Buy a House in SF or Buy Multiple Properties Elsewhere?

[Susie C.]

So I need some advice on what to do.

My current goal: to invest and build cash flow through my investments 
The dilemma: My husband and I live and work in SF. Right now we are currently living in a 2b2b condo in Potrero Hill (owned by his sister). We pay about $2000 in rent per a month to share one bedroom together and rent out the other bedroom to cover the rest of the mortgage.  To me I feel like it's a waste of money. Yes, it is going towards his sister, whom is family, but we aren't gaining too much out of it except for a place to live. So I want to get our own place, but the cost is really high in SF. For a point of reference, 1b1b condos are going for 800+ in good areas and HOAs are around 500-800$.

For me there are currently two options for me to reach my goal and resolve the dilemma: 

1.  Get our own place. Refinance on a property I have and add the amount needed to make the 20% downpayment needed. Essentially we're looking at about a 200k DP.  Then what would happen is we would rent out one of the bedrooms and continue to pay what we're currently paying for rent (well a little extra), but at least it gets applied towards our mortgage/equity. 

The problem: If I refinance the other property that I have and add in the other portion needed to meet the 20% downpayment, I wouldn't be able to purchase a smaller / cheaper investment property for about a year or so, when the SF placed is seasoned and I can refinanced again or wait until we have enough savings. 

2.  Save the money that we currently have and re-invest this into *multiple* other properties in different cities that are more inexpensive (250k under).  In my mind, this would be a good option, but I need to actually FIND those properties first and for them to really have a good return to outweigh the rent that we're currently paying ($2000) so that it *balances out* our loss, I feel like this may be really difficult to do and may take a lot longer than. 

The problem: I continue to pay rent and have a roommate. 

What are your thoughts on this and how would you approach this situation on a logical financial standpoint. 

FYI - FHA loans with a 3.5% down is a very unlikely option. SF market is hot and with multiple offers on the table for units, sellers are not interested in 3.5% down when they are getting over asking, 20% down or all cash offers.