@Jack Plantin, I'm sure I'm not the only one to say this but these questions are hard to answer until you make certain choices based on your specific situation. One place to start is to get connected with people in your desired areas and really dig into the scenarios. Your questions can be answered best when having a conversation with a good lender and realtor who know what options to give you after seeing your detailed situation.
That all said... I went the buying where I live, La Grange (Chicago West Suburbs), route. When starting out and managing yourself, it makes sense to have as much at your reach at a moment's notice. There are so many benefits to going the "house hacking" route. I moved from a SFH to 2-unit property. I ended up keeping the SFH and rented it out. Even if I would have sold the SFH, it made sense for me to move into the 2-unit. I was able to find the perfect property for what I needed. Each unit in the 2-unit is larger than my SFH. The public schools are good. The neighborhood is amazing. I'm paying off a more expensive property for less than what I was paying for in my SFH (this by itself is like doing magic). All of that, and I was able to lower my out of pocket expense for personal housing.
In this situation, I am not getting cashflow while I am living here. Meaning, the rent from the second unit is not covering the mortgage and expenses for this 2-Unit. If you want to be close to cashflowing or breaking even in these A/B suburbs then you most likely have to look for a property with more units to make the numbers work. Plus, I would have had to give up some of the benefits I mentioned. I was not looking for a cashflowing property in this house hack scenario because I figured the other benefits outweigh that. Lowering the out-of-pocket expenses for housing did help my savings rate get a boost. Which will help put together funds faster for the next investment.
No matter the location or the time, money is being made in REI by someone. I think as long as you set up your systems and people correctly, you should be able to make your investment work in either Minnesota or in the Chicago area. If I were to invest out-of-state (or further than a 2 hour drive from me) I would definitely consider getting someone to manage my property. There are several people on here doing out-of-state investing and make it work for them. I would just make sure to vet the potential property manager to make sure I am confident that they will care for my property well enough. And even then I would have to keep an eye over them to make sure there is no complacency.
When it comes to your last question, using other people's money to finance an investment is usually a nice tool to have. I would not do that on my first attempt but once I am comfortable with my abilities and have the systems and connections in place I would jump on that in a heartbeat. One suggestion I came across is when getting into any agreement with anyone, make sure each person/party knows EXACTLY what is expected from them throughout the process. Write down the type of control each person has in each phase of the process. Who can dictate what and how much responsibility each side has. That will lead to less headaches later.
I put myself in a position to get lucky. I reached out to people doing what I want to do and am learning from them. I got together with an amazing realtor in the area who knows what it takes to invest in properties. He was able to connect me the right lender, lawyer, and contractors. All of which know what is needed to make investments work. It took months for me to find what I needed but when I found the right people the right paths started showing up. I suggest you start looking to meetup with others that are doing what you want where you want.
If you need any help or are interested in the near west suburbs of chicago, let me know. I'll try to help any way I can. Good "luck".
