What’s up BP Community of Friends! As always thank you In advance for the feedback, you have no idea! Okay where should I start? So I need your upmost honest opinions about my current dilemma. I was recently approved for a first time homebuyer program HFA of 300k with 3% down current location is Turlock California we are in a HOT Market and we are at its peak of very crazy home prices. I have $20,000 saved up. Oh and there’s more I have Family Out Of State and have talked to some investors and Agents who say it’s a boomin market of course I will definitely do my due diligence as far as verifying. But I am new to the investment game and have been reading tons of books and listening to podcasts trying to put the pieces together. If you were me would you pump the breaks and not purchase a property in a sizzling HOT Market With an HFA Loan?  Or would you invest Out Of State where the Numbers make more sense? If neither of these make sense to you give me your input on what does make sense in my current situation if you were in my shoes? 

Why would you buy a first time home out of state?  Are you planning on moving out of state?

Originally posted by @Sue K. :

Hi Sue! No do not plan on moving out of state,The question was either to take advantage of the low interest rates for a first time homebuyers program with the money I have saved in my current location or use the money to invest out of state?🙂

@Jonny Nila

For starters, are you talking about a FHA loan at 3.5% down? If so, this requires the property be owner-occupied for I believe the first 12 months. To not do so would be fraud.

Hmmm, I think you have more research and understanding to do on your financing options before truly deciding on your “move.”

Maybe what you are asking to how to determine your investment strategy, but I think you need to figure what strategy works for you first. Then, how, if possible, can you achieve it.

Good luck

@David M. thanks a lot for the response back! But actually to clarify more better David Im well aware of the FHA 1 year owner occupied having certain guidelines for 1st time homebuyers. The question was either to take advantage of the low interest rates on the HFA for a first time homebuyers program with the money I have saved in my current location or use the money to invest out of state? Thanks again David!

@Jonny Nila

Oh I didn’t think hfa was a first time buyers program..

Anyway, that’s entirely up to your investment strategy and if you think you can handle a long distance investment. You seem to be asking about “numbers.” While the numbers have to work, there is a lot more to it than just have working numbers.

What’s the point of saving day 0.5% points when the deal doesn’t work? Or chasing after a better market when you find you can’t manage the investment from long distance?

I won’t really say either way. It’s a matter of your personal preference.

@David M. Good point you made thanks again for responding!

@Jonny Nila you said it's a very HOT market, but "at its peak of very crazy home prices." If you truly think prices are at a peak, meaning they will start to decline, it may not be the best time/place to invest. More importantly than in-state, out-of-state, HOT market, cold market, etc is knowing what makes a property a good deal (avg. purchase price, avg. rents, class of tenants, rehab costs, etc). Even in a very hot market with prices at their peak, you can find great deals. Just make sure you do your research and run the numbers. Numbers don't lie (most of the time) and they will tell you if it's a good deal or not

@Jonny Nila without knowing your goals, any advice is pretty useless.

1. Don’t buy out of state. Bad idea. I’ve done it, it’s a bad idea. Invest in stock market. Better returns. I’ve made 100 percent on my money with mild due diligence on some stocks in 3 months. With zero effort, and it’s entirely liquid.

Long distance if you get 10 percent that’s considered good. Usually you’ll lose money.

2. Buy locally if you want to househack. The current state of the market is irrelevant. It’s been a hot market for years. Likely won’t be changing anytime soon.

The last recession was caused by real estate. This recession wasn’t, hence the effect on real estate will be minimal

@Jon Kelly thanks a lot for the response back and appreciate you feedback!

@Caleb Heimsoth Good point you made about the market being irrelevant. Appreciate the response to the post!

As far as the hot market, I think you'd be glad a few years down the road. I bought my first duplex at a great price as an FHA, lived in it for several years while it appreciated rapidly. Now I rent out both sides and am very happy with the cash flow and the equity. But tying up my hard saved cash as a young investor- it took quite a bit of time to be ready to make the next move.

So I'm saying think about what your next moves will be, and how you can put that 20K to work in a way that it starts coming back to you soon. 

