First Rental in Expensive Market

[Blake Wood]

Hello BiggerPockets,

Would love to hear some opinions/feedback on what course to choose as I try to tackle my first rental property.  I am an agent in San Diego and work with some of the top flippers in the area (If you are looking to buy a fixer or have a fixer to sell - give me a call 410-507-9854).  I have saved some cash and have another chunk in the stock market (enough to be comfortable with a $50k down payment).  Currently I am renting at very discounted price for being a few blocks from the ocean.  I know the first step is usually to buy your own house but I love where I live and only pay $750 a month - Don't tell my landlord they could charge $1,400 haha. So with all that being said, here are the options I am considering:

1. Try to house hack.  I have seen a few properties in coastal areas that have house hacking potential.  Like I said, I sell fixer properties to flippers so I definitely come across a few a year that I would love to take on.  That being said, I would need to raise funds and cosign with someone (probably family) to take on the down payment and mortgage since the property is going to be in the $900k-$1.5m range.  Also, even with renters helping to pay the mortgage, I would most likely be increasing my living expense substantially from what I am paying now.  This is my favorite option because if I figure out how to afford it, I know I'll have an appreciating property that is partially being paid for by renters.

2. Buy in a cheaper market.  I have researched a ton of other markets and like a few (Fort Myers Florida, Baltimore Maryland, Nashville Tenn, etc).  I like this since I could afford to make a move today by myself, but I am not sure I want to take on the risk of investing out of state to maybe cash flow a few hundred every month.

3. Hunker down and save cash. If I put my head down and save over the next few years, I could (hopefully) get to a point where I could purchase a multi-family property to BRRRR in San Diego.

Would love to hear opinions, feedback and/or your experience buying your first rental when living in an expensive market.  Thank you!  
  

[Sebastian Marroquin]

HELLO! My friend you have more resources than you think…. 

You work with heavy flippers? !!!!! You know how many leads they say no to before choosing a flip… 

Build the relationship with them (if you haven’t already ) and buy one of the properties they say no to. Even if another realtor represents you on the purchase (who cares about the commission). 

Buy a fixer (primary home ) at 5% down. And rent your current place to someone for 6 months to 12 months. Even if you let it sit vacant for 1 year (which it won’t) but that would be $700 x 12 : or $8,400 lost… 

If you buy this year at $600k : that property will go up by $30k this year and another $30k + next year. 

Then rent the place out and come back to your little tiny small apt (kidding) :) 

I bet you wont come back lol but let's just say you did…. And rent out the home you bought: that you renovated and that you put an ADU in: that home will be worth $900k with all the forced appreciation. And you will be laughing to the bank.

What if you instead you buy a condo for $500k : same difference and that condo will be worth $650k in 2 years (if you bought a fixer) 

What if you keep it simple and buy a renovated condo: (I don’t suggest it) but it is still better than waiting a couple of years to save more money for a multi unit. 

2 years or 3 years from now after getting started, you will have $100k or $200k or $300k more money than you do now and you will be able to sell it or refinance it and buy something you want to keep the long haul. 

Start marketing for off market listings : you will either find your home or will find more listings to sell! 

But you have to get started. 

Make a plan, save for an emergency and execute!