4 plex in SF Bay Area or invest in Cleveland

[Erik Grahn]

I live in the sf bay area

I have been considering investing in sfh rentals in Cleveland for long-term holds. The numbers seem to make sense.

Today i spoke to a couple who are very successful in RE. I told them my plan for Cleveland and they suggested i buy a 4plex in the bay area. Live in one unit and rent the rest. Their reasons were to get a primary residence loan, be able to pm myself,slowly renovate over time(im an electrician and know other tradesman), and to have more control over my investment. They have done well in the bay area(and elsewhere) and think this would be a great way to get in the business and learn directly.

I liked the idea of Cleveland because of lower costs. With a  bay area 4plex i would be "all in" money wise.

Curious what others here think

[Tom Kastorff]

@Erik Grahn Lot of questions and unknowns here. First, what is your budget? Can only imagine what a fourplex in SFBA costs, just knowing what a typical SFH/condo costs, unless you're buying somewhere east bay or ghetto. Imagine the mortgage on a fourplex, and if you live in one of them, you then only have 3 tenant dollars coming in. You will be cash flow negative aside from having a place to live, some extra write offs, and the primary home loan. IMO not much of a deal.

Are you single? Married/kids? Depending on answer to first question about budget and location, do you really want to live in one of said fourplex units? I know the answer to just "house hack" is super popular on this site, but anyone married with kids doesn't exactly want to move into a 2br apt in a fourplex in XYZ neighborhood. So, is that part of your personal plan? If you are single / young and willing to be flexible and move around, it does open more doors for buying and investing. 

Third, just because random "couple who are successful in RE" said to do ABC doesn't mean you have to deviate from your desired plan to do XYZ. There are thousands of ways to be successful in RE. My parents were successful in RE but they bought in CA 40 years ago when homes were $40,000 so it's a different ballgame today. The couple you speak of may have done the same, so anyone with experience 20+ years ago before the modern spike in prices is playing a different game than today, may be out of touch, or may be rich and again can afford to play a different ballgame. Buying a fourplex in SFBA is $$$$$$$$. Stick with your plan (be it CLE or whatever) if that's what you want to do. I also live in a HCOL part of CA and will likely never invest here aside from my primary residence. My money will simply go further in other areas, which is what you want to do.

@Chris Mason is a local bay area lender, great to work with, and can also provide some advice once you update some parameters.