Renting out current home and building a small Short term rental to move into!

[Ilya Golubevs]

Hey guys, 

My first post here, I have been saving up and researching a bunch to purchase my first property. I am rarely able to find relevant information, so I thought I would see what you guys think.

Im in Roseville,CA, Sacramento area. Currently own a house with a nice $1500/month low interest mortgage. The home is in a nice area so I want to hold on to it. I want to acquire my first investment property but not sure which direction to go.

I have been considering in buying out of state. I went to school in Notre Dame, IN and it seems like houses cash flow over there. 

I would love to invest closer to me, but there are not many deals I can find locally that would work, primarily looking for cashflow. I looked at a manufactured home on owned property, but that was priced too high for my comfort. Duplexes seem out of reach at the moment and they do not cash flow(at least with my calculations). Looked at some condos, but would hate to pay all the HOAs, that I feel I could use better. 

Finally, I have been looking at land in foothills, 45-60min from Sacramento. It seems like I could buy some land there. My idea is to find land with a view to build a very simple small house 600-800sqft to live in and rent out my current house, looks like I could get up to $2500 in rent for 3bed 1 bath house. While living in the smaller house I could improve the area around it like build a nice deck for a view, maybe a sauna, firepit etc.  Then once we build up some money hopefully buy another place and move, and turn the small house into a short term rental. 

The properties I am looking are in  $100k - 250k range.  Some are ready to build, some need to be developed. 

I can pull together roughly $50-60k in cash to invest. 

Am I over complicating my first investment? Or is it feasible and could work out for me ? 

I would appreciate any comments, ideas, advice and local connections as well ! 

Thank you!

[Brian Larson]

I would use extreme caution buying in this market right now, especially as someone new to investing.  It sounds like you have the ability to stock away money now.  I'd continue to do that.  Maybe get a roommate to lower your monthly expenses further.

BP has many success stories on the podcast and this forum but we haven't seen a downturn in the real estate market for over a decade so I suspect many people (including ones here are overleveraged).  Don't make that mistake.  People look like investing geniuses because they have serendipitously timed the market so even bad investments look good.

However, there are always deals to be had, even in a down-market, but I'd advise not being too hasty and waiting for a deal.