Formulating the right pla

[Ryan Slade]

Hello BP community, My name is Ryan I currently live in San Diego,CA and I’m ready to start investing in real estate. I’ve gone through many different plans on where to start but haven’t really come to any definitive conclusions. My plans have been to buy a multi family here in San Diego house hack but with the market being highly priced in SD my tenant would really only cover 50% of my mortgage but still allowing me to save money for my next investment and ultimately move out and rent out the entire multi family home or my other plan is to buy out of state, cheaper market, less money to get in and start to get cash flow from that property before purchasing in San Diego. Any ideas or advice would be greatly appreciated!

[Dan H.]

@Ryan Slade

You indicate OOS is less money to get in but I suspect that is not true due to financing options for owner occupied versus non-owner occupied. I suspect you could get 95% LTV owner occupied. Most of my conventional non-owner occupied have been at 80% LTV but my last purchase was at 75% LTV. Using the 75% LTV versus the 95% LTV you can purchase an owner occupied that is 500% of the cost of the OOS for the same down payment.

I am a big fan of San Diego RE but I am a bigger fan of newbie investors start their RE investing local and self managed.  So many advantages local.  

I recently did a comparison of San Diego average profit from appreciation on SFR in last 5 years versus profit from cash flow of average Midwest SFR for last 50 years and San Diego average SFR RE had more appreciation in last 5 years than the Midwest appreciation for last 50 years.

Add in all the advantages of local investing: market knowledge, no need for PM, easier to deal with issues, less need for trusted team as you have greater oversight, able to house hack including the finance advantages.  

You reside in a market that historically has produced one of the best ROI for buy n hold in the nation and you are considering buy n hold elsewhere.