Out of State Rental vs House Hack in San Diego

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Out of State Rental vs House Hack in San Diego

Christian Ortega
Member since 2019 · 4 posts · 2 votes

Insight on situation: house hack vs OOS rental

Hello, my name is Chris Ortega and I’m seeking a bit of insight on my situation as what would you do in my shoes. I’m currently stuck between investing in OOS rental or house hacking here in San Diego for my first investment property. My end goal is to reach financial freedom through rental properties (10k net a month in passive income for the time being). I appreciate all feedback and wish everyone the best of luck. Also if anyone in the area fancies talking RE and so forth I’m more than down !

Background info:

I currently make around 50k

I have 20k for a downpayment (and still constantly saving)

I currently am living with family so my expenses are around 1k a month

I have no debt, single, with no obligations

Credit score of 770

Currently in college studying to become an RN, two and half years left to finish (only purpose is to obtain a stable higher salary to use for RE investing, this is not my passion nor something I wish to do for a long time)

RE experience:

Currently managing a duplex and a SFH

Have partaken in three rehabs

So being hands on is not something I’m scared of

My personal thoughts:

I know the cash flow investing OOS rentals would be better, I've specifically been looking at Huntsville, Alabama, certain parts of Ohio and so forth, compared to house hacking here in San Diego. However with that said, I would be able to use an FHA and obtain a property here in San Diego of higher value rather than investing OOS, and would be able to house hack a year another after my first one and so forth. The thing is I would be breaking even at best due to how hot San Diego market is at the moment. I'm somewhat wary of an upcoming rescission but not too much since my plan is to buy and hold. I do plan on taking out HELOCs in the future/building up more capital in order to start BRRRR and snowball from there.

So my question is what would you do in my shoes ?

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Craig CurelopBusiness Member
Real Estate Agent · Post Falls, ID · Member since 2016 · 1k+ posts · 1k+ votes
6y

@Christian Ortega - Maybe I am biased, but I would start house hacking. Here is why. 

1. If you are break-even BUT living for free, you are actually saving likely $1,000+ a month because you have removed rent from your monthly expenses. 

2. You are building equity in a property that has high odds of appreciating a lot and quickly. Even if it dips in the first couple years, do you really think San Diego will be down significantly over the next 10? 

3. With House Hacking you are gaining the confidence and experience of buying a property, owning a property, and managing it while you're right there. Also, I suspect you'll be doing a whole lot of networking once you get serious about buying. These relationships you make over your next 2.5 years while house hacking will help you BRRRR.

4. BRRRRing involves a lot of skill, relationship building, and trust. There are contractors, agents, and other folks out there who FEAST off of out of state investors who are in over their heads trying to BRRRR. Trust me, I've been one of them.

5. You need a lot of capital to BRRRR. To the likes of $80k to $100k?

I hope this helps! 

[email protected]Podcast Guest on Show #350
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  • Jason Graves
    Rental Property Investor · San Diego, CA · Member since 2018 · 242 posts · 234 votes
    6y

    @Christian Ortega

    1 Pay off you car and credit cards and continue to save...

    2 At this time in the real estate market, I would look out of state. I have partner @Daniel Perez who buying houses in Indi for oppox $60 and doing very well.

    Pm me and I can introduce you to Dan

    0Reply
  • Alex Sabio
    Investor · Fontana, CA · Member since 2017 · 95 posts · 59 votes
    6y

    Hey @Christian Ortega! I have investment homes in Huntsville and Ohio, DM me and we can talk. I also live in Southern California (Inland Empire) and I primarily invest out of state.

    Having said that, everyone needS a place to stay, so I would House-hack. Homes in the Midwest don’t really appreciate like they do here in SoCal so you can probably wait a couple years, homes won’t be that much more expensive. 

    1Reply
  • Craig CurelopBusiness Member
    Real Estate Agent · Post Falls, ID · Member since 2016 · 1k+ posts · 1k+ votes
    6y

    @Christian Ortega - Maybe I am biased, but I would start house hacking. Here is why. 

    1. If you are break-even BUT living for free, you are actually saving likely $1,000+ a month because you have removed rent from your monthly expenses. 

    2. You are building equity in a property that has high odds of appreciating a lot and quickly. Even if it dips in the first couple years, do you really think San Diego will be down significantly over the next 10? 

