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

Buying & Selling Real Estate
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1st Time Home Buyer...terrified...help?

Lisa Taylor
San Diego, CA · Member since 2016 · 5 posts · 0 votes

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!!! =)

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Lee RipmaPro Member
Rental Property Investor · Prairie Village, KS · Member since 2015 · 2k+ posts · 2k+ votes
10y
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.
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  • Chris Eaker
    Buy and Hold Investor · Knoxville, TN · Member since 2013 · 450 posts · 270 votes
    10y

    @Lisa Taylor

    First, take a deep breath. Congratulations on buying your first home. It is a major life decision. Sure, $525k is alot of money for a house, but you're in San Diego and prices are just that high. In my city, that much would by a really nice house in the expensive area of town, but I'm in Knoxville, TN. 

    Your income varies widely. Even if you're on the low end of your range one year, your total housing cost is still less than 25% of your income, which is great. On the high end, it's just over 13%. I think you will be fine. Plus, you can make extra income if you want by renting out rooms on Airbnb. When you do get married, your new husband will hopefully bring income into the family as well, so you'll be even better off.

    So relax and enjoy the process.

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  • Dacia Ray
    Phoenicia, NY · Member since 2016 · 42 posts · 29 votes
    10y

    Its normal to be terrified when making such a big decision! That doesn't necessarily mean you shouldn't do it. I bought a coop apartment in NYC when I was single - it was terrifying, but all the numbers made sense. Definitely one of the best choices I've made. If you have the ability to do this while you're single, do it. Don't wait for marriage. Best case scenario its a great asset for you and your husband as you figure out your goals and your lives together. Worst case scenario it is your own asset, not marital property, and can help you out financially if you need it.

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  • Ron Drake
    Investor · San Diego, CA · Member since 2014 · 180 posts · 72 votes
    10y

    That's a lot of dough for a first home.

    I like that you were doing so well but sharing a $1300/ month apartment with a roomate. Your new mortgage is going to be 4 times your current rent, that is probably why you are freaking out. Not exactly a baby step.

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  • Lisa Taylor
    OP
    San Diego, CA · Member since 2016 · 5 posts · 0 votes
    10y

    @Ron Drake Thank you for your response! =) The $1300 is actually just my portion. Our apartment is $2600, which is actually low for San Diego. My portion would double, but still it's a jump. Actually, she would be moving in with me for a year at the new place so at least I'd have half of it paid for a year.

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  • Lee RipmaPro Member
    Rental Property Investor · Prairie Village, KS · Member since 2015 · 2k+ posts · 2k+ votes
    10y
    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.
    Podcast Guest on Show #373
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  • Account Closed
    Real Estate Investor · Rancho Santa Fe , CA · Member since 2016 · 323 posts · 107 votes
    10y
    Hi Lisa Taylor $525k as You have notice, It dosent Buy a wow place in San Diego seems like a lot, for What You get, Also loan To Income ratio, You technically could buy a $700k depending on savings, $334 HOA is real high, I would really consider am I buying this place cause I love it and if you were you may not be asking us and you should get guided into more important since is the largest purchase in your life, is it a good investment where is my property my neighborhood My complex gonna be in 3-10 years. I will happily guide you but if you getting cold feet it's probably good to back out, I consider my self a pretty smart investor, when it comes to buying income property but when it came to buy my personal home I got blinded by other things and forgot that buying a house is a business transaction that you have to enjoy I didn't loose money but I haven't made a ton, like all other investment
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  • Account Closed
    Real Estate Investor · Rancho Santa Fe , CA · Member since 2016 · 323 posts · 107 votes
    10y
    Oh and I didn't see the part where you said wait, to save more money absolutely not, buy now trust me buy now and later keep saving find that deal leverage your self now that market is hot price are believe to be high but I was a Analyst for 6 years during the crash and my 2 cents they gonna get higher. So buy now
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  • Fyzl Atmar
    Lender · San Diego, CA · Member since 2016 · 41 posts · 30 votes
    10y
    Lisa Taylor, your in the clear for the San Diego market. I'm an agent here specializing in Downtown. It looks like your HOA is low putting you in either East Village, Cortez Hill, or maybe Little Italy. Regardless with 25% down and a 3.25% rate (I'm hoping a 30yr conventional since its for your residence) and with your current buying power you are all set for San Diego. No MI payments and your in an appreciating market. I would say take a few breaths and smile since your about to become a property owner in a great part of San Diego. If you have any questions I'll be happy to answer them or give you a little advice about your particular HOA. Just let me know which development, I've been to them all. Good luck Lisa and I hope after reading all the great comments from the community you feel more confident in your actions! ;)
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  • Ronan M.Pro Member
    Rental Property Investor · Chicago, IL · Member since 2015 · 352 posts · 281 votes
    10y

    Relax....

