Out of State Rental vs House Hack in San Diego

[Christian Ortega]

Insight on situation: house hack vs OOS rental

Hello, my name is Chris Ortega and I’m seeking a bit of insight on my situation as what would you do in my shoes. I’m currently stuck between investing in OOS rental or house hacking here in San Diego for my first investment property. My end goal is to reach financial freedom through rental properties (10k net a month in passive income for the time being). I appreciate all feedback and wish everyone the best of luck. Also if anyone in the area fancies talking RE and so forth I’m more than down !

Background info:

I currently make around 50k

I have 20k for a downpayment (and still constantly saving)

I currently am living with family so my expenses are around 1k a month

I have no debt, single, with no obligations

Credit score of 770

Currently in college studying to become an RN, two and half years left to finish (only purpose is to obtain a stable higher salary to use for RE investing, this is not my passion nor something I wish to do for a long time)

RE experience:

Currently managing a duplex and a SFH

Have partaken in three rehabs

So being hands on is not something I’m scared of

My personal thoughts:

I know the cash flow investing OOS rentals would be better, I've specifically been looking at Huntsville, Alabama, certain parts of Ohio and so forth, compared to house hacking here in San Diego. However with that said, I would be able to use an FHA and obtain a property here in San Diego of higher value rather than investing OOS, and would be able to house hack a year another after my first one and so forth. The thing is I would be breaking even at best due to how hot San Diego market is at the moment. I'm somewhat wary of an upcoming rescission but not too much since my plan is to buy and hold. I do plan on taking out HELOCs in the future/building up more capital in order to start BRRRR and snowball from there.

So my question is what would you do in my shoes ?

[Craig Curelop]

@Christian Ortega - Maybe I am biased, but I would start house hacking. Here is why. 

1. If you are break-even BUT living for free, you are actually saving likely $1,000+ a month because you have removed rent from your monthly expenses. 

2. You are building equity in a property that has high odds of appreciating a lot and quickly. Even if it dips in the first couple years, do you really think San Diego will be down significantly over the next 10? 

3. With House Hacking you are gaining the confidence and experience of buying a property, owning a property, and managing it while you're right there. Also, I suspect you'll be doing a whole lot of networking once you get serious about buying. These relationships you make over your next 2.5 years while house hacking will help you BRRRR.

4. BRRRRing involves a lot of skill, relationship building, and trust. There are contractors, agents, and other folks out there who FEAST off of out of state investors who are in over their heads trying to BRRRR. Trust me, I've been one of them.

5. You need a lot of capital to BRRRR. To the likes of $80k to $100k?

I hope this helps!