    3. With House Hacking you are gaining the confidence and experience of buying a property, owning a property, and managing it while you're right there. Also, I suspect you'll be doing a whole lot of networking once you get serious about buying. These relationships you make over your next 2.5 years while house hacking will help you BRRRR.

    4. BRRRRing involves a lot of skill, relationship building, and trust. There are contractors, agents, and other folks out there who FEAST off of out of state investors who are in over their heads trying to BRRRR. Trust me, I've been one of them.

    5. You need a lot of capital to BRRRR. To the likes of $80k to $100k?

    I hope this helps! 

    [email protected]Podcast Guest on Show #350
    7Reply
  • Brandon Carlson
    Real Estate Consultant · Glendora, CA · Member since 2019 · 314 posts · 95 votes
    6y

    @Christian Ortega

    House hacking in San Diego would be the best choice. You know the area, appreciation works in your favor, and you will gain experience in being a landlord.

    I’ve been house hacking for 3 years. I bought a house in LA county and have earned 75k in appreciation and I rent a room out for $850 a month. My mortgage is less than what a one 1 bedroom apartment in my rents for.

    Good luck on your endeavors

    2Reply
  • Michael JeronPro Member
    Wholesaler · Van Nuys, CA · Member since 2017 · 3 posts · 3 votes
    6y

    Totally agree with most everyone above. I live in San Diego area and have invested in out of state areas. It does well for cashflow, but since you have no strings, house hacking in San Diego would be a great start. Find a fixer upper with a lot of rooms and rent out to students, military, or AirBnB. You can live for free and possibly even make a few bucks each month. I am currently helping a vet do just that. PM me if you want to meet up and talk Real Estate.

    Mike

    2Reply
  • Brian Garlington
    Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
    6y

    @christian ortega If you only have 20K and you live in San Diego, you are not buying a place in San Diego.....unless you are using the VA Loan. You CAN definitely buy something in Ohio with that 20K.

    0Reply
  • Account Closed
    Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
    6y

    Three times in rehab? Please first get your life together and get off the drugs, then lets talk real estate

    2Reply
  • Lee RipmaPro Member
    Rental Property Investor · Prairie Village, KS · Member since 2015 · 2k+ posts · 2k+ votes
    6y

    @Christian Ortega

    I was in your shoes about 3 years ago but with a much higher salary. Try getting preapproved in SD and see what your purchasing power will buy you, it's going to be low. So unless you're talking about living way out in SD county I'm not sure you'll be able to buy much. Take a look at what you can get though. I went out of state and got a lot of units doing out of state BRRRR in Kansas City. I soon realized that the dream of having 10k/mo cash flow can wait. When you're young I think growing your networth through equity is more important. It's easy to make active income to pay the bills while investing on the side. So I nowvfocus on growing my networth and my equity. I do have cash flow but I don't care about it, I'm more focused on getting equity.

    Since you’re young you could maybe go be an RN elsewhere in the country where prices are lower and house hack there while you learn more about RE. You could be house hacking and building up rentals and flipping on the side while working.

    Podcast Guest on Show #373
    0Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    6y

    @Christian Ortega I would try to house hack if I were you. Your debt structure is so much better. I have talked to out-of-state clients about this and some say house hacking is impossible where they live. I am not too familiar with CA's real estate market as I am based in Columbus, Ohio. I am fortunate to be able to pay $15,000 to house hack and cash flow like crazy. I plan on being filthy rich in about 10 years.

    [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
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    0Reply
  • Kenneth Donaghy
    Real Estate Broker · San Diego, CA · Member since 2016 · 355 posts · 195 votes
    6y

    @Christian Ortega, welcome to the forums. I am usually one to promote househacking in SD, I am helping people with a wide range of expectations of how to do so in SD. Being a RN will be a good way to find like minded tenants/roommates. I know a few RNs that seem to always have a good rotation of other nurses for roommates. 

    My concern is your current budget, based on where in SD you feel comfortable living, compared to how far of a  commute you want/need for work and school. 

    If you haven't done so yet, the next step is to speak with a lender and get pre-approved. I have a few I work with I can refer. Then once we know what you are qualified to buy, I can then show you properties in the area within that range. This will help better set realistic expectations of your house hacking abilities. 

    1Reply
  • Kyle Smith
    Rental Property Investor · San Diego · Member since 2019 · 109 posts · 87 votes
    6y

    Hi @Christian Ortega and welcome to BP. What stands out about your post so far is how divided the responses are. Some favor the house hack, others the OOS investing approach. I've done both and understand the merits of each strategy. 

