Should I Rent or Purchase?

Question

Hey everyone!

I know there is some information contrasting the difference between rental and purchase as primary residence but I want some advice about my particular circumstance.

I am in the process of relocating to Paso Robles, CA for work and am having a very hard time finding a place to rent for my family of 4 (Plus small dog). I was hoping to find an affordable apartment about $1200 to $1500 a month, but nothing is coming up within that range. The handful of rentals available that would accommodate us are between $1900 to $2400 per month.

I am not familiar with the current market trend (UP or Down) in Paso Robles and there seems to be a very limited number of homes for sale (Which might be the reason the cost of homes is high).

Either way, I have seen a few properties in the 330k-350k range that might end up being nearly the same monthly payment for a mortgage as the rent or $1900 to $2400. The benefits would be the tax and interest that can be itemized on the tax return. Also, Paying down the mortgage will help to build some equity. If I do move back to Florida, I do not think I would have an issue renting out the property and covering the mortgage. It would just be about having a reliable management company to handle the rest.

Any thoughts and ideas will be greatly appreciated!

Thomas S. · Answer

Renting will be less expensive regardless of what you pay, equity growth in a personal home will likely be insignificant and renting a $350K home will likely have negative cash flow after expenses. If the rent only covers the mortgage you will defiantly have negative cash flow.

Patrick McCandless · Answer

Hi @Andres Blandon I currently live in Paso Robles and it has been a second home to me since I was born. I am managing broker for a local real estate office which services everything from San Luis Obispo to King City in Monterey County. We do manage a handful of rentals, but they are all in Oak Shores at Lake Nacimiento which is about 35 minutes from Paso. I would love to connect and see if I can possibly find a rental for you and your family to secure before you arrive and of course answer any questions regarding purchasing in the area and assist with that.

Account Closed I would love to connect with you as well.

Andres Blandon · Answer

It's a bit too late to negotiate a higher salary since I already accepted the position and will be there next week.

One thing I did notice is that some properties that are below market value (possible good flips) require a new water well to be put in. I'm not familiar with this process in regards of how long it would take to get permits and have work completed.

Does anyone know of have experience with water wells?

Account Closed · Answer

@patrick McCandless Hi Patrick.  I'm new to the bigger pockets forums and don't know how to connect through official channels yet.  Maybe you could advise?

Account Closed · Answer

I have only been in the Paso Robles area for about three years myself.  I don't know every detail of the water situation so do your own research to confirm, but here is my understanding.  This area of California has been in a long drought (5 - 7 years), and on top of that we have a big agriculture based economy.  We have huge vineyards that grow wine grapes.

The combination of an extended drought and the need for Agriculture water and lowered the water table by a considerable amount.  Wells that used to produce at 300 ft are now dry, and new wells are going in at 700 to 800 ft.

I have heard of well costs ranging from $10,000 to $40,000 depending on the area.

Account Closed · Answer

I live in Paso Robles and you are right affordable housing is rare in this area.  If you are moving here for work I recommend that you negotiate for a high salary because you will need it.  With that said an occasional rental does come on the market between $1200 and $1900, but you need to act fast when you see one.

Andres Blandon · Answer

I wanted to submit my latest update on this post:

I spent 6 weeks in a hotel looking for a rental that would accommodate my family and I in the $2000 range and there was nothing to be found. Half way through January I opted to find a decent property that was somewhat outdated and could have upside potential. I found a house 3/2 for 342k and my mortgage was approximately $1900 a month.

I did some light renovations, like new bathroom vanities and some kitchen updates. After 6 months, I had to move again and decided to post the house on Zillow as a sale by owner. Within 1 week I had the house under contract to sell without a realtor. (It really saved me not having to use a realtor this time, other wise I would have had to pay between $10k-18k in commission).

I could have also made a nicer profit, but when the appraiser came through, the appraisal came in 10k below the sale price. I had to move fast, so I agreed and we closed in July. Now I am in a temporary rental and looking for my next deal.

Andres Blandon · Answer

Hey Greg,

Good point to focus on the cash flow... I know that the 2 mayor aspects of investing in real estate are cash flow and equity. So i will definitely keep that as my focus.

I was able to see some foreclosures on auction.com that start bid around 100k to 200k, but they required cash. Those 2 properties have an ARV of about 345k.

I need to start making some connections here on bigger pockets that might be able to fund some of those.

Until then, I might just stick with a rental.

Thanks for the comment!

Zachary C. · Answer

@Andres Blandon,

Well, another thing to consider if you purchase is you should have time to develop a network of people that can deal with issues for you. Perhaps find a good handyman that you use every time an issue arrises at the home and develop a relationship with that person. If there is an issue beyond his skill see who he recommends, for instance maybe he has a buddy that is a plumber that can get you a better price than whatever the large company with all the ad campaigns in that town will do. If you build that good relationship with the handyman and he makes good recommendations for the specialized issues then might have just built your property management network. That could be very beneficial, esp if the amount you can charge for rent is anywhere close to what the mortgage payment is. Sure, you might get a call in the middle of the night because of chance or the time zone difference between California and Florida, but how often is that going to be an issue with one house thats in good shape?

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