As a first investment, should I look to flip or house hack?

[Austin Mudd]

I’m from San Diego and went to school in LA. I’ll be moving to Pittsburgh late summer to start work in commercial real estate (lending). I joined BP to learn the residential side and I hope to dabble in private real estate investment as I progress through my life. One note: my job has me in Pittsburgh for 18-24 months - there’s a possibility it might be up to 36 months.

As a California kid all my life, moving to the North East is a huge move for me (what's winter? Never heard of it). I did a summer in NYC for an internship and have been to Pittsburgh for the interviews for this job, but It’ll be a complete change.

Here are two options I’ve thought of:

1) Owner occupy a 2-4 unit.

There are a few neighborhoods that I’ve been recommend to check out to live in from friends (Shadyside, Southside, Lawerenceville). It looks like these have the highest demand, thus the acquisition prices are higher and competition among other investors is fierce.

Adv: Can take advantage of strong rental rates, start building an income-based portfolio, and take advantage of PA lending programs that can lend up to $6,000 repaid at 0% interest over 10 years that goes towards closing costs. Can take advantage of putting down between $5-15k.

Disadv: My lack of knowledge about the neighborhoods without living there makes it extremely challenging to connect with RE professionals, view potential opportunities, and keeping a close eye on trends. I’m concerned I’m going to have to find a place month to month to lease for a few months until I acquire something. LL’ing with a full-time job might be tough? (Can be mitigated by prop. mgmt).

2) Flip 

I’ve been reading that Pittsburgh is also one of the hottest flip markets in the country as well. I’m seeing people sell property for prices like $40k-150k. In SD, your D class dumpy house wouldn’t sell less than $200k. So the barrier to entry is much lower for someone without a ton of cash like me. 

Adv: Low barrier to entry and seems like a compelling market to flip. Ability to connect with investors to fund rehabs (both in the Burgh and from back home?). Have the ability to settle down, find a place to rent, learn the neighborhoods, and then take 4-6 months to do a flip once all that is taken care of. I have the power not to get stuck with RE out of state in case the time comes to move back to the west coast.

Disadv: Little knowledge and experience about rehabs (well anything really) and the types of homes common in the North East. May be difficult to work a full time job and do flips. Is it possible I take on more risk at losing my capital?

Bonus 3) Channel my inner Donald Trump and do both at the same time

I think this came out longer than I anticipated, but hopefully someone can help me out!

Link to that PA program: http://www.phfa.org/consumers/homebuyers/advantage.aspx