domain area since it's a middle ground for both of our jobs, but are open to some surrounding areas.

    0Reply
  • Damian DelSignore
    OP
    Rental Property Investor · Austin, TX · Member since 2017 · 5 posts · 0 votes
    7y

    @Blake Edwards

    Thanks Blake, I'm really looking forward to getting started!

    When you say "take your equity elsewhere," you're meaning with a cash-out-refinance or a HELOC, correct?

    0Reply
  • Matt J.
    Rental Property Investor · Puget Sound, WA · Member since 2019 · 59 posts · 44 votes
    7y

    @Damian DelSignore, I would look at all the numbers - including what you spend on rent - before moving forward. For a simple example, if you pay $1,200/mo for rent, but find an out of state property that ultimately returns $500/mo in cash flow, your net is a negative $700/mo. If instead you house hack a triplex in Austin with total expenses of $2,500/mo and gross rents of $2,000/mo, your net loss is only $500.

    Again, this is just a simple example. There are many factors to consider such as potential appreciation, market conditions, financing, etc. Just consider the whole picture before making a decision. 

    1Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    7y

    @Damian DelSignore $3200 rent with a $250,000 purchase price

    Took me 9 months to find

    [email protected]512-888-9122
    The Moorhead Team5140 Reviews
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  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    7y

    @Damian DelSignore everything I've bought is MLS

    [email protected]512-888-9122
    The Moorhead Team5140 Reviews
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    0Reply
  • Frank Geiger
    Rental Property Investor · NC · Member since 2018 · 776 posts · 776 votes
    7y

    @Damian DelSignore I've had both great and terrible days investing out of state. It really comes down to your team. It took me a while to build mine. Be prepared to be extremely flexible. You have to rely on someone else for everyone which can be a good and bad thing.

    House hacking and breaking even isn't a terrible choice. You are eliminating one of the biggest expenses, a mortgage. Your portion of the rent would just be regular maintenance. But you would still get the loan pay down. You can choose to sell in a few years too. Just build it into your numbers!

    0Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    7y

    If you lived in a shiat hole area I would say invest in a better area is ok if you like. Since you live in an above average area IMO, perhaps it will make much more sense to invest locally. Whatever you do, DO NOT be easily influenced into thinking investing out of your superior area is going to be better long run than investing into any lessor areas!

    1Reply
  • Kyle Wells
    Realtor · Lake Stevens, WA · Member since 2018 · 122 posts · 91 votes
    7y
    Originally posted by @Damian DelSignore:

    Hi Everyone,

    I’ve been a long time listener of the podcast and have been saving up money to begin my real estate investing career. I currently am 25 with about $50k in cash saved up.

    I live in Austin, TX, where tons of companies and people are constantly moving to. Originally, I planned on buying a small multifamily here to househack, but then realized that it’s very difficult to find a multifamily that will cash flow (even if I rented the whole thing out).

    I’ve also started reading David Greene’s book on out of state investing (among other investing books) and it seems like BRRRRing out of state could be a good option as well.

    So my question is, should I focus on saving money to 1) buy a primary residence in Austin, where companies/ people are constantly moving to (since prices are expected to keep increasing), or 2) should I use my money more efficiently and BRRRR out of state?

    My long term goal is to be a buy and hold investor, while still working my full time job.

    I appreciate your responses and thanks for reading this lengthy post.

    Thanks,

    Damian

    My biggest regret is not house hacking on my first home purchase. I would recommend househacking for your first investment property as it'll allow you to be more hands on for your first learning experience. You'll be able to avoid paying 10-12% for PM (although you should build this into your analysis for when you move out), while you would be relying on a team if you decide to invest from a distance. Trust me, NO ONE will manage your properties or analyze deals/market rent like you will. 

    1Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    7y

    @Matt R. Love your response. So many people think lower cost areas are better. THEY ARE LOWER COST FOR A REASON!!! If you can make it work in a more desirable area you’ll be much better off long term. People keep buying these $30,000 shacks in the worst areas or the country because they look good on paper. I’d rather keep buying in decent cities that have some sort of upside for $200,000+

    [email protected]512-888-9122
    The Moorhead Team5140 Reviews
    WebsiteView Page
    1Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    7y

    @Frank Geiger househacking is always the best way to start. Maybe you invest out of state later on down the line after you have some experience but breaking even while househacking is amazing if you learn enough to make your later investing profitable!

    [email protected]512-888-9122
    The Moorhead Team5140 Reviews
    WebsiteView Page
    1Reply
  • Frank Geiger
    Rental Property Investor · NC · Member since 2018 · 776 posts · 776 votes
    7y

    @Jordan Moorhead couldn't agree more. I believe you still need expectation management and an exit strategy If you don't plan on holding for 30 years. Need to run the numbers with it owner occupied and non owner occupied.

