Beginner’s Dilemma - To house hack or not to house hack?

[Marine Palamutyan]

Hello BP Community! So I’m super excited about getting our first rental property, but we have a dilemma and would love to get your thoughts on this. Should we house hack in LA without cash flow, but higher appreciation potential, or buy a rent only property elsewhere with cash flow but slow appreciation? Scenario 1: we purchase a 3-4 unit property with FHA 3.5% down payment, live in one and rent the others. However we would have zero cash flow and need to pay ~$4000/month out of pocket just for mortgage. Small multi-family properties in LA area are around $850k-$1.3mm in an area where I would feel safe to sleep at night and in a condition that would get FHA approved Scenario 2: we purchase a rental property in Fresno or out of state, with 25% down and aim for $100/month per unit cash flow. But this would wipe out all our capital AND we would still be paying $1700/month in rent for our current apartment (we are first time home buyers). So need to save up all over again before we could buy another investment property while we pay $1700/month towards paying off someone else’s investment property mortgage. :) Any recommendation for us newbies? Thanks in advance for your input! Marine

[Jeff Zimmerman]

Either are great, it really just depends on your long-term goals.  In 30 years Do you want to have a large portfolio in Fresno or a small portfolio in LA? either are great, it just depends how many properties you want and if you want to mitigate your risk across lots of properties or just a few.  yes, LA will have a higher appreciation, make sure to factor the appreciation rate against your loss of cash flow in LA vs your rent rate in LA and appreciation and cash flow in Fresno.  Whatever number you get in the end may help you decide.

Does that make sense?