Questions from a Newbie Ready to Come off the Sidelines

[James Thierbach]

Short Background: P2 and I are 30 years old; she has a stable government job and I have a successful small business that was fortunately not overly impacted by Covid. We have managed to save up about $150,000 over the past few years and are looking to use the bulk of it toward our first REI. We currently rent substantially under market value, so our living expenses have been low, even though we've been paying off someone else's mortgage instead of our own.

Oh yea…. And we live in So Cal.

Our first idea was to house-hack a 2/3/4-plex in an area that we would like to live OR in an area that we’re not as fond of but is guaranteed to appreciate over time (like LA area). However, it seems virtually impossible to have positive cashflow in these areas and when we eventually leave the property, it won’t be worth it to have break-even or negative cashflow even if the property is likely to appreciate over time.

Next concept was to invest in a more affordable burgeoning market like Cleveland, but we have no interest in moving their, so it would simply be an out-of-state rental property.

P2 has received a COE for a VA loan, so that adds another wrinkle; I don't know if it would be a good idea to lock up the VA loan for a cheap $50K-$200K property in Cleveland (or whatever other lower value market we decide on) and no longer have the availability to use it for a primary residence.

Would it make sense to just continue renting for our own living expenses while still purchasing rental properties out of state just because my rent is so cheap? Or is that a waste of money? Should I focus on a primary residence before focusing on rental properties?

I feel like I have a good idea of the strategies I’m interested in; but I’m really struggling with the first REAL step of buying that first property. Any advice or insight would be greatly appreciated.