Advice: Short term house hacking or Out Of State purchase?

[Shane McQuerter]

I’d love some advice on making my first property purchase and whether I should look to buy a duplex and house hack in my current HCOL city or instead focus on finding an investment property out of state.

Here’s some context: I currently rent in west Los Angeles with my partner who is doing a PhD at UCLA. We (unfortunately) need to continue living relatively close to campus, in very HCOL west LA, till she graduates in ~3-4 years. Once she graduates, we will likely move from LA, though we’re not sure where to. I’ve been toying with the idea of buying a duplex and house hacking in west LA mainly for the financial incentives that house hacking can yield, but also because I’d obviously feel much more comfortable living close to (or in) the first property I buy and being able to learn first-hand from being there. Yet, it seems to me like the sheer expense of properties in the area, as well as our short time horizon in LA makes buying here an imprudent option.

The other option would be finding a property OOS--turnkey or otherwise. This feels much more intimidating to me as a first time investor but, at the same time, also feels like less financially risky (at least in terms of the property cost / down payment outlay). Going this route would obviously rule out the advantages of house hacking.

Pros of buying in LA:

• Could leverage house hacking and live in half of the duplex--saving on rent while also potentially getting space for a work from home office (which I’d really like)
• I’d be able to manage the other unit myself and could save on property management
• Living in/near the property seems like an ideal introduction/education to REI

Cons of buying in LA:

• We would very likely be moving in 3-4 years and may need to sell the property when we move
• Very high prices in LA (I could get the money together for a downpayment but it would take all my savings and I'd rather start my REI education with a smaller purchase).

Pros of buying out of state:

• Lower prices (would be dipping a toe into a first property purchase rather than throwing all my savings into it).
• Potentially higher returns (though maybe not considering house hacking as an alternative)

Cons of buying out of state:

• All the difficulties of purchasing / managing an investment property at a distance--especially as a first time investor
• Having property management fees (and maybe turnkey costs) eat away at the return

My main question is: Should I even consider buying a duplex in LA with our (potentially) short time horizon? Would it make sense to buy a very expensive property if we’d need to sell it in 3-4 years when we move?

Should I HH in a duplex in LA? Look for an income property OOS? Simply keep my money in the stock market and reassess when we move in 3-4 years?

[Brandon Goldsmith]

It already looks like you have thought out everything pretty thoroughly. In my opinion, house hacking is one of the best ways to learn and dive into real estate. It is going to be more than just a numbers game but will depend on if you think buying a duplex locally might have some appreciation in LA. If you break even that is just 3-4 years of equity built up.

On the other hand OOS isn't nearly as impossible as people think and establishing your core 4 and a great team of connections can streamline the whole process for better returns and appreciation. I would think of what options might match your more present goals better. Good Luck! @Shane McQuerter