Should I buy an owner occupied 4-plex in California? Good move?

[Swat Khan]

Hey guys,

First I would like to say I love this forum! I've learned so much from you guys.

I could really use your advice right now.

I have been debating back and forth with myself if I should buy an owner occupied Multi-Family property (I will live in the property with FHA financing). Or should I just buy a cheap foreclosed condo near my office to avoid living with tenants, some pros consider this the cardinal sin. I would instead invest out of state for bigger returns and leverage property managers. If it matters I am married with a baby.

End goal: Generate $5000/mo cash flow from investment properties.

Pros:
- Low entry cost - 3.5% FHA financing. Won't have to pay 20-25% down on my first MF investment.
- Live for free: tenants pay my mortgage. All of my income goes to savings. This is nice to have in California, where living costs are a significant part of your paycheck.
- Experience in owning MF so I would be better prepared on out of state deals.

Cons:
- California prices: 4 unit multi families are going for $350-400k in the desired area. Should I just rent and get better returns on an out of state property?
- Living with tenants

Details about the deals I am seeing:
- 4 unit multi family in Long Beach.
- $400,000.
- (2) 2bd/1 ba, (2) 1 bd/1 ba. Total rent: $3600-4000/mo rent.
- 5.4 cap rate with 50% rule.

I understand these are not the best numbers but what attracts me is being able to save on my mortgage. Anyone else been in my shoes? Should I dive an owner occupied multi family? Would this be a good step towards my end goal?

Thanks in advance for your advice!