I am looking to make my first real estate investment and need guidance

[Jonathan Weilbacher]

Hi,

I am a LA resident, attorney, and first time investor. I have read various real estate books and found a few strategies that could work but not sure what to do.

1) The first option was doing an FHA or 5% conventional loan on a 3 unit Multifamily 3-3-2, in an out of state market, put 30K into the rehab, and rent the bottom two units and one of the rooms on the top to a traveling nurse. The cash on cash return is 22% and 38% after year one (I move out) renting to graduate students. I work remotely without a current primary residence, so this is an attractive option.

2) The other option was to save up cash for the BRRRR strategy and then start with single family homes in an area that makes sense. However, this would take some time to do.

3) Buy my own condo in LA, to have as a deduction to my high-income (single, no other deductions, 27/yrs old) and then save for one of the above strategies.

I am not sure what to do, so some advise from some seasoned investors would be greatly appreciated.

[Doug Spence]

@Jonathan Weilbacher Welcome to BP. I also live in a high cost of living area (San Diego) and I recommend two strategies to you:

House hacking, which has already been mentioned here. This is the first strategy you should employ, because it allows you to get the best mortgage terms available since its a primary residence. Ideally you would purchase either a 2-4 unit property, or a property with an ADU you can rent out. The key is to be able to rent out a portion of the home, even if its just a converted garage. My wife and I are currently house hacking in San Diego using her VA loan entitlement.

I'm also a fan of the out of state BRRRR. I've done two successful BRRRR's and two successful flips in Oklahoma - all while living in San Diego. Yes, its tougher now with rates where they are, but its still possible. If rates continue to rise, you'll be glad you bought when you did, and if they go down you can refinance. Generally speaking, I believe that property values will continue to increase in the short and long term.

Have you thought about your long term goals? Once you're clear on your goals and where you want to be in 5-10 years, the strategy will reveal itself. 

Good luck and don't hesitate to reach out if you need anything.