House Hacking in appreciate area VS Out of State investment for cashflow to pay rent?

[Wei Zhao]

Hi everyone,

I live on the east side of Seattle, where almost no cash flow can be found. I’m currently renting and haven’t bought my first house yet, but I’ve decided to start investing in real estate. I’m in my late 20s and not in a rush to retire, but my goal is to achieve financial independence in the next 10 years through real estate.

I’m considering two options:

Option 1: House Hacking with a Multifamily Property
I probably have to use all my cash for the down payment, and the rent income won't cover the mortgage. Besides my current rent, I still have to pay an additional $1~2000 for the mortgage, etc.

Pros:

• Better financing rates than for investment properties
• can manage it myself to save the PM fee
• having my own place without worrying about rent increases

Cons:

• May only afford a small townhome or apartment, not sure if I still want to live there after 5 year
  

Option 2: Investing in Out-of-State Multifamily Properties
I could use my cash to invest in several multifamily properties out of state and use the cash flow to cover my rent.

Pros:

• Potential to spread risk across multiple properties
  The cashflow can cover my rent, maybe have extra left

Cons:

• Additional costs for property management
• Limited potential for appreciation
• Have no experience in managing OOS property, and I am afraid it will be annoying

I’d love to hear your thoughts or any advice you might have.

Thank you!