Starting out: Primary (CA) vs Rental (OOS)

[Scott Doyen]

Any advice?

Situation: I am a young tech professional. My gf is applying to nursing school and we think she will start somewhere in the Sacramento Area in about 6-12 months. It is generally a 2-2.5 year program. Now this means that if she is indeed in the Sac area then I will be here for a fact at minimum 2-3 more years. After that, I say it's 50 50. I've committed to myself that I want to get into Real Estate sooner rather than later ("it's not about timing the market, but time in the market"). So I see 3 options:

1) Buy SFH (conventional loan) in between Sac-Folsom area. A lot of the duplexes just aren't in that nice of areas. And while I might be able to "rough" it, my guess is the girlfriend might not. Homes in some places I'm looking at are still fairly cheap 350k is what I'm seeing. That currently rents around 1.8-2k. According to most cash flow estimates though, it's negative if I were to rent out but I'd live in it for 3 yrs building equity rather than paying rent. Is it worth it?

2) Buy OOS - probably turnkey B class properties. I would do my due diligence - see the property, hire inspector, make sure school is good, crime is low, etc.

3) Wait till we both really know where we want to end up (5-10 yrs).

What do you guys think? Any other recommendations? Thanks :)

[Jonathan Oh]

I am assuming you are in your early to mid 20s. If that is so, definitely not option 3. Time is on your side, and you'll want to take advantage of current low interest rates. If you plan on selling your primary residence in 3 years, it may not be worth it. A general rule of thumb is that you should stay at least 3 years when considering owning vs renting. But also consider the fact that we are near the current business cycle. No one can say we will be in a depressed market in 3 years, but based on general sentiment from economists there is a good chance. If that happens, you'll be stuck in that property and possibly not see the equity you think you will. I am not here to make the decision for you, but if I were you I would start building a portfolio now rather than later. Turnkey is a good place to start, but it is not the only option out there. Every investment has its pros and cons. I buy turnkey so let me know if you need help here. Whatever you end up doing, just do your DD. GL!