Primary Home Investment or New Purchase

[Haile Shavers]

Hi! I am about a year into purchasing  primary residence for me and my family. Our home has an in law unit above the garage that we currently live in. The space is pretty outdated since it was built in the 80s. We live in a small rural town on the way to Yosemite National Park, surrounded by huge lakes and hiking trails. With this we attract lots of people over the summer, fall and even winter for the snow slopes. 

My goal is to generate some passive income either from; creating a short term rental of the in-law unit on a seasonal schedule OR purchase a new investment property such as a small multi-family home somewhere long distance. 

I have about $20k in liquid capital that I can use for either option. Curious on what folks thoughts are. Thanks!

[Brenden Mitchum]

Hi @Haile Shavers, welcome to the BP community!

I would say it all depends on the numbers and your goals! I know, not the most helpful answer so let's dive into this a bit further.

You said you live in the in law above the garage, right? Does anyone live in the main house? If so, are they paying rent? If not - unless it's family that do not have the means of living on their own - you already have the perfect opportunity for a house hack. Since there is potential STR income, you'd want to look at both options to see which makes more sense. Also, knowing more about your market would give you an idea of whether or not renovating either "unit" makes sense.

$20k isn't going to get you a small MF in many markets unless you get a low-down, owner occupied loan. Since that doesn't sound like an option here, my suggestion would be to first focus on what you have. Does it make sense, numbers-wise & logistically, for you to make your primary residence a house hack investment? If not, are you able to find anything else locally that makes sense? Maybe you can move out of your current house, rent out both "units" and put that $20k towards another similar property? I see you're in CA so that may not be possible. However, you should only look outside your own market once you're certain there isn't any opportunity for you there.

Does that all make sense? Feel free to add some details, including numbers in here or as a dm, and I'd be happy to dive deeper!