Invest out of state or local?

Question

What would you do as a newbie with 40 grand to invest? Would you buy a primary residence in a hot socal appreciating market with an FHA (no house hack possible with this one) with the hopes of living there 2 years and using the equity built up to buy another place and airbnb/vrbo the property afterwards for cash flow ........................ or invest out of state in a lower barrier to entry market to hopefully find a good brrrr deal and scale more quickly? We would still be paying rent in Socal with scenario number 2, but I have a job where I could most likely save for a local FHA down payment of 30-40 after another year. Any advice? I greatly appreciate it!

Marlen Weber · Answer

Invest wherever you find a deal that works for you and when you're ready. I know these times are scary, but don't let a great opportunity slip. Good luck to you.

Kevin Dubina · Answer

Whats the rent/price ratio locally? That should tell you a lot. If you can't even collect .5 percent monthly rent of sales price I'd definetly look elsewhere. 0.75% is probably a good cutoff where it may be worthwile to buy to live in now as an investment strategy

The out of city/state move is often the best, but it requires more work by you. You really should visit these cities and network there.

Carolyn Albinder · Answer

Thank you all for the input!

Twana Rasoul · Answer

@Steven Albinder personally I think new investors should start locally with their own property, going out of state is not necessarily easier, it’s a little more complex. Locally you have advantage of knowing your market at least and being nearby.

Also, buying something retail now and hoping to build enough equity to play with won’t work unless you are doing a massive value add especially if using fha with 3.5% down. For instance for a cash out refinance right now most lenders won’t let you go beyond a 75% LTV and with fha you’ll be at 96.5% LTV.

Best of luck!

Carlos Villalobos · Answer

Have the end game in mind and invest where it makes sense for you and your personal situation not where it is convenient close and comfortable. Stretch your dollars as much as you can.

Scott Matthew C. · Answer

@Steven Albinder Become a rehab partner. Establish a trusting relationship with someone that has a proven track record of flipping. That is going to be the fastest way to build up your cash.

Don’t wait another year. You need that money working now.

Or

You could be a small private lender. Your return could be a percentage of the proceeds of a sale instead of charging interests, points, etc.

Best of luck!