Choosing a Starting Strategy in California Markets

[Daniel Young]

Hello BP Community,

My name is Danny, I currently live in the Bay Area, and I am a beginner looking to get into RE investing. I've been on Bigger Pockets for a while, learning as much as I can prior to doing my first deal. I'd like to share my personal situation and see if any veteran investors might share your opinions on what you think the best plan of action might be or what you'd do in a similar situation.

I currently rent in the Bay Area and just recently signed a new lease which will keep me renting through 2021. My GF and I have been planning to move to the Sacramento Area to buy a small multifamily unit to house hack but, with the current economic uncertainty and the fact that we both have been lucky with stable employment, we decided that we wanted to stay put and continue to rent here for at least another year. I have been in the learning phase for some time now and would consider myself in somewhat of an analysis paralysis situation. I am eager to get started but am unsure if now is the right time to being starting as a beginner. I would prefer to use the long term buy and hold strategy to build a portfolio of properties that provide additional cash flow(either locally or OOS) but would also be open to getting into flipping as well. From what I've read I think investing for cash flow, especially in these uncertain times, is the smarter way to invest.

Here is my situation and the options I am currently considering. I am currently renting with a stable job here in the Bay Area. I have around $100,000.00 - $120,000.00 to invest. Here's what we are thinking...

1. We wait and save as much as possible until our lease is up at the end of 2021 and purchase a small multifamily place in the Sacramento Area to house hack. The positives with this being a safer starting strategy, gaining experience with less risk than there might be investing OOS, and the Sacramento Area being an appreciating market over the long term if we are able to keep this property. Downsides with this would be that most of our savings would be spent on an initial down payment preventing us from investing OOS for better cash flow and that the Sacramento market doesn't necessarily cash flow well (or at all) until much further down the road.

2. Start the process of choosing an OOS market and building a network in that market (we've been looking into Pittsburgh, PA among others) and start investing while we are still renting here in the Bay. In this situation, we would ideally start investing OOS at a much lower price point, start building positive cash flow, and be able to save enough for a down payment on a SFR in Sacramento to live-in-flip when we decide to move up there. We could even purchase the SFR while still down in the Bay and rent it out until we are ready to move up there. Not sure if owner occupied financing is enough of a reason to avoid buying anything in Sacramento before we are ready to move up there.

Any insight or advice would be greatly appreciated. I am open to other strategies as well if anyone thinks there might be a better way. These are just the two that make the most sense to me at this point. It feels like I am reading something different about the future of the housing market everyday and I think opinions from some more experienced investors would help me narrow down a gameplan.

Would love to start networking more and meet other investors. Please reach out if interested.

Thanks