On another note, when someone tells you something is a "bad idea, " take that with a grain of salt. You can find plenty of successful OOS investors here on BP. You look at the strategies available to you and decide what you can be successful at.

Best of luck to you. 

@Matt Stricklen  First off I appreciate the response back Matt and I will definitely take your advice and will sit down and think what can maximize my profits I’n my current situation. Great points you made!👍

@Jonny Nila

The primary home isn't an asset unless you make it an asset, house hack, live-in flip, etc. It ultimately depends on your bottom line, is Turlock and any house you buy going to be a long or short term buy? Would buying a primary free up more housing cash? Really depends on the numbers and your goals. If you buy a primary, look at it as an investment and get something under valued then you can always refi cash out and invest like a live in BRRRR

I have a nephew who got a USDA loan near Turlock - I think it was New Delhi? I don't see you getting a better deal than a first time home-buyer's loan.  And, there are a lot of benefits for staying in CA, which would include Prop 13 and appreciation, plus just being able to manage your investment yourself close to home.

Good luck to you.

@Jonny Nila Whatever you decide make sure the numbers make sense to you. If you choose to purchase a primary residence be purposeful with your actions and decisions. Check the value of homes over the last 20 years. See what kind of appreciation the potential home or similar homes have had in that neighborhood. Negotiation is key; I would try to negotiate to build equity into the deal (10-20% discount). As you take advantage of that FHA loan, you can refi out at a later time and get some/all/or more of you money out and you can use that for another deal. You can keep the house and rent it or, just sell it. You have options.

Investing out of state; you need systems and a team in place. If your spending your hard earned money, you want to make sure you understand who you are dealing with and what type of opportunity you are pursuing. Investing in a cheaper market can be a very profitable method if done correctly. 

At the end of the day, it all depends on your investment strategy. What are your short and long term goals. Don't just jump on a deal because you have the money. You jump on a deal if the number scream to you this is right. Trust your gut. 

Much Success to you...

Originally posted by @Kevin Wilson :

Great suggestions Kevin thank you for the responses sir! The plan if I went HFA 1st Time home would be to buy a duplex and house hack. I currently pay $1300 in rent

Originally posted by @Sue K. :

Yes Sue I have looked up the USDA loan but the thing with that loan is it would be outside of the city type of residence. But some great points you made thanks a lot for the response back to the forum!

Originally posted by @Jabbar Thomas :

Amen to that brother and appreciate the advice and response back to the forum, the thing about trying to get a discount  On property in my neighborhood is currently it is a sellers market when it comes to few inventory and more buyers purchasing homes less homes being put out due to the current COVID.I will definitely take this all into consideration Jabbar!

Sorry for the book, but I'm keeping a close eye on this thread.  I'm out in Oakdale and in the process of refinancing cash out of some Modesto properties.  I can't decide if we (my brother and I) want to buy more in the Central Valley or buy out of state.

My thoughts of being "pro" Central Valley:

-Prices have accelerated for a long time now.  I keep hearing how they're topping out (have literally been hearing this for years), but the Bay Area people keep coming over the hill and buying up the valley since it's so "cheap".  I keep hearing that Bay Area tech workers are getting green lighted to work from home permanently and will be making a bigger exodus out of the city (although I'm not sure they're dreaming of the Modesto area.  haha).  Still, I'd personally be surprised to see the prices crash unless it's a national thing - which I'm a little concerned about.

-I LOVE my property manager.  He's not cheap, but we've had zero problems and the rents are sky high.  He's super aggressive and everyone loves him.

My thoughts on being "anti" Central Valley:

-Rents don't pencil out that great.  You can still cashflow (especially 4plexes etc.), but it's definitely not like it used to be and the rates of return seem higher out of state.

-I'm still not completely sold on the economy.  I know I'm a Debbie Downer, but I'd rather stay on the sidelines for a few minutes in cash to see what transpires.  I'd rather miss out on 5-10% of appreciation over a few months instead of buying into a storm.

-My main "anti" bias is the state as a whole.  The laws seem completely anti-landlord from statewide rent control to the continuous extensions of the "no evictions" thing.  I'm not wealthy and can't keep my rentals if all of my tenants decide that they're not going to pay.  We haven't seen that (yet), but it's a real concern...

