Thoughts on house hacking with intent to move to a new state soon

[Dylan S.]

Hello,

I’m new to bigger pockets and wanted to get some advice on my situation. To preface, I just turned 22 and am about to graduate from college. I want to start investing in real estate, but I don’t know where to start. I’m in Southern California, and I plan to stay out here for another 3 years for personal reasons. Then I plan on moving out to South Florida.

I have a solid background in real estate and finance but haven’t applied it to a real-world setting. I know I want to start house hacking for my first investment property, but the problem I’m having is the timing and market. I live in an expensive market in Orange County, so finding a good deal for the right price is challenging. I also don’t know whether to pull the trigger out here in California and then possibly 1031 exchange into Florida or what strategy to use when I do eventually move out to Florida.

To give you an idea of my personal financial status, I have about $2,000 in savings and a little over $20,000 spread out in stock market investments. Fortunately, I will also graduate with no debt. I’m curious as to what you experienced real estate investors would do in my situation? Any advice would be greatly appreciated!

[Sandra F.]

Hi Dylan,

I want to echo what @Timothy Lewis advised about income before getting a loan. Otherwise, expect to have to put about 30% down and pay in the 5-6% range for a mortgage (plus a pre-payment penalty). I’m not a tax advisor, but as long as you live in the property for 2 of the last 5 years, when you sell, it’s considered your primary residence and the first $250K of gain (assuming you file single) is tax free. So, you may not need to worry about a 1031 exchange if you house hack in CA, live there for 2+ years then sell to move to FL.

As a 10+ year resident of Miami proper who’s now wrapping up house hack #2 (in 8 years), I can tell you it’s possible to do well, but you need to consider where exactly you purchase. The city itself is HUGE geographically speaking and the traffic is even worse. So, definitely figure out your work/commute situation before you commit to something. I know traffic in SoCal is crap too but if you work downtown, say, and pick somewhere SW, you could be only 35-40 miles away but that drive could easily take 2 hrs. 

Also, not only are house prices in Miami at large RIDICULOUS, but the property taxes are pretty steep too and will be adjusted based on your purchase price. Plus, if you finance, you must have wind (hurricane) insurance, possibly flood too and neither is cheap. Yes, there’s no state tax but seriously consider if you have to be in Miami-Dade or another area of the state might serve as well. You should know what they say about that: “the further north you go, the more South it gets.”

Best thing about living in MIA? I love living so close to the USA 😆 

Kudos to you for starting your journey so young and good luck!