Living in San Diego and trying to invest in our-of-state MF

[Michael Ndjondo makadi]

I need advice. We’re thinking about three 3 options currently and we’re currently renting for 1900 a month. The long term goal is to build financial freedom. We have no kids at the moment but we might try in the next year or 2. We saved some decent cash to be able to put down 20% for a nice single house in San Diego. That’s when we start having different ideas as follows:

1. Should we buy a house with at least 4 BR and rent out at least one room. This way we will reduce our renting expenses. Save that cash to then start investing later.

2. Buy a small condo in SD and Airbnb that property. This means we keep renting.

3. Keep renting and invest in multi family properties out of state. Thinking about either Wichita, KS or Dallas TX. Mainly because we lived in both cities and still have connections there. Also, are MF properties in those 2 cities attractive?

4. The issue with both options 2 and 3 is that, this means we would be able to a house for ourselves in the next 5 years. We’re worried that prices in SD will keep raising.

So we need some advices on what to do. Your contributions will be greatly appreciated.

[Dan H.]

@Michael Ndjondo makadi

I started with option 1.  It works well when you are young but I would not recommend it once you have kids.  Also the cash flow situation in San Diego makes this an appreciation play rather than a cash flow play.

item 2 has a lot of risk. Around 2 years ago San Diego council passed anti STR regulations. A petition was submitted with the require signatures to put the item on the ballot. The council rescinded the regulations. It would seem all is fine for now but the state also has a large anti STR contingency. I suspect it is more likely that the state pass anti STR regulations than it is for the city of San Diego. if that were not enough risk, the condo HOA could change the policy regarding STR at any time. Even if it were not a condo, I view the risk as too high but with it being a condo the risk is higher. A retail purchased condo as a LTR is negative cash flow.

Item 3 has all the risk of OOS and in practice the OOS cash flow does not hit projections.  Especially for newbies, that is a tough challenge.

I propose a variant of item #1. Look for a detached duplex to house hack one unit. This eliminates the issue with having someone that is not family share your living space (or your space all together which is why I recommend this form of hack be a detached duplex). Similar to a detached duplex would be a RE with an detached ADU. Same thing, just a more recent option.

Good luck