Best Strategies for a High-Value Market (NY, LA, SF, Seattle, etc...)

[Cameron Daste]

Curious to hear folks' thoughts on the recommended approaches for markets where home values are on the higher end. Trying to get started in the real estate investing space, and I live in Seattle where home prices are quite high (at least, in my opinion). I've heard flipping might be a good place to start, but would love to hear about people's opinions and experiences in these types of markets. What tends to work, watchouts, etc...

Thanks in advance!

[Michael Haas]

@Cameron Daste flipping is highly competitive, as a newbie your about as likely to lose money as make money. Have you considered HouseHacking? Some simple Math:

Lets say you do a Seattle 4plex HouseHack w/ 5% down conventional (a new loan option for multifamily that's better than 3.5% down FHA, just DM me if you want the full rundown on why).

That $70,000 could purchase you a property up to $1,400,000... and to get a 100% ROI on your investment all you need is 5% appreciation on the property. The average appreciation rate in Seattle over the last 40 years has been 5.5%. Cashflow / rents will provide additional ROI but in our experience over a long hold time appreciation will always contribute more to your total ROI than cashflow. Interest rates will also be .25% - 1% lower on an owner occupied property than on a rental property.

Contrast that with buying out of state / non owner occupied properties. That $70,000 now has to go into a 20 - 25% down mortgage, allowing you to purchase a property for $280,000 - $350,000. Now, to see 100% ROI the property would have to appreciate 20 - 25% in value. Cashflow / rents will provide additional ROI but not enough to overshadow the more favorable loan terms and higher value of the househacked property.

This is an oversimplification but I'm sure you get the point! Happy to talk about the strategy more - we're up to over 20 rentals owned in WA now and wouldn't have been able to scale to that level quickly without househacking.