Investment in. Orange County

[Mayra B.]

Hello, we have $300,000 saved to play with. My husband and I don't know what to do. We live in Orange County, CA. We are currently renting a 2bd and need to move to a 3bd because of the new baby. Right now our rent is $2100 and the new rent will be $3,000. We would like to know what to do. We are debt free and never invested in real estate before. Here our options we have thought off. Option 1: should we buy a SFR with a big lot to build a granny flat or ADU Option 2: should we flipping homes here in CA or invest in a different state? Although my husband's business company is located in CA. Option 3: should we keep renting? Your advice would be well appreciated.

[Joe Homs]

@Mayra B. welcome to BP here in Orange County, California.  Sounds like you are way ahead of the game with that much money ready to invest.  I will make some assumptions here so I apologize.  

If you have that much saved up then I will assume that both of you combined are earning a hefty salary.  If so you know that "Uncle Sam" loves taxpayers like you.  Here are my thoughts.

1. You really need a tax write off. The best way to accomplish this is to own your own home. You can write off the interest and up to $10K in property taxes. This should lower your adjustable income so you pay less. I would encourage you to only put the minimum down you can tolerate and still be able to enjoy life. I would then use the remainder to invest in something else. I do like you idea about an ADU, but you need to be careful where you buy that you will not be overpaying at the end of the day.

2.  If you decide to flip properties, welcome to my world.  My average flip is around $500-$600K, yes we are in Orange County and its a teachable skill.  However, when I make a profit I do have to pay taxes, so if you are trying to reduce your taxable income this may not be what you want.

3.  STOP renting.  Although I love renters, since I have buy and holds, this is never going to get you anywhere.  

Good Investing...