    1Reply
  • Jason Hirko
    Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    @Damian DelSignore Why would you BRRRR out of state when you can invest in an excellent rental market 70 miles south?

    2Reply
  • Damian DelSignore
    OP
    Rental Property Investor · Austin, TX · Member since 2017 · 5 posts · 0 votes
    7y

    @Jordan Moorhead

    Wow, glad to see you were able to make an MLS deal work, and the fact that you took 9 months helps me feel better since I haven't seen an amazing property in the few I've been looking.

    @Frank Geiger

    @Matt R.

    @Kyle Wells

    Thank you all for the responses here. Based on what you’re all saying, I’ll turn my focus to house hack here in Austin, with the understanding that it’ll take a long time to find a deal that works. But still planning on renting it out full time after a number of years.

    After that, I’ll figure out where to invest.

    One step at a time, right?

    @Jason Hirko

    I slightly misspoke. I said “out-of-state” but really, I was talking outside of Austin. I agree that there are great investing markets in Texas.

    0Reply
  • Scott Sutherland
    Real Estate Broker · Austin, TX · Member since 2013 · 87 posts · 73 votes
    7y

    You should be able to find a duplex near the domain for $400kish and short term rent the other side. We're getting roughly $40k per side in gross rents for 2 bedroom STRs and $45k per side for 3 bedroom STRs in similar Austin neighborhoods. Most of ours are duplexes as well. You need to account for utilities, cleaning and furnishings but it still should be more profitable than a traditional 12 month (long term) lease. We've also had good luck with mid-term (30 day+) rentals from corporate renters, snowbirds, etc. 

    0Reply
  • Kyle Wells
    Realtor · Lake Stevens, WA · Member since 2018 · 122 posts · 91 votes
    7y
    Originally posted by @Damian DelSignore:

    @Jordan Moorhead

    Wow, glad to see you were able to make an MLS deal work, and the fact that you took 9 months helps me feel better since I haven't seen an amazing property in the few I've been looking.

    @Frank Geiger

    @Matt R.

    @Kyle Wells

    Thank you all for the responses here. Based on what you’re all saying, I’ll turn my focus to house hack here in Austin, with the understanding that it’ll take a long time to find a deal that works. But still planning on renting it out full time after a number of years.

    After that, I’ll figure out where to invest.

    One step at a time, right?

    @Jason Hirko

    I slightly misspoke. I said “out-of-state” but really, I was talking outside of Austin. I agree that there are great investing markets in Texas.

    Patience is the hardest part of property investing, but it's important to remember that no deal is better than a bad deal. Sometimes you just have to walk away. Just make sure the numbers work when you decide to pull the trigger. It can be easy to be too optimistic in your projections when trying to make that first deal. It took me 3-4 months in Kansas City to find my first deal that had the right combination of location and cash flow. You'll find it, just continue to be proactive and make sure you have an agent that understands your goals. 

    2Reply
  • Henry Ho
    Member since 2019 · 3 posts · 1 vote
    7y

    buy the worst house in a good neighborhood.

    0Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    7y

    @Damian DelSignore just be patient and analyze deals every day!

    [email protected]512-888-9122
    The Moorhead Team5140 Reviews
    WebsiteView Page
    0Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    7y

    Well I can't speak for BRRRR as I don't do that method myself, but generally speaking I'm always in favor of going the investment route versus the primary house route. Here's why-

    https://www.biggerpockets.com/blog/2014/01/18/buy-...

    Hope that helps.

    At the end of the day, just run the numbers on each scenario. That will tell you something.

    0Reply
  • Scott Fehrenkamp
    Austin, TX · Member since 2018 · 62 posts · 26 votes
    7y

    Hi Damain,

    Agree with everyone saying to work on buying a primary residence first.  If youre in it for the long term, I think you're going to to want to own property here in Austin, however you can get it!

    I was in the same boat as you last year (purchased in December), and would just say to remember that house hacking has two sides to it: the numbers should work, but you also have to live there!  You have to factor in that lifestyle component.  Maybe you find a property that works on paper, but your commute would be horrible, or your fiancee doesn't like the neighborhood.

    And house hacking doesn't have to be 2-4 unit; perhaps look for a fixer upper SFH and put in some sweat equity, or one where you can potentially add on more sq ft or an ADU.

    Cheers

    1Reply
  • Jim Robertson
    Investor · Austin, TX · Member since 2014 · 102 posts · 41 votes
    7y

    @Damian DelSignore Have you thought about a live in flip? Occupying a property as a flip would mean no tax for the first $250k of gains (if you live in the property for 2 years). Repeat every two years

    0Reply
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