Living out Set for Life in San Diego. To house hack or not...

[Peter Talbot]

I just read @Scott Trench's book Set for Life and loved it, as I feel it was written just for me :) I'd like to get started with a house hack, but am not sure if that would be the best investment given my current situation. What are your thoughts in my stretching myself to house hack in my local market (San Diego) vs buying a cheaper multifamily in a lower-valued market (like Tulsa, Indianapolis, basically anywhere outside of CA)? What would you do if these were your constraints:

25 years-old, single, living in San Diego. 

I've got about 21k saved up in the bank  and am on target to make that about 26k by the end of the year. This is what I'd use for the down payment and any rehab costs/initial repairs, though I pretty much need to get tenants in there on day 1 otherwise my mortgage payment will eat me.

Based on what I've seen in SD, I'd be lucky to get a duplex for 400k. Using an FHA loan with low money down, I'd have FAT PMI which would eat into any potential cash flow

My monthly expenses are about 2,400

I make about 75k per year at my W2 job, which does let me work remotely whenever I want

To househack in San Diego or invest far away...both have pros and cons...

[Dan H.]

Originally posted by @Lee Ripma:

@Peter Talbot

I enjoyed the book as well! The catch with what @Kevin Fox is saying is: what you can actually qualify for on a loan? With an income of 75k and a 25k downpayment you're not going to be able to get anywhere near the purchase price of 700k! You'll probably be able to get 400k with FHA. You know where you can get a duplex in SD for 400k? That's right, it doesn't exist! You can't even get a SFH for that. I was interested to know how the book would address those of us living in high-priced markets. I think the take home was, move to an area where you can house hack. The other option would be to buy rentals out of state, which is what I'm doing. Since you can work remotely you could be at your rentals to over see their renovations. You could also just move to a lower priced market but you likely have reasons that you don't want to do so. If you don't, it's a consideration. I am investing in Kansas City and I LOVE it here! It's not crowded, it's so cheap, and it's charming!

Do you look at what duplexes have actually sold for in the San Diego county (versus the prices on the MLS)? I see them sell in my market area near $400K fairly regularly (over $200K/unit on a duplex to quad implies either rehab, larger than 2/1 or large 2/1, or over paid for property). My ex-protégé purchased a detached duplex that had a 3/2, 2/1 and 3 single car garages for $427K fairly recently. I was presented a duplex (2/1, 2/1) in the last month that was decent size (>2000') at $405K that if I made an offer on my offer would be below $400K. I have never paid as much as $400K for a duplex but prices are going up so my next duplex purchase may be my first above $400K.

You can still find duplexes below $400K but they are getting a little harder to find.  Triplexes at less that $600K are a little easier to find.