Southern California Investing or Out of State Investing

[Andrew Atakpo]

Hi Everyone!

My wife and I are newly married and have been doing our research and are about to get into real estate investing.

We however have become torn between whether we should buy something here close to where we live in Southern California (which would be our first property and we would want to buy a duplex to house hack) or buy something out of state as our first investment to get started as it would be much cheaper. 

We know there's pros and cons of each but could use some additional feedback, insight or additional ideas.

We also currently live with our in-laws, so whatever we buy in state or out as I stated would be our first property/purchase.

Thanks in advance for any and all feedback and advice as well as opinions!

[Jon Schwartz]

@Andrew Atakpo, this very much depends on your longterm goals.

In SoCal, you'll get excellent property appreciation, but little to no cashflow. Out of state, the world is your oyster! There are plenty of high-cashflow markets all across the country.

For me, my wife and I both work, so we see our real estate investments as tools for longterm wealth creation. At the same time, we both work for ourselves, so "wealth" in our minds means net worth and passive income.

Here's what we did: we purchased a duplex in LA and moved into the upstairs unit. The downstairs unit pays about half the carrying cost. It's not cashflowing while we live there, and it'd be modest cashflow if we moved out now. but the appreciation is going to be very rewarding. And now, we that purchased wrapped up, I'm exploring a small handful of markets (in AR, TN, and KY) to make further investments.

If I were you, I'd take advantage of the FHA loan program and buy a duplex (or triplex or fourplex!) in SoCal for little down. You probably won't live for free, but after accounting for your tenants, your monthly carry cost will be really small compared to the size of the appreciating asset. Then, go out of state.

Best!

Jon