First investment: SFH house hack vs out of state investing

[Account Closed]

Hey BP! I’m just getting into the real estate investing world and have had a blast bridging my learning curve so far. My girlfriend and I have discussed getting married and beginning the REI journey. We live in a hot market (Nashville), and are contemplating a couple options. Would value your advice. For context, I have about 30k saved to make my first investment this year. Scenario 1 Move into her place and pay $1,000 in rent, then start investing in out of city/state SFH or MFH around the 100k range. Scenario 2 Use FHA loan to purchase a nashville property which we would renovate the basement to have a live in tenant. Price tag would probably be in the 250k-350k range. It seems like a SFH would be the most affordable option to house hack, and we’re okay with the lifestyle choice. I haven’t seen many duplexes or triplexes in the nashville market. My concern with scenario two is if the ROI would be worth it. Does it make sense making that investment at a peak market? I don’t know much about the tax benefits, or lack of for both options too. With scenario two, would a higher debt to income ratio make it more difficult to obtain future loans? Thanks!! Taylor

[Andrew Kerr]

@Account Closed - go with the house hack. And if it was me at your age, on the scenario above, I would live in the basement and rent out the upstairs (which I assume is larger and would rent for more). Then buy the house in only your name. Then let your girlfriend move in with you. Let her live rent free but have her pay the utilities, or something like that. Then hopefully you are living rent/housing cost free, and she drastically reduced her housing costs. Then you both save money like crazy for paying down debt and/or investing further.

Then as far as the market question, I feel like we are closer to the top than the bottom. But you can still find good deals. And if you are trying to sell a place in the next two years I would be more concerned, but if you buy with a 10-15 year horizon then you can ride out any corrections in the market. I say this as maybe you don't want to live in this first house hack for 10-15 years, but buy a place you could hold for 10-15 years.