Need Advice: Renting vs. Buying in San Diego with $1.5M in the Bank

[Samuel Koekkoek]

First time poster and new real estate investor but I could really use some advice. I have $1.5M in the bank, and I’m trying to figure out the best move for my situation to start building out my portfolio and making moves towards financial independence. I’d love to get your input on my options.

Background:

Age: 34

Location: San Diego, CA

Current Living Situation: Renting a beautiful apartment across from the beach for $3,200/month. It's an ADU behind my landlords, who are great. However, they've told me their daughter might move in next summer, so I'll likely need to find a new place in about a year. We might move back to the East Coast in 4-5 years, so I'm looking for investments that can work well as a primary residence now and a rental property later.

Income: Both my girlfriend and I have solid tech salaries (150k+ each).

Current Portfolio: I don’t currently own any rental properties.

Goal & Long Term Plan: I don’t love my current job so like many of you, I would like to create enough passive income through rental properties to have financial freedom and be able to work business ideas or side projects. Or at the very least be comfortable working a job but knowing that I don't have to if I don't want to.

Options I’m Considering:

1. Buy a Multi-Family Property:

 Plan: Purchase a multi-family property and live in one unit while renting out the other. After we move in 4-5 years, I would rent out both units.

Pros:

Potential for long-term appreciation in San Diego.

Cons:

The property will not cash flow enough to cover the mortgage while we are living there.

After we move, it would provide very low returns and minimal cash flow.

Would require a significant portion of my liquidity, making it harder to invest elsewhere and grow my rental portfolio.

2. Buy a townhouse in this development near where I live called Sea Colony:

Details: $860k for a comfortable townhouse.

Pros:

Comfortable place to live for the next few years, and I’d still have liquidity to invest elsewhere.

It is still in my current community where all of my friends live, so I would still be where I want to be location-wise.

Will get appreciation.

Cons:

High HOA fees ($660/month) and potential 10k special assessment in the next few years.

Likely won’t cash flow after we move, so unsure whether it would make sense to hold.

3. Stay Renting:

Pros:

We have a great deal on rent ($3,200 total, $1,600 each), which allows us to save, stay liquid and focus on growing the rental portfolio.

We love the apartment.

Cons:

We’ll likely need to move in a year, and comparable places are around $4,000/month.

I’m not thrilled about moving, and it feels like we’re just delaying the inevitable.

Not getting any appreciation.

I’d love to hear your thoughts. What would you do in my situation? Any advice or recommendations are greatly appreciated!

Thanks in advance for your help!