Is it time to finally buy that first property???

Question

Good afternoon, here is the deal, a few years ago my wife and i discovered biggerpockets.com. Ever since we did a lot of reading and researching on property investing as possible. We both agreed that real estate investing was the path we were gonna take, however, as a last minute option i decided to start a swimming pool remodeling business instead. things have been going amazing business wise ever since. Recently, we found out that we would be having our first little one and are considering buying our first house/condo. we live in San Diego CA and as you may imagine, cost of living here is a bit over priced. So with all this said, my question is, giving the circumstances my wife and i are in, would you go ahead and buy that first property or would you consider renting and maybe invest in a out of state rental property instead?? i must say, rents here average from $1,200 to $2,200, i am blessed enough to have a lease of $800 for a decent apartment. thanks in advance, your time and help will be much appreciated.

Jake Ernst · Answer

@George Zavala Why not do both? You could use a low down payment loan (FHA or conventional) to buy a duplex (or small multifamily) where you could live in one unit and then rent out the other. If you do it right, you could essentially live for free or close to it and get your feet wet with a rental property. Then when you want to transition to another home, you already have a rental property in hand. I realize San Diego is an expensive market but I bet there are small multifamily properties that can work. Good luck and congrats with the little one!

Dan H. · Answer

If you are planning on owning at least 5 years then I recommend purchasing.  San Diego is an appreciation market, but there have been many short depreciation cycles.  Few depreciation cycles have lasted 5 years.

I agree with those that suggest house hacking a duplex but I would add that I would look for a detached duplex with a fence separating them.

Initial cash flow is poor.  Quite likely to be initially negative in the cash flow.  However, we own 9 San Diego properties.  Everyone one of them has appreciated over $1k/month over the hold period with the longest hold being 27 years.  What do you think the rents have done?   The rents have appreciated significantly.

Good luck

Maxwell Ventura · Answer

@George Zavala

Yes I am biased to investing here in San Diego. With that being said, I would recommend investing locally.

1) So you have your finger on the pulse w/ whats going on w/ your property, and you don't have to hire a PM at first unnecessarily.

2) If you see yourself staying in San Diego for the foreseeable future, it's an incredible long term play.

3) If you have the opportunity to leverage debt (less money down) for an owner occupied property I'd recommend taking advantage of that to start building your portfolio. You'll experience a much higher return on your money.

Hope this helps

Cody Barna · Answer

@George Zavala congrats on the pool business, I've been to SD a few times and I love the area especially coming from the east coast. I would recommend house hacking, but considering your rent is extremely low that gives you more options. Would it be possible to airbnb your current place?

Joaquin Camarasa · Answer

If you are a  first time home buyer I would always invest near me for two reasons. 1) Take advantage of a low downpayment loan 2) Just think for a second the responsibilities you already have with your business and the baby coming soon. Would you want to add the headache of researching a new market, building and trusting several people, possible problems in an out of state investment...

You are starting out, I would do things you can control and that will also keep your mind free of worry to take care of the little one.

Jermaine Sims · Answer

@George Zavala depending on your taste of living I would by a duplex and rent the other places or buy a place that may need a little work but livable and fix it up.

George Zavala · Answer

I am confident that a duplex is the way to go! I crossed paths with a buddy of mine who I haven’t seen in a while. I mention my dilemma and he invited me over to take a look at his house. He is just starting out as well. He picked up a duplex in a ok neighborhood, but what he did was rented out both units and hacked his garage. He turned it in to a decent size one bedroom one bath apartment. I’m assuming it’s best to skip a property management co. Since he lives on site? I like the idea of what he is doing, and quickly jumping on a second property within a year or to. I know many of you will say one step at a time, but I can’t help to think ahead lol.

Theresa Harris · Answer

How much would your housing costs increase if you were to buy a house?  I'd avoid condos as the HOA/condo fees take a lot of money that could be used for a mortgage.

If you like your current rental and are only paying $800, you might be better off either buying a duplex or place with a suite to rent out.  Or buying a place elsewhere and renting the whole house.

Twana Rasoul · Answer

@George Zavala I have been investing in San Diego for a little while now and my wife and I decided to purchase a 2 unit to house hack last year and do a complete gut renovation while she was about 8-9 months pregnant...I don't really too much on planning everything perfectly in life or trying to time things...There's always a million reasons not to do something.

If you can get into a duplex that would be the way to go if you want to invest as well as keep your housing expenses low at the same time...I absolutely do not recommend starting OOS for your first purchase.  I have out of state investments as well and for most people it is not the best way to start.

Best of luck!

George Zavala · Answer

@Jake Ernst Multi family duplexes are very popular out here and it is actually the way I’ll go rather than a condo. @Cody Barna unfortunately air b&b is not an option for me, house hacking is definitely an option considering the Discounted labor I can get from many of my subcontractors, however, I feel that might just be a bit too much for me at the time considering the baby’s arrival. @Joaquin Camarasa, you are absolutely right, out of state is definitely not an option. At least not at the moment. I really appreciate your time and advice, it means so much more when it comes from experience individuals.

Is it time to finally buy that first property???

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