1st Time Home Buyer...terrified...help?

[Lisa Taylor]

Hi there! I am looking to buy my first home and I'm more than terrified. I'm 28, female and live in San Diego, CA. My parents have been pushing me to buy a home for years and I just haven't been ready. I pay $1300 in rent and have to share an apartment with a roommate. I'm so ready to be on my own or just be in a house (with a garage)...something I haven't had since living at home 11 years ago. I make between $130-240,000 a year (very thankful for a great job) and have a ton of savings. The home i put an offer on is centrally located and the nicest, most popular community in San Diego. It is very easy to rent those homes (if i ever needed to). The housing price is $525,000. I am putting 25% down at a 3.25% interest rate so my mortgage with HOA of $334, insurance, and property taxes will be about $2640. The house is a 3 bedroom, 1400 sq ft condo, fairly new so not much I'd need to do. I've studied this SD market for 7 months and this is the proper market value for this home. However, I'm concerned. I don't know what i'm doing and i'm terrified. All I see are dollar signs and I feel like i can't breathe. Is this a huge mistake? I know interest rates are as low as they've ever been so at least I have that going for me. I've heard they will be going up soon (prob after election). I don't know where the market is headed so i'm worried i'll end up losing money as we are at the height of the market (sellers market). Is this too much money to be spending on a first home? I at least know i could always rent the place for more than the mortgage if I needed to. I would also have plenty of savings in the bank for just in case reasons. I just seem to be so unsure and so scared. My parents are all for it and everyone I know (CPA, FA, etc), but I am just having such a hard time with the money this costs. I need some 3rd party opinions. Is half a million dollars just way too much for a first home? Keep in mind...this is San Diego...things are not cheaper than that for the good areas. Would I be better off waiting a few years until my boyfriend and I get married and buy something together? I'm worried the market could be so high then that we couldn't afford anything...Any thoughts/opinions would be so helpful!! Thank you!!! =)

[Lee Ripma]

Hi Lisa Taylor ,
That's great that you're taking the plunge in real-estate. If I had your capital and purchasing power in San Diego (I currently live in Ocean Beach) I would buy a property with more potential. I would buy either a SFH with room on the lot to build more units or an existing duplex, triplex, or quadplex. I would purchase in an area that I think is up and coming such as Barrio Logan or Normal Heights. As these areas continue to improve you'll get appreciation and that will give you options. You know how hot rentals are in SD so you won't have a problem renting. And do you think rental rates are going up or down??? In SD we both know they will continue to climb. By buying something with more potential you'll have more options as you move through life, in 2 years you could move out and rent the whole duplex, triplex, or quadplex and start to cash flow. You could also build new units on the SFH lot or just rent it as is. It sounds like you're buying a condo at retail price, which I think gives you the least exit strategies. Lookup house-hacking and BRRR strategies on the forums if you're interested in how folks often build up a rental property portfolio through new purchases every few years. I'm not sure where your condo in SD is but my problem with condos here is that you lack outdoor space which is so valuable with our weather. Also dealing with others in an HOA can be a nightmare. Best of luck to you in your venture and if you want to discuss more specifics of what I would do I'd be happy to (not sure how much it's worth, I haven't done it yet!). My purchase power is less by I'm targeting a small multifamily in Barrio Logan or a SFH with zoning for more units and looking to make offers starting in November when the market is softer.