Help in San Diego

[Ben Landis]

I live in San Diego and am currently trying to figure out how to get my first rental property. As of last year year we own a condo. The original plan was to live in the condo for 5 years and then rent it out so we could buy a house, but I have an itch to buy something before that to rent. My problem though is that real estate here is pricey especially with the market the way it is. Everything I have read says that your first rental property should be close to where you live and especially not out of state. I can only afford out of state at this point. Do I just need to be patient and keep saving? Risk out of state purchase? Look for someone to help me with a down payment? Thoughts would be appreciated. Thanks!

[Kevin Fox]

Hey @Ben Landis

As @Bruce May stated,  all three of the choices you laid out for us are viable options.  It is fairly hard to say exactly what is best for you due to the relatively limited information provided; but, if I was making the investment decision for myself, here is how I would rank the three alternatives you mentioned in terms of favorability:

1. Receive gifted down payment (although this tends to be more difficult with investment properties than it is with primary/secondary residences)

2. Remain patient and save (believe me when I say that I understand how elusive patience can be at times)

3. Invest out of state (but only after I was 100% confident in the team I assembled OOS's ability to execute the entire process of locating, evaluating, closing, and managing my investment)

With that said, there is a fourth route that you didn't mention which, at least for me personally, is far more preferable than the three options above. (Primarily because I don't have anyone who likes me enough to gift an entire down payment) If I were in your shoes, I would most likely elect to sell the condo I was in and use the proceeds from the sale to purchase a multi-family property, live in one unit, and rent out the others.  By doing this, I am able to 'kill two birds with one stone,' so to speak. This route allows you to purchase both a primary and an investment property, but only requires 3.5-5% down for both. (Commonly referred to as "house hacking")

There are a number of other benefits that I won't get into here, as I don't want to bore you with an essay, but please feel free to reach out if you'd like to chat about this further.

Best of luck!