First Property: FHA or Conventional (Specific Situation)

[Matt Anthony Soriano]

Hi all! I have been having trouble deciding between two options regarding my first rental property, so I thought it'd be best to just ask the BP family :)

Context: I am a newly graduated college student (graduated in may!) who is working as an engineer for a major general contractor in construction. Due to the nature of my industry, we are relocated every several years once a project is finished. In this case, I am working on a new building for a hospital in the Los Angeles county area. I am currently living in a studio for 1500 a month, next to my job site. It eliminates all commute but it is definitely a hit to my expenses. I have really been pushing myself to get into real estate while I'm young and still have the flexibility to make mistakes. Here are the two options I've been stuck on:

1. 1. I have been searching for SFH around my area (live in Los Angeles County in Southern Cali) to use as a rental property that I would hold long-term. The prices are pretty absurd, with the main area I am looking at having a median price of around 600/700k. I would use a conventional loan and try to make the 20% down payment. I could cover most of it, may have to find ways to raise money for the rest of the down payment, and I have a solid W2 job. I would then rent out that whole house all while living in my studio since I have a one-year agreement to stay here. I cannot house hack at the moment unless I break my lease. The pros are that I get my first deal, learn, get a rental property that will eventually add to my wealth in the coming decades, and set myself up as a lifetime real estate investor
2. 2. Or I can wait until I move to my new project around January 2023. With the move, I can house hack a property around the new jobsite (still will be SoCal area), so I can afford a bigger property with the 5% down. Then with the FHA loan and renting out the rooms, I can cut living expenses down and eventually start earning monthly cash flow and equity in the property. The downside is I do have to wait a year and a half before my first deal.

I would really appreciate any feedback, comments, constructive criticism. I am blessed to have found the BP community when I was so young! Thanks, everyone

[Chris Levarek]

Option 3 : Invest Remotely, where it makes sense. Buy the book "Long Distance Real Estate Investing" by David Greene.

But I would say, house hack. The less equity you use to fund your purchase, the more properties you can scale into. Or the more strategies you can try, such as remote investing. If you commit into one deal, you will be stuck trying to get the equity out(especially in California) or saving up for another 20%(difficult especially in California). 

Remember, if you purchase that SFH, you might not have enough income to fund another loan quickly at California prices, so that house hack next purchase could be out the window.

Starting with the house hack will be less equity down and simplifies management. Being able to manage a property in a house hack will be easier, since you on site versus driving to a SFH. A lot can be said for learning the ropes while making it easier on yourself.