    Either choice would work for you. Continue to live at home while finishing nursing school and invest OOS. Or find a place here in town and find some roommates for the house hack. I'm sure there are some other nursing students who need a place to stay? 

    The point of all of it is that there's no one-size-fits-all approach to REI. Everyone's goals, ambitions, risk tolerance etc etc are different. Pick one of the routes, dive-in to learn as much as you can and then just go for it. REI is pretty forgiving in the long term if you've done your due diligence up front.

    1Reply
  • Justin R.
    Developer · San Diego, CA · Member since 2015 · 1k+ posts · 1k+ votes
    6y

    @Christian Ortega First, ask yourself where you have an advantage compared to all the other people out there. Do you have an advantage buying in Kansas City? Or do you have the advantage of an FHA loan qualification, family, familiarity, potential network, and your own eyes and hands in San Diego?

    Second, ask yourself what approach will teach you more so you have an even bigger advantage for your next step.

    The answer to me is pretty obvious.  In either case, just be sure you're not buying just anything - pick a smart property.

    To put my money where my mouth is, here's an offer: I'm just about done subdividing some urban land here locally.  As part of that, I'll have an empty perfectly flat lot in a perfectly urban area about 4 blocks from I-5 for which I have no plans at the moment.  Three units could be built there.  If you agree to buy it, I'll build those three units on it (or whatever you spec) for you and sell to you - you get a house hack optimized for cash flow AND appreciation.  The catch is you've gotta do the grunt work for the project (picking and delivering material, checking on the site, running documents to the City, etc) so I can focus on other projects.  

    You get the tri(quad?)fecta: 

    • Experience in building and managing
    • A high quality new construction coastal asset
    • Leverage your FHA loan advantage
    • Cash flow.

    I get to focus on other projects, still get my profit, and a buyer set before building. DM me if interested.

    1Reply
  • David Featherstone
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 23 posts · 9 votes
    6y

    @Justin R. You would happen to be developing in LA county would you! ;)

    0Reply
  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    6y

    @Christian Ortega

    Kansas City or any Midwest market is ideal. I specialize in helping OOS. Happy to chat :)

    1Reply
  • Nicholas GlatterPro Member
    Investor · Tampa FL, USA · Member since 2019 · 72 posts · 20 votes
    6y

    Hi Christian, welcome to the forum! I'm currently search for the ideal house hack in SD and have considered purchasing OOS. My main focus is here in the state of CA seeing as I'm military and the VA loan requires me to live on the property for a year. That being said, if you do go HH route, the traditional 1% test and some of the other rules you learn through BiggerPockets, don't apply so much in this market which can make it challenging.

    As a new investor myself, I'm trying to narrow my focus and work on one strategy at a time. OOS investing seems to require more moving parts and more room for error. I'd suggest going with what you know the most about and what works for your budget. It all comes down to your decision on what you want and are comfortable/knowledgeable about.

    0Reply
  • Robert Comstock
    Member since 2018 · 138 posts · 56 votes
    6y

    focus on finish nursing school and save your money.  don't side-track yourself ...the last 2 years of nursing school will be all consuming.  worry about the real estate after your done and are established earning 6 figures.  you may have to relocate after finishing for your first job.

    0Reply
  • David Pere
    Rental Property Investor · Springfield, MO · Member since 2016 · 1k+ posts · 890 votes
    6y
    I'm house hacking in Oceanside by renting out one (about to be two) of the bedrooms in my single family home. I think house hacking is great for many reasons, but especially the fact that it will cut your living expenses drastically, and you'll be able to save money faster for the next investment.
    0Reply
  • Christian Ortega
    OP
    Member since 2019 · 4 posts · 2 votes
    6y

    @Craig Curelop I truly appreciate your insight, I've actually heard your story on the BP podcast! I'm also awaiting my copy of your book to come in haha! It does suck that you were taken advantage of in your pursuit of BRRRRing. however thank you for sharing your experiences for the rest of us to learn from. I do agree with the points you made, even if the RE market here in SD takes a dip, it'll still appreciate in the long run which then I could tap into the equity later on.   

    0Reply
  • Christian Ortega
    OP
    Member since 2019 · 4 posts · 2 votes
    6y

    @Account Closed you misread, I've done 3 semi-gut rehabs of houses, not been in actual rehab, I don't partake in drug use. For someone my age I feel I am headed in the right direction with my life.

