Investment Property vs. Own House – SF Bay Area

[Bastian Kneuse]

Hi everybody,

I recently discovered the Bigger Pockets podcast and became an instant fan. I am new to BP and real estate investing in particular. I have done some research as well as read some books to familiarize myself with this subject and concluded that I would like to get involved in real estate investing. As I am getting more knowledgeable about the “ins” and “outs”, I am struggling with the following question: Should I purchase my own house first and then engage in investment properties? Or is there a scenario where it makes sense to continue being a renter, while investing in out-of-state properties?

Let’s back-up for a second…. I am currently living in the San Francisco Bay area (very expensive!!) and live in a rental property with my wife and baby boy. Our monthly rent pushes $4,000 (...did I say I live in the SF Bay area?). We moved to the SF Bay area about 2 years ago for job reasons (…you guessed it – technology) and currently rent a 2 bedroom house. Both, my wife and I have a comfortable 6-figure income as well as savings stacked away, which enables us to “swing” the rent. Most of our savings are nicely invested in the stock market; however I would like to implement a system that provides additional passive income on a regular basis, which led me to real estate investing as a viable option. I considered purchasing a home in the SF Bay area, but some arguments deter me: 1) I am unsure on how long my family will stay in the Bay area – there is a distinct possibility that we will move to a new location within the next 5 years. 2) Houses here are pushing the million dollar mark tying up a lot of capital, which could be used differently (season tickets for the Warriors, anyone?). 3) The SF Bay area housing market is extremely hot – I am very fearful about a mild to severe bust in the near term. 4) Buying a house in the SF Bay area would not leave enough ammo to pursue other investment properties.

I am currently looking into single family investment properties in Jacksonville, FL. (Seeing the words “investment properties” and “Florida” in the same sentence may give some people the chills, but I can back that up.) A) The Jacksonville economy seems to be very promising over the medium term – a lot of growth happening. B) My sister-in-law and brother-in-law are real estate agents in Jacksonville and can hook me up with good deals, excellent contractors and property management companies. C) I used to live in Florida and am familiar with how things are being done there. D) I have eyes and feet on the ground given parts of my family live there. If I would take a portion of my current savings, I could probably invest in 2-3 properties in the Jacksonville area for a buy-->fix-up-->rent-out strategy.

Long story short, I am very interested in some expert opinions on how to proceed in my real estate investment endeavor. I would appreciate any feedback…if good or bad.

…you made it! Thanks for sticking with me to the end. :-)