Beginner Investor Seeking Advice

[David G West]

Hello BP community! I'm a beginner looking for advice. I'm a recent college graduate looking to start my investment journey in real estate.

I currently have about 2/3 amount of debt ($30k in student and auto loans) as I do in assets ($17k cash, $25k in stock market & roth 401(k)).

I would like to invest while rates are still low (looking at August/September). Ideally, I would prefer to house-hack where I live/work in Southern California (looking at $600-$750k duplex+ possible ADU). However I'm also looking into long-distance rentals since housing is crazy expensive here and I want to begin investing sooner rather than later.

With all that being said I have a few questions I need help answering:

1. Would it be best to pay off all my debt before I make a purchase? Student loans are in forbearance until the end of September so I can wait to start paying those and save for a downpayment instead.

2. Should I pull money out of my stock portfolio and/or 401(k) (in form of a loan) to get cash for a downpayment? I will likely working 1099 instead of W-2 come June.

3. To avoid analysis paralysis, should I just commit to a house-hack style even if SoCal is a sky-high market?

I may have answered #3 for myself in the question but I'm worried I won't have enough for a downpayment to compete in the SoCal market. The question also relies on answers to 1 and 2 since the more funds I have accumulated, I'm guessing it will give me a better chance to finance and close a deal.

[Brad Sneckner]

@David G West Hey David! Congrats on starting your journey! There are a couple things to note in your questions. 

First, if you start working 1099 in June, you will not be able to qualify for a conventional or FHA loan. As a 1099 independent contractor, you are seen as "Self-Employed" and you will need a 2-year history. There may be SOME flexibility to allow for only a 12-month history depending on your specific scenario, but if you just graduated that is unlikely.

Second, I would definitely recommend saving more for the down payment, but whether you pay off the student loans or not would depend on your income level. Even if they are in forbearance, they will still impact your debt-to-income ratio since you are looking at a 30-year mortgage and they aren't going to be in forbearance for the whole 30 years. If your income level supports the added "payment" they would calculate (1% of the balance, so ~$300/mo) then I would say save more for the down payment and don't bother paying them off. 

Hope that sheds some light! You're off to a great start, nice work!