STUCK! Seeking encouragement for which route to take.

7 Replies

I'm looking to start my RE investment journey. I've hoarded cash, am debt free with a credit score of 815. Ready to go. I currently rent. I've heard three schools of thought as to where to start. What is your opinion given that you live in SD, too?

1. Always invest in your principal first. Spend below your means, house hack, take out equity, buy smaller investments next.

2. Start with smaller in-state investments, rent them out, be your own landlord, allow the income from those to fund your principal purchase in San Diego.

3. Invest smaller, out of state, allow time for those to build to then fund your principal purchase in San Diego.

If I do option #2, secure a renter to cover mortgage, will that allow me to get approved for more to purchase next property or will it tie me up in the eyes of a lender, and then prohibit me from being able to buy principal in next 6-12 months?

@Amy A. Option #3 works the best for us. We currently rent as well. Focused on small, multifamily out of state to BRRRR and grow the portfolio to reach FIRE as quickly as possible. We are still considering a duplex in San Diego to house-hack but it has to be a phenomenal deal.

Everyone has their own path. It seems all the options you listed are focused on purchasing a primary residence.  If option #2 is the best fit for your goal, definitely look for a duplex.  There are currently a few grants available to cover the 3.5% down and then you are only responsible for closing costs.

@Amy A. I like the way your thinking, it's not that your are thinking either/or... It more about in which order. 

It could depend on your budget, time, and risk tolerance, and to answer I think it will depend DTI.

@Amy A.

Few variables here, but it will also depend on the quality of life you're looking for, what kind of neighborhood class, etc.. 

The house hacking option w/ little money down leveraging OPM (other peoples money) here in San Diego is a safe, yet powerful play. And you'll have more flexibility for other investments sooner down the road.

Speaking to the security of SD, I'll copy & paste a piece from another post of mine earlier today:

San Diego is one of the safest markets in the U.S. Especially right now. We've had on average 4.5% appreciation annually over the last 50 years. We're one of the fastest growing cities, We have one of the youngest populations of wealthy and educated people and our high paying Bio & Tech fields (new jobs/careers created) are set to explode over the next decade.

Not to mention better weather than other major markets priced higher than we are, w/ more potential. We're running out of places to build that's anywhere significant geographically in the metropolitan areas and we have an extremely low supply of inventory and high high demand. 

And to one of the options you mentioned, you have the ability to leverage yourself in a very favorable position w/ low money out of pocket and have a portion of mortgage paid by a tenant(s) while your home continues to appreciate. Not only that, value add's (especially ADUs) are a hot commodity here and it's easier to force appreciation than most places.

Hope this helps.  

@Amy A. To keep it short for you, I personally recommend purchasing your primary first before buying investment property. For primary, I’m a huge fan of house hacking, especially a duplex if you are using an fha loan. I would not recommend going OOS to start, although there are few individuals like @Jose Linares who have taken that route and killing it.

My opinions are based on the investments I have here locally, I also house hack a multifamily and have investments out of state.

Originally posted by @Amy A. :

I'm looking to start my RE investment journey. I've hoarded cash, am debt free with a credit score of 815. Ready to go. I currently rent. I've heard three schools of thought as to where to start. What is your opinion given that you live in SD, too?

1. Always invest in your principal first. Spend below your means, house hack, take out equity, buy smaller investments next.

2. Start with smaller in-state investments, rent them out, be your own landlord, allow the income from those to fund your principal purchase in San Diego.

3. Invest smaller, out of state, allow time for those to build to then fund your principal purchase in San Diego.

If I do option #2, secure a renter to cover mortgage, will that allow me to get approved for more to purchase next property or will it tie me up in the eyes of a lender, and then prohibit me from being able to buy principal in next 6-12 months?

When I work with someone I always start with:

"In order for me to figure out how to help you I need you to tell me a little bit about what your goals are.

Retirement? Put money to work? Cash flow? Diversification? Tax write offs?

Are you interested in single family, apartments, commercial, storage, lending, creative financing?

Will it replace your income or be a bit of a hobby?

Have you invested in real estate before or would this be something new?

What do you do during your day job? Will you manage the properties or would you want to have someone do that for you?"

Once you can answer most of those, you are ready and the rest is simply implementation. There are many ways to successfully invest in real estate but you need to know your goals first, in my humble opinion.

@Amy A. Buy a duplex or triplex as your primary. House hack. It's a safe wave to be sure you like being a landlord and the entry cost is low. Investing out of state is tough without a team to help and you'll be able to better vet that team with landlord experience under your belt.