Owner Occupied vs. Out of State for First Deal

7 Replies

Hi all! Happy New Year!

I am fairly new to BP and have been researching and saving in anticipation of buying my first property this year. I currently live in Raleigh, North Carolina / The Triangle Area and consider my market decently expensive with lower returns than I could perhaps obtain elsewhere.

Does anyone have any thoughts/comments with regard to purchasing a property in the Triangle that is owner-occupied (myself) and renting out part of it and eventually converting it into a full rental that I no longer live in OR investing out of state with the potential for higher returns?

If the property is occupied by me I can have a very low down payment and a great rate. If I buy out of state I know I'd have to put down more money but it might be a better investment in the long-run. I've been looking at properties in the Triangle for several months now and cannot make the numbers work from an investment perspective. 

Any thoughts or advice would be appreciated. Thanks all. 

If I had the opportunity to house hack locally I would do that. I say this from the perspective of recently buying our 3rd place and turning our last house into a rental that is now only 15 minutes down the road. This allows me to be able to check on it and deal with any issues that may arise face to face. I now have two rentals that are in the local area and for starting out I am glad I went this route as I was able to learn on a local level how to deal with being a landlord. 

In your case depending on how big of a house you buy and many roommates you can handle you have the potential to live for free, minus utilities of course. Then when you hit your year mark you will be able to move from that house into another one and providing you aren't sick of having roommates you can do it again. All the while socking what would be your mortgage payment away and having the cash on hand for additional down payments, and or any repairs that might come up. If you want to take a step further you could even go the multifamily route and grow even faster. 

So long story short if you did this and kept it local you might have an easier go of it to start out with. 

I am barely thinking of branching out now into other markets as multi families here are just too expensive right now. I am only doing this though because I travel a lot with my job and I have the ability to get out and check out other markets first hand.

Good luck! Happy New Year.

@Hannah Smith have you considered buying locally through a wholesaler? If you’re just looking at the MLS I imagine it would be difficult to make that work in this hot market.

If that doesn’t work, I’d recommend looking out of state. That’s the route I’ve gone so far and It’s worked well so far, but it is more capital intensive.

Feel free to PM me if you have other questions.

@Hannah Smith We are in a very similar situation, living in Raleigh and all. It would be helpful to see how you are running the numbers and also what your goals are, long and short. It sounds like you are worried about the down payment costs, who isn't now? Have you considered a live in flip? Same appeal as owner-occupied in regards to your down payment needs but not specific to rentals, unless you find a multi-family; which is also a possibility.

House hacking is awesome if you can find something that works.  I started in college with a 4 bed/4 bath unit which worked out great.  Lived there for a few years, converted it to a full rental, rinse and repeat.  Of course not everyone has the willingness to live in student housing.  I was in grad school and then working (and still in my young 20s) so as long as I had a place to sleep and take showers I was pretty much set.  It's a lot tougher when you're in a serious relationship or have a family, so do it while you can.

@Hannah Smith

It's a numbers game.  If your money goes a lot further out of state and the numbers look good, it might be a better idea HOWEVER having a good team in place along with a good business model are crucial to investing out of state.  I have been investing out of state for a decade now and without proper checks and balances, I wouldn't be in business today.