Purchase A Home in CA or Invest Out-of-State?!

[Krystin Aversa]

I'm currently paying 3k/month for a one bedroom apartment in the Bay Area. I'm seeking advice on what would be a better investment option/smarter financial decision: to buy a home in the Bay Area, or to continue renting and use that money to buy investment properties out of state. Purchasing a home here would require use of nearly all of my saved capital for a down payment, and would increase my rent to about 5-6k. The train of thought with this option is that I am currently spending 3k/month on rent in someone else's pocket, money which could be going towards an asset that belongs to me with the benefit of principal pay down and appreciation, and I could still invest OOS it would just take a longer time (2-3years) to save the capital again. The other option would be to continue renting and to begin investing OOS this year, and with the money I have saved I could in fact purchase multiple properties in a different state (which I would intend to BRRR/hold as rental properties). Any advice/thoughts/perspectives are appreciated!

[Darius Ogloza]

@Krystin Aversa There are guys (this is mostly or exclusively a male thing) who spend a lot of time at the gym working on their biceps and pay no attention to their legs.  They develop huge biceps but maintain spindly legs such that they come out looking like a cartoon character.  When faced with your issue, I look to this analogy.  Owning a home is like developing a good set of legs.  It's your foundation.  As a homeowner, you will learn a lot about houses, which, in turn, will make you a better investor in the future (because you will develop a better sense of the systems that comprise houses and how real estate is financed), etc).  And yes, you can try hacking a bedroom or two to reduce the total payment if necessary.  

I have been investing in real estate in the Bay Area (and elsewhere) for almost 25 years and the performance over this time between our Bay Area assets and out of area assets simply has no comparison in terms of genuine wealth building. As to what will happen in the future, no one has a crystal ball. No one can guarantee anything. However, it may be helpful for you to know that when we bought our first SFR in Mill Valley in 1997 for a price in the mid $400,000's we were absolutely convinced it was the top of the market and that we were sure to lose our investment.