Using 600K to invest in cash flow properties or primary residence

[Ryan Smith]

First time on this site and not sure if tis is the correct forum but here it goes:

Important background info.  I do have experience with 2 single family rental properties in the past and growing up my father had lots of investment RE so this is not completely foreign.

My father has sold 2 properties and the funds are currently wth 1031 company.  He is "gifting" me the 600-700K to do what I want with (I realize I am very fortunate so please no spoiled brat eye rolling- its not like that).  I live in San Diego and my partner and I currently rent but would like something a little bigger (in this market that means probably around 3K/month.  

We have a combined annual salary of 260K.  Mine is by far the smaller contributing amount to that total.  We have been approved for a loan up to 1.25M using the 1031 proceeds as a down payment for a single family home.  Given that this is SD that almost put us in our favorite neighborhood but even still, here, that doesn't buy you a lot close to the city which is where we want to stay.

Now, the question:

What is the best way to spend that money.  Would it be smarter to spread it out over 2 properties or put it all into a singe family or maybe a home with a back unit to rent out that we live in?  Because of family money that I will eventually be privy to I don't feel tremendous pressure to buy a residence for myself/us at this time however the ever increasing cost of real estate here does make me feel pressure to do so now.

The other side of the coin is that creating extra monthly cash flow is extremely tempting right now and would be beneficial especially because it could help bridge the income gap with the work that I do.  I am self employed my partner is salaried in a secure job/field.

If we decide to go the investment route what would be best?  There are so many options.  Maybe pay cash for a place in Palm Springs to rent out and use, buy a multifamily in a gentrifying area of San Diego that could be rented out or AirBnB, Pay all cash for one and finance the other or finance both to get more house for the money (I have yet to talk to lender about what we would qualify for in this situation), buy a 4 plex in a place like San Bernadino and rent that out?

If you were in my shoes what would you do?? All of these are good problems to have but I really want to leverage this money the smartest way possible.  

Any and all advice would be greatly appreciated! Thank y

[Robert Freeborn]

Personally, I would go the 4plex option and owner occupy one side. That would create rent free living, thus increasing your "cash flow" by not having your existing rent.  This holds true even if the rent doesn't completely cover the mortgage. You'll still be net positive cash flow each month.

I don't know the SD market at all, so I'll leave that for more experience investors in the area. Its a very large down payment, so they may have some better suggestions.