First time RE investor in an expensive market. Is it worth it?

[Dylan Grabowski]

Hello to all the fine folks at BP!

I live in an expensive market. I'm also studying REI and building up a down payment for a property sometime down the line. These things take time, but...

Is it even worth looking for a first property (I'm mostly interested in 2-4 unit multi-family) in an expensive market? Sure, there's 3% down lenders (which I haven't met yet) and FHA. But, at what cost?

I want to live in my own home, and rent out other units. However, four or five properties can be purchased in other markets for the same price as one property in the Oakland/East Bay area.

If you've gone through similar thought exercises, what were your conclusions? If you've invested for a long-time, what are your words of wisdom? Advice? Thoughts?

I'm interested to hear what the minds of BP have to say about the topic.

Cheers!!

[Account Closed]

@Dylan Grabowski Like all the other posters, I feel your pain. The lifelong debate of appreciation vs cashflow is something that everyone struggles with. However, after many months of deliberating, I came to the conclusion that as a newbie investor you should go with cashflow. With cashflow, you may make less money in the end, but you'll be able to get in the game and get your feet wet with a low risk asset (losing 40k hurts a lot less than losing 1M).

I attended a workshop where one of the speakers (Eungelo Rumora from Ohio Cashflow) said, "you can't eat equity". It's true, you may get an asset in the Bay Area that has appreciated greatly, but if the rents are still not keeping up with your mortgage payment, then the only way to get money from the asset is to sell it (refinancing it will only increase your debt service). Once you sell the property, then you'll be in the same situation as you were before. Cash on hand but no cash inflow.

If you focus on cashflow instead, you can purchase a property, refinance your principal out in the future, and still have an appreciating asset that gives you positive cashflow every month, while paying your debt service down.

It sucks investing outside of your backyard, but it's easier than having negative cashflow for years.

Good luck!