First Buy: SFH House Hack in Hot Market vs Out of State SFH/MFH

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Hey BP,

I’m new to the RE world, and have had a blast bridging my learning curve over the last year. My girlfriend and I are talking about getting married and then beginning our first real estate investment. For context, we have about 30k saved up, and are living in a hot market (Nashville). Here are some options we’re contemplating.

Scenario 1

Purchase a single family home ($250 - $350) with an FHA loan in the Nashville market that could be modified for an additional tenant (renovate the basement, add an additional room for forced appreciation that we'd rent, etc.). I haven't seen many duplexes or triplexes in the area that don't need a significant rehab, or that are in our range, so it seems like SFH would be the most practical starting out.

Scenario 1

Move into girlfriends apartment, pay $1,000 in rent, and begin investing in out of city/state SFH or MFH around the 75k - 125k price range. I’ve been looking more into the midwest area or local markets in Tennessee. With our joint income, we’d have about 40k a year to invest.

We’re pretty flexible people and don’t mind the lifestyle choice behind either option. With scenario 1, my concern is the opportunity costs that would come with purchasing a 300k home. Does it make sense to house hack a SFH during a peak market? I also know very little about the tax benefits, or lack of with each option. I’m trying to crunch numbers to see what would be more valuable an investment over a 30 yr period. I’d think the cash flow would be better with option 2, but would it be worth building equity in a home for the first investment? 

Thanks for your advice. 

Taylor