Seeking Advice: Which option is the better investment?

[Michael Johnson]

Hi everyone, I wanted to get your thoughts on house hacking in an expensive market (Chicago) where it isn’t easy to live for free. Please let me know your thoughts between the two options:

1) Buy a smaller duplex with an FHA here in Chicago to tie up as little capital as possible so that I can invest the rest of my capital for higher returns in Milwaukee. I can get better CoC/cash flow there but it also requires more money up front with having to put 25% down on investment properties - I currently have one duplex in Milwaukee.

2) Buy a much more expensive 4 unit (700-750k) with an FHA in Chicago, cash flow around $150-200/door once I move out BUT get far more principle pay down , gross rent and appreciation. I don't calculate principle pay down or appreciation in my calculations for CoC so the numbers are off putting when using a BP calc.

I know expensive markets struggle with the 1% rule but they provide higher gross rents, principle pay down and appreciation (in general), which can increase net worth a lot quicker than cash flowing say $200-300/door with a high CoC return. I've been leaning toward doing the 4 unit in Chicago and forcing appreciation to increasing rents as tenants move but wanted to get other opinions. Hope to try a BRRRR once I get experience rehabbing my FHA. Thanks in advance!