House Hacking in the bay?

Question

I recently started school in San Jose. As majority of you know, prices are extremely high here. Back when I was living in Wyoming I had the plan to house hack with an FHA loan in a 4-unit. Now that I'm in the bay and that I will possibly be employed in the San Jose/Mountain View area, I was wondering what other people have done to get their foot in the real estate investing market here. The only things I can think of is still doing an FHA loan on an SFH and renting out the other bedrooms or just continue renting and find a multifamily to invest in out of state. I figure with as expensive as the homes are here I would be looking at maybe around the same down payment. 3.5% in Cali vs 20% on an out of state.

Matt Wood · Answer

@Andrew McIntyre Here in Atlanta, we have a lot of investor clients in your situation who live in California that we help buy and manage properties for. It definitely takes an extra layer of communication and trust on both sides... if you invest out of state, make sure you get some client referrals and ask for pics/videos of your properties during turns and rehabs. It can certainly be done! Good luck with school in San Jose.

Ali Boone · Answer

I do use property managers. I landlorded one property from afar myself for one year one time, but that was only because I knew the tenant history and how reliable she was and I have an agent friend who was local and could run over there if she needed anything major. But that was just while I was shopping for a new PM. I have an MFR (only a duplex though) here in LA/Venice as of recently but everything else has been SFR so far. Not for any particular reason though other than they are just what I ended up with.

Matt Wood · Answer

No problem! Feel free to PM me anytime.

Ali Boone · Answer

Well to be fair, 20% out-of-state could easily still be less than 3.5% in CA. Lol. (I laugh, but it makes me sad at the same time)

For house-hacking, here are general considerations-

https://www.biggerpockets.com/renewsblog/considera...

Personally, I've always stuck to the renting in CA and investing elsewhere idea.

Amy Little · Answer

I live in the bay area (north bay - marin county). We have SFH here and rental properties out-of-state. For what it is worth, here are somethings to consider.

-How long do you plan on residing in the area?

-What do you want for your exit strategy?

-What are the rental laws in the area you are considering purchasing (make sure you fully understand)?

As you've mentioned, it is very expensive to get into the real estate market here.  If you're going to be in that area for 5-10 years, it may be worth looking into. Otherwise, renting may be the better option and buy outside CA. Personally, I'd avoid a SFH and only consider a tri or quad. Multiple units will always give you a better return than SFH.

Also, you can buy a multi-unit out of state for less than 20%. I did 2 years ago and only put 10% down. I bought it as my 'second home' took out a 7 year ARM at 3.25%. I made no mention of renting out the other unit...or both for that matter.

Make sure you understand the rental laws in that area. As you may know, SF is a heavily rent controlled city. Rent control is creeping outside of the city too. We live in San Rafael and there are loads of small multi-units around us. We have decided not to buy here because it is too expensive to buy-in AND rent control has been floated around city meetings. There is no rent control in place....yet. But, I do not want to be a landlord here if that does take place.

Andrew McIntyre · Answer

@Ali Boone Very nice! Thank you for sharing that with me :) Good luck with your future endeavors!

Andrew McIntyre · Answer

@Matt Wood Thank you for that encouraging bit! I may be giving you a call someday :).

Andrew McIntyre · Answer

@Amy Little Those are some things definitely worth considering! When I first started looking into possible FHA house hacking multifamily properties in the Bay area I was shocked at even the cheapest tri or quad plex prices. I think I'm leaning more towards out of state investing with a property manager. Thank you for your wisdom!

@Ali Boone Sad but unfortunately true, haha. I would love to hear more about how you manage that. Do you use property managers for your out of state investing? And do you deal with Multifamily properties?

House Hacking in the bay?

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