    1Reply
  • Bill Goodland
    Rental Property Investor · Allentown PA, United States · Member since 2016 · 567 posts · 442 votes
    6y
    Originally posted by @Christian Ortega:

    Insight on situation: house hack vs OOS rental

    Hello, my name is Chris Ortega and I’m seeking a bit of insight on my situation as what would you do in my shoes. I’m currently stuck between investing in OOS rental or house hacking here in San Diego for my first investment property. My end goal is to reach financial freedom through rental properties (10k net a month in passive income for the time being). I appreciate all feedback and wish everyone the best of luck. Also if anyone in the area fancies talking RE and so forth I’m more than down !

    Background info:

    I currently make around 50k

    I have 20k for a downpayment (and still constantly saving)

    I currently am living with family so my expenses are around 1k a month

    I have no debt, single, with no obligations

    Credit score of 770

    Currently in college studying to become an RN, two and half years left to finish (only purpose is to obtain a stable higher salary to use for RE investing, this is not my passion nor something I wish to do for a long time)

    RE experience:

    Currently managing a duplex and a SFH

    Have partaken in three rehabs

    So being hands on is not something I’m scared of

    My personal thoughts:

    I know the cash flow investing OOS rentals would be better, I've specifically been looking at Huntsville, Alabama, certain parts of Ohio and so forth, compared to house hacking here in San Diego. However with that said, I would be able to use an FHA and obtain a property here in San Diego of higher value rather than investing OOS, and would be able to house hack a year another after my first one and so forth. The thing is I would be breaking even at best due to how hot San Diego market is at the moment. I'm somewhat wary of an upcoming rescission but not too much since my plan is to buy and hold. I do plan on taking out HELOCs in the future/building up more capital in order to start BRRRR and snowball from there.

    So my question is what would you do in my shoes ?

    I would continue to save and make do with your low cost of living as is. Once you get a pay bump, I would then use that income to qualify for an FHA loan and househack a SFR in San Diego. While you may not find a small multi family to work, a SFR if you're willing to live with roommates works just about anywhere as @Craig Curelop talks about in his House Hacking Strategy book. OOS investing although definitely a good option, requires a team and systems that is tough to do with limited capital and experience. Plus, if you're young and need a place to live anyway, you're going to get the best ROI by reducing your living expenses and gaining equity and appreciation from a house in san diego compared to returns and risk of investing out of state.

    1Reply
  • Christian Ortega
    OP
    Member since 2019 · 4 posts · 2 votes
    6y

    @Brandon Carlson @Remington Lyman @Kyle Smith @Nicholas Glatter @David Pere @Lee Ripma

    I appreciate you guys taking the time out of your day to reply to my thread with your advice/insight. 

    I wish all of you the best in your future RE endeavors. 

    1Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    6y
    Originally posted by @Justin R.:

    @Christian Ortega First, ask yourself where you have an advantage compared to all the other people out there. Do you have an advantage buying in Kansas City? Or do you have the advantage of an FHA loan qualification, family, familiarity, potential network, and your own eyes and hands in San Diego?

    Second, ask yourself what approach will teach you more so you have an even bigger advantage for your next step.

    The answer to me is pretty obvious.  In either case, just be sure you're not buying just anything - pick a smart property.

    To put my money where my mouth is, here's an offer: I'm just about done subdividing some urban land here locally.  As part of that, I'll have an empty perfectly flat lot in a perfectly urban area about 4 blocks from I-5 for which I have no plans at the moment.  Three units could be built there.  If you agree to buy it, I'll build those three units on it (or whatever you spec) for you and sell to you - you get a house hack optimized for cash flow AND appreciation.  The catch is you've gotta do the grunt work for the project (picking and delivering material, checking on the site, running documents to the City, etc) so I can focus on other projects.  

    You get the tri(quad?)fecta: 

    • Experience in building and managing
    • A high quality new construction coastal asset
    • Leverage your FHA loan advantage
    • Cash flow.

    I get to focus on other projects, still get my profit, and a buyer set before building. DM me if interested.

    @Christian Ortega I cannot encourage you enough to take this offer. Justin is very active and you are sure to learn a lot. Not only is he very active but he has done a wide range of efforts (versus I stay with my try and true BRRRR). Offers like this are rare.

    Good luck 

    0Reply
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