I love what @Jabbar Thomas  mentioned in terms of being intentional.  I'd tell you if you're going to buy in Turlock, don't go all out to buy the most you can (unless it's multiple doors).  Keep your payments within your ability to pay, let prices appreciate, save cash, refi and keep that first house as a leverageable asset that you can keep using. 

One of my co-workers about 20 years ago explained that they bought their first house for way less than they could afford to pay.  They lived there a few years and saved up a down payment for the next place.  Again, bought below their means, but a better house and just kept working their way up the ladder.  I haven't spoken to her in a while, but I think they've collected several rentals (that keep getting better) and with appreciating rents, etc. they keep moving up in the world!  haha.  It's always struck me as a good way to get rentals when in an expensive market.

Anyway, it's an exciting time in your life, so be sure to enjoy the ride!  Imo, it really is the journey and not the destination and I'd trade it all to be able to do it again (I'd have to be young again though - no deal on just starting over as of right now)  haha.

Good luck and please update this thread with your decision as I'm sure your logic will help influence my own.

Originally posted by @Chris John :

First off thanks a lot brother for the detailed response back! So yeah my plan was to buy a duplex or a 4 plex even though the 4 plex are so expensive right now. But I would be able to offset the mortgage payment with the rents Being payed. I work at Gallo Glass in Modesto and I am currently Throwing 1300 a month renting so I figured why not house hack and save up some more cash I’n the process. I know that the market is a little unrealistic as far as most home prices but I figured of the market tanks which no one can predict that I can still hold on to the property and the market will eventually come back up. I was thinking of investing out of state in Idaho I have family that have sold there homes here and moved out there and I have got in touch with agents through BP and chatted on the phone with an investor over the phone who are buying mobile homes for 18k - rehabbing and selling for up to 85k. There home prices are climbing but you can find a lot more bites than Turlock/Modesto for sure! I joined a Meetup qroup in Modesto with some good minded investors who have more experienced Out of State property’s cool to   hear and learn off them.But most definitely with my current situation most likely will house hack with the rates being so low now!😏

@Jonny Nila Hey Jonny I’m new also and invest in the Modesto area. I would house hack in Modesto you really need experience and a good network to move OOS. I’ve seen some decent multi family homes in the la Loma/ downtown area (1min commute ) that u could handle the payment if your renters stopped paying. Good luck

Originally posted by @Sterling Butts :

Great advice and thanks a lot for the input!👍

haha.  Small world.  My wife's oldest friend's brother is Mark F (don't know him well enough to put his name online).  I'm pretty sure he works at Gallo glass tho.  My classes (I'm a teacher) took a field trip to Gallo years ago and we toured the glass plant.  I could watch that machine go all day.  It's mesmerizing to watch those molten, orange blobs shoot down that thing!  haha

Yeah, I think you'll be happy with your decision if you decide to do that.  My only advice would be to shoot for the moon with your rent prices.  Honestly, if you're renting for $1300 in the valley, I'd almost tell you to stay there anyway as that's pretty modest compared to what some places are renting for nowadays (I get you can't with the fha loan, but darn).  I was super resistant to turn our management over, but when I saw what our manager was able to get in terms of rents, I've never looked back.

I have a buddy that is considering renting his house in Escalon.  He was thinking $1650 a month, but my guy told him to shoot for $2200-2500.  We were both stunned.

@Jonny Nila

As a beginner I think you should buy locally, near you, like no more than 30/40 min away from you. With that loan I think you can buy a building of up to 4 units, live in one and rent the others. I think investing out of state is good if your portfolio is big enough to have a good property management company manage it and still have a positive cash flow. But one or two units out of state I think it’s not worth the headache. On your first deal I also think you should manage it yourself, it would truly give you the felling and experience that one needs to beat that inner fear we sometimes have when it comes to real estate investment as a beginner, I manage about 98% of all work at our two rentals, that includes maintenance, repairs, tax related paper work and expense tracking. I use to not know how to repair certain things! Thanks to my rentals now I do! You can do the same if you wish to experience the good and bad of this wonderful hustle.