First Property Options - 22 year old San Diegan

[Brianna Billings]

Hello All, 

I graduated from undergraduate in May 2020 with no debt (low tuition cost, scholarships, and a little help from my parents). I started my first salaried job ($80,000k per year) in early August 2020. At that time, I had about $11k in my bank account and $9k in a Roth IRA that I had started about 2 years prior. I kept my high school car which is 100% paid off, and I pay my parents for insurance twice annually (about $1000 total). I also opted to continue to live with my parents, rent free. Because all I pay for is gas and food, I have been able to save most of my taxed salary and currently have $38k in my savings and $12k in my ROTH IRA. I have also been putting 10% pre-taxed income into my 401k and have about $4k in that; 6% will be matched following 1 year of employment, in August 2021.

When I reached 6 months of of employment, I applied for home loan preapproval from 4 different lenders. My max loan currently (30 years, 2.855% APR) is for a $580,000 purchase price, with 5% down ($29,000). I am able to purchase a $600,000 home with this lender if I increase my down payment and closing costs to $50,000. This would take me about 15 more weeks to accomplish at my currently savings rate.

I would like to purchase my first property with the intention to occupy one room and rent out the remainder (I am actually moving in with my Grandma for the foreseeable future, she is 92 years old. So until I need to live elsewhere, I could potentially rent out all rooms or the house/condo as a whole? I am not sure if that is an issue with the rules for a first time home owner). I live and work in San Diego, where property is pretty pricy. I have a few options outlined below and would like to get more experienced opinions on what my move should be. 

1) Single family home inland with large property: These are going for between $450k - $600k. If the property is large enough, I could build an ADU on it in a year and also collect rent from that. Only issue is that the rents are barely covering the mortgage payments it seems. I think the only way I would make money every month would be with the ADU.

2) Condo in beachside communities: The ones in my price range are between 2-3 bedrooms and 1-2 baths. They are going for between $450k and $600k. I like this idea because I surf, so if I need to ultimately stay in my first property, I would feel way better about being close to the beach. My hesitation with this option is the HOAs I am seeing and the lack of potential in the property. The HOAs are around $300/month, which really cuts into the profitability it seems. Also, unlike the single family home, I am limited in the amount of additions to the property that could potentially increase rental income as well as appreciation. 

3) Condo in inland communities: These go for between $350k to $450k. About 2-3 bedrooms and 1-2 baths. My hesitation with this is that it is well below my budget. My idea was to make the most of the 5% down payment, since I only get that opportunity on my first property I believe. I want to leverage myself as much as possible in this first property so I am able to take out more money from it in the future. Is this a correct way of thinking, or should I buy anything that produces cashflow each month?

3) Any other ideas? Things that you noticed I am confused about/need clarification on?

Sorry for the essay! I really appreciate anyone who took the time to read this. 

Thank you!

Bri