Good time to buy in Orange County CA?

[Gaurav Bahal]

My friend is planning to buy a town home in Orange County (Irvine) and wanted my advice on whether it's a good time to buy in that area. He is currently renting and paying our sky high rents :-( I want to check with other fellow BP'ers what their thoughts are on Orange County market. He can afford buying ~$600k so his 3 options are:

1. Buy a $600K town home in Irvine and live there and hope it appreciates over time. The market has already appreciated a lot in the last 2 years though

2. Buy a $350K range town home in Orange County to live and invest the rest in commercial real estate either in CA desert cities or out of state. This will avoid him paying rent , diversify the investment and hopefully get some cash flow on the side

3. Don't buy anything in Orange county and invest most of the money in rental properties in CA desert cities or out of state. In this case he will keep renting but will hopefully start making some cash flow on the side

My personal thought process is that the Irvine market has gone up quite a bit and going with #1 is analogous to buying one stock with all your money at it's peak and hope it will go up more. I want to hear what other more experience investors think.