[SF bay area] Selling primary residence to buy investment properties and rent myself

[Account Closed]

Hi all,

I am from Fremont, CA and want to get started in investing in buy and hold properties.

I have read lot of posts on BP and done research of my own.  I have explored areas like Sacramento, Stockton etc but I feel that the local economy is not stable for the long run. 

I have contacted a few investment specialists from out of state and I feel it will be good to start out of state. Fully managed by a PM who will send pictures/videos. I have done this for my first property over seas and has worked well.

My goal is to build a stream of passive income over next 7-10 years which can sustain my current lifestyle (10+ rental units).

Primary residence:

We have out grown our starter home and looking for a bigger home (4 bed or so). Those homes are over a million $$ around here. I have over 50% equity in my current home (300-350K equity).

I am trying to evaluate if it would be wise to sell the primary residence and put the cash in to out of state properties (with leverage, operating a million $ investment with 20-30% down).

That could generate enough income (and more) for me to rent a 4 bed home that will suit my family needs.  Would this be a wise decision to not have a primary residence but buy investment properties?

Any help much appreciated.

Thanks!

[Manch Hon]

I think it is not one mistake, but two.

People often say real estate is a privileged asset class. Financing is easy and low cost, and tax law generally favors real estate. But within real estate, primary residence is even more privileged. Purchase loan on primary residence is 50 basis points cheaper than investment loans, down payment can go as low as 0, and the first 500K of sale profit is tax free. This is the best wealth generator anywhere in the country, and that is exponentially more so in the Bay Area. How much has your Fremont house appreciated over the years?

Investing turn key out of state is no picnic, and certainly not as easy as promoters would like you to believe. There are many, many posts on the forum about these turnkey rentals that didn't turn out too well for the owners. 

Rent in Fremont will likely outrun most Midwestern towns. Schools are good and it's close to Silicon Valley. Your turnkey rental cash flow may cover your rents right now, but it may very well not 5 years from now.