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Sean Brennan
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Seeking Advice - Unmarried Couple Building Real Estate Portfolio

Sean Brennan
Posted Aug 12 2022, 21:18

Hi BiggerPockets community, my fiance and I are first time home buyers, and ultimately looking for advice on which of the following options below will help us scale our real estate wealth quicker. We are currently renting, but have both been pre-approved separately in the Bay Area for conventional loans, but we are unsure if we should both buy in the Bay Area. I also have an interest in investing out of state, but if I invest out of state, I would miss out on putting a low down payment as a first time home buyer.

In summary, here are the options we are considering - 

1) Buy two primary residence (duplex or single family with adu) in the next 1-2 years in the Bay Area at lowest down payment possible (3-10%). Convert into rental properties 2-3 years.

2) Buy one primary residence in the Bay Area and one rental property out of state in the next 6 months. Convert Bay Area property into rental property in 1-2 years.

Following conversion of the primary(s) into rental property, we would love to establish our forever home in California. Between then and now, we would love to make more investments to continue building wealth.

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David M.
  • Morris County, NJ
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David M.
  • Morris County, NJ
Replied Aug 12 2022, 21:38

@Sean Brennan

Definitely depends on your strategy..  Are you okay with long distance investing and using and finding a property manager?

I know there is "surge" in going for income in real estate investing, but remember the "old school" strategy for single families has been to go for appreciation if not just the equity build up.  The Bay area historically appreciates to my understanding and your price points are pretty high.  So, with the "power of leverage" you'll have a pretty valuable property in 30 years free and clear.  You can't always say that when buying out of state.

Not sure about your financial situations, but option #1 is preferable to maxing out your leverage and preserving cash.

If you'd think it'd help to chat, send me a message and I'd be happy.  Good luck.

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Replied Aug 15 2022, 08:51

@Sean Brennan

I'm from the Bay Area and it's hard to get a rental property to pencil if purchased on market with conventional financing. 

Since you're new to this, I'd recommend keeping things as simple as possible, and option #1 definitely has fewer moving parts. If you start with house hacking and then also rent out you unit when you move, you'll have your rent partly subsidized for now and get hands on experience with property management in the easiest way possible. Bay area properties are unlikely to be cash flow breakeven due to high prices, so you'll probably still be paying rent and bills, possibly even when both units are rented. The only bay area people I know who are able to cash flow have very low LTVs and very low long-term interest rates, and they've primarily made money through cash-out refis due loan paydown and appreciation. However, that's a very long-term play and your horizons seem relatively short. I also know a few people who pursued a version of option #2, but rather than out of state, they found properties in sacramento that would cash flow.  

When you're running the numbers, just make sure to properly account for the new property taxes after closing. Some people new to CA that don't understand how prop 13 works and get a nasty surprise when their first property tax bill showed up after closing.  

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Drew Sygit#2 Managing Your Property Contributor
  • Property Manager
  • Royal Oak, MI
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Drew Sygit#2 Managing Your Property Contributor
  • Property Manager
  • Royal Oak, MI
Replied Aug 16 2022, 08:02

@Sean Brennan

When partnering with anyone, but especially family & friends, you want everything in writing. Otherwise, you may not be welcome at family events!

Too many investors want to partner with “handshake agreements”, which they would never do with a tenant or property management company.

Things to think about:

1) What happens if one of you is suddenly incapacitated or dies? Do the surviving partners get that investors shares or do they have to deal with relatives that may be ignorant and/or greedy?

2) What happens if one of the partners wants to terminate the business relationship and wants their investment out now?

3) What happens if one of you drinks & drives, killing someone and getting sued by the victim's family? How would the other partner(s) be protected from that?

So, why wouldn't you want to hire an attorney to create a partnership agreement and perhaps an LLC to cover as much of the above as possible?

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Steven Foster Wilson
  • Rental Property Investor
  • Columbus, OH
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Steven Foster Wilson
  • Rental Property Investor
  • Columbus, OH
Replied Aug 16 2022, 08:06
Quote from @Sean Brennan:

Hi BiggerPockets community, my fiance and I are first time home buyers, and ultimately looking for advice on which of the following options below will help us scale our real estate wealth quicker. We are currently renting, but have both been pre-approved separately in the Bay Area for conventional loans, but we are unsure if we should both buy in the Bay Area. I also have an interest in investing out of state, but if I invest out of state, I would miss out on putting a low down payment as a first time home buyer.

In summary, here are the options we are considering - 

1) Buy two primary residence (duplex or single family with adu) in the next 1-2 years in the Bay Area at lowest down payment possible (3-10%). Convert into rental properties 2-3 years.

2) Buy one primary residence in the Bay Area and one rental property out of state in the next 6 months. Convert Bay Area property into rental property in 1-2 years.

Following conversion of the primary(s) into rental property, we would love to establish our forever home in California. Between then and now, we would love to make more investments to continue building wealth.


 I think you need to do more research and run more numbers. Take a few properties that would be potential properties and run the numbers in the Bay area. How much would you make? Then do the same for OOS. You would need to identify which market you want to invest in though. 

I recommend you read this article on OOS investing. This explains who you need on your bus! You will need to get a local, Realtor, contractor, lender, and property manager. All the pieces to making a successful business.

https://www.biggerpockets.com/...

I invest locally in Columbus, Ohio

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Aj Parikh
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  • Rental Property Investor
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Aj Parikh
Pro Member
  • Rental Property Investor
  • Centreville, VA
Replied Aug 17 2022, 08:16

If you are trying to invest out of state, let me know if you want to connect and chat about Cleveland market. I am based out of Northern Virginia but due to the rising home prices, I chose to go out of state and have found a lot of value in Cleveland with cash flow, available inventory and more opportunity for small multi family. Good luck on the investing journey!! 

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James Wise#3 All Forums Contributor
  • Real Estate Broker
  • Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH
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James Wise#3 All Forums Contributor
  • Real Estate Broker
  • Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH
Replied Aug 17 2022, 10:42
Quote from @Aj Parikh:

If you are trying to invest out of state, let me know if you want to connect and chat about Cleveland market. I am based out of Northern Virginia but due to the rising home prices, I chose to go out of state and have found a lot of value in Cleveland with cash flow, available inventory and more opportunity for small multi family. Good luck on the investing journey!! 


 Did someone say Cleveland?

Cleveland is dope yo. Just make sure you do your due diligence before buying something. It can be a very difficult market to understand.

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Irish A.
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  • Realtor
  • San Jose Bay Area Central Valley, CA
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Irish A.
Pro Member
  • Realtor
  • San Jose Bay Area Central Valley, CA
Replied Aug 18 2022, 15:16

Hey Sean!

Another thing to think about is the level of involvement you want to have when it comes to operating the rentals. For example, I know a couple in Bay Area who's house hacking a duplex and renting the other unit out through AirBnb. The other unit covered all their mortgage so they were able to save a lot of money and get another duplex a year later. More start up time initially, but their systems are now automated so not as much time operating it.

I personally bought out of state, but my velocity of money would have been quicker had I purchased in bay area at the time I bought last year and leveraged the greater increase in appreciation to buy another property. Hope that helps!

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