Moving from California to Missouri for first property / rental property

[Kevin G.]

Hello Everyone,

I have some experience with real estate investing, mainly house flipping here in the Bay Area, CA. I currently have no rental properties but definitely want some. I work full-time in the Bay Area and earn a strong income (Range is $180k-$240k based on how much OT I work). I am a first responder with essentially endless overtime. I am married with 2 kids and about to have a third soon.

My sister lives in the KCMO area, specifically in Lees Summit. I am considering buying a starter home for my family (around $300k), living in it for a year, and then renting it out while buying a larger home for our family, like a 5-bedroom in the high $400k to low $500k range. I can comfortably afford both the starter home and the more expensive home with my income, given my DTI is basically zero. My plan is to utilize the 5% down payment available through conventional loans.

I would essentially mega-commute for the first year or two, working about 10-day stretches and then having equal time off, using my PTO strategically to gain more time off. I also get baby bonding through CA, which is paid family leave, and I plan to use this strategically to spend more time at home.

When I buy the starter home, based on my calculations, I'd be saving around $6-7k per month. Even with the larger home, I'd save around $4k, depending on how much overtime I work.

I am tired of paying high rent in the Bay Area, along with high utility bills. I feel that even if I work less, my money will go further and I can save more. This would only be a 1-2 year plan as I work on building other income streams to leave my first responder job.

I also want to acquire lots of SFH and small MFH over there using the BRRRR method as I build more connections.

Thoughts on this plan?

P.S. Don't worry, flights would essentially be free (I have tons of points and credit card churn), and I’d have a free place to stay when I am working in California.

[Travis Biziorek]

Hey Kevin, a couple thoughts from someone who's done something similar.

My wife and I moved with our (not even) 1 y/o son from the Bay Area to Metro Detroit in 2017. We bought a large home on a large lot we thought would be our "forever" home for $460k. 

While I grew up in Michigan, my hometown was 4 hours north. And the only family I still had there was my dad who isn't very present (to say the least). I mention this because we didn't have family help, etc. so this could have been a factor in what came next.

We soon decided Michigan was not for us and we wanted to be back in California. It's a long story but we ended up aggressively investing in Detroit real estate, built a 12-door portfolio, and then moved back. But this time we're on the Central Coast (SLO county) and we love it here. 

It's more affordable than the Bay Area and we're closer to my wife's side of the family. We don't get a ton of help but it's definitely better for the kids. 

Some advice on what I would do different...

Be prepared for the fact that you may want to move back. We didn't think we would so we bought our "forever" house right away. If I did it over I'd buy a much smaller house that would make a sensible rental. It sounds like you have this covered. 

Make sure that the market there makes sense for your goals to invest. We were originally going to Ann Arbor but the real estate market was so competitive there it started feeling like the Bay Area. So we expanded our search to Metro Detroit and landed there. Still, we thought we'd invest in Ann Arbor RE but that didn't make sense for our goals. Luckily, the Detroit market did and it happened to be 20 min from our house. 

If you're making a big move like this it would be wise to make sure you live as close as possible to where you plan to invest.

Beyond that, simply being open to the idea that you may not enjoy living there and acting accordingly would be my best advice. Difference in weather, culture, etc. might be too much year around for you to enjoy. We found Michigan winters to be blah and too long/drawn out. Summers were ok but are extremely humid. These things can add up and take a toll.

Finally, cost of living may not be as good as you imagine. Yes, housing is cheaper but we found groceries were about the same, eating out was roughly the same (although we don't do it too often anyway), car insurance was higher, home insurance was about the same if not higher in MI, and property taxes on my $460k Michigan home were the same as I now pay on my $740k CA home.

Overall, if you can make this work I like the idea of it. But do not discount your desire to come back to CA.