Buying a large primary residence vs. investment property

[Anwar Mai]

Hi BP, Joined 6 months ago and learning quickly as I go. I'm at a crossroads and looking for advice. I'm in Northern California and have been looking at purchasing a 4 plex for the past 6 months. Going to an open house for a primary residence, discovered that a friend was selling their house. Their list was $1,575,000 on a 5br/3.5 ba. They would sell it to me for $1,525,000. They declined an offer of $1,650,000 that was asking for a quick close. They need to stay in their home for 2 extra months after closing rent free. After those 2 months, they would pay $6k/month for rent. HOA is $85/mo. PITI would be ~$7400/mo.

I am approved for a 4.375% loan for 30 years with 20% down. I can make the monthly payments, but it would limited the money I set aside for investment savings. For an investment property I can get 5.125% on 30 years with 25% down on a $400k investment property like a triplex or 4-plex.

Should I pass on the primary residence and invest logically? Emotionally, I love the home. Great place for my kids to grow up and the neighbors are great. Or should I put the money and invest it and have it grow, per Richest Man in Babylon, Millionaire Real Estate investor, Grant Cardone, and perhaps even what our beloved podcast hosts Mindy Jensen, Scott Trench, Brandon Turner and Josh Dorkin have done.

I currently have a primary residence that I plan to rent if I were to purchase this new primary residence. I could rent for $3500-$4000/ mo. PITI on my current primary is $3500. When I started on this journey, I was looking at putting down $100k on a 4 plex and perhaps buying others as they become available in the year. With this primary residence purchase, putting down $305k zaps my savings, and I would have to start from scratch.

The questions boils down to whether I want financial independence or if I want to be house rich and cash poor. I think I've answered my question.

Also depends on how the market moves. If there is softness in the coming 2-5 years, I would need to be ok with having a mortgage under water. If the market continues to rise in the bay area, I would be missing out on those gains. Major FOMO.

Pretty personal post. Looking for some guidance. Thanks!