    If you make $150K to $200K a year you are obviously no dummy.

    You are not buying another country..you are buying a house. Its no big deal.

    Enjoy the experience and have fun. Take Mom & Pop and your friends and go shopping...look at tiles, and light fixtures and your new furniture and all that fun stuff.

    Leave the stress with the realtors and attorneys and just enjoy the ride.

    And best of luck in your new home.

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  • Lisa Taylor
    OP
    San Diego, CA · Member since 2016 · 5 posts · 0 votes
    10y

    @Fyzl Atmar The complex is escala near Qualcomm...so 10 mins to downtown and 10 mins to the beach with shopping/retail everywhere. i actually live there now (and rent) and i love it. From what I've seen of the market (and we all know how analytical i am), it is the best san diego neighborhood for the price and location (centrally located)...what are your thoughts? I feel the HOA is high, but then when i compare it to bad neighborhoods with ugly housing, their HOAs are even higher!

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  • Fyzl Atmar
    Lender · San Diego, CA · Member since 2016 · 41 posts · 30 votes
    10y
    Lisa Taylor I went ahead and did some research on the MLS for Escala. I know the area well and for east of the 805 freeway it is a tad bit high on the HOA but it isn't as high as you would find in say fashion valley as you noticed. The condominium is beautiful and scenic I'll give it that and if you already enjoy living there then it would be a great home for you. With your financial outlook you can afford it and the rate is great! The only other side, and I'm just going to be brutally honest from the investor standpoint your purchasing the home at market rates of around 2005 pre bust in 2008. There is nothing wrong with that, it's a fair and average deal. The home will appreciate albeit a little slower than if you were west of the 805 or south of the 8 but your purchasing this as a residence and not from an investor standpoint. The HOA like I said is a little bit high for its location but after looking at the amenities offered it kind of makes sense tennis courts, lap pool, club room, etc.. But if you enjoy living here and find it to be central for your needs then it makes sense to buy. From an investor standpoint your buying at market value. I hope this helps Lisa. You can always reach out if you want to further discuss, always available! Just go to my site at fyzlgroup.com for my number.
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  • Lisa Taylor
    OP
    San Diego, CA · Member since 2016 · 5 posts · 0 votes
    10y

    @Fyzl Atmar Thank you Fyzl!! Ya, i think i just can't get over the price tag and mortgage cost. This is way more stress than i ever imagined.

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  • Fyzl Atmar
    Lender · San Diego, CA · Member since 2016 · 41 posts · 30 votes
    10y
    Lisa Taylor Welcome to the San Diego Market;)
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  • Ron Drake
    Investor · San Diego, CA · Member since 2014 · 180 posts · 72 votes
    10y

    Escala is a cool place and a great location. There are actually multiple HOAs that you will be a part of at least I was. I bought a condo there and when I sold there were all kinds of people holding their hands out for transfer fees. All in all around $1,000.

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  • Lisa Taylor
    OP
    San Diego, CA · Member since 2016 · 5 posts · 0 votes
    10y

    Thank you all for your comments/feedback! I really don't know what to do and maybe that's my answer... I certainly appreciate your help =)

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  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    10y

    It looks like you are desiring this for a residence and not really looking at it primarily as an investment.  Some of my thoughts: 1) you are in a fairly high tax bracket which will provide a good write off on mortgage interest and property tax.  2) You already live in the area and like it.  This implies that you are likely to stay more than a few years.  I recommend purchase over renting for anyone that is planning on living at the location more than 5 years.   3) because you are not really looking for an investment opportunity but instead a home to live in and enjoy it is more important to buy the place you like than purchasing a little below retail (investors in general do not want to pay retail for a place but they typically are not living there (a few exceptions about living in investments such as for house hackers)).

    I was scared when I purchased my first home.  It was many years ago and the home was ~4X my salary and the interest rates were in the 8% (early 1990s).  My mortgage to income (>40 of my income was going to my mortgage) would leave very little room for fun items or unexpected expenses.  I cut coupons.  I did every unexpected expense item from plumbing to car repair myself.  I am happy that I did not let my fear prevent me from the purchase.  Today I have made multiple offers sight unseen on various properties.  So the first home purchase is scary but I think if your planning on living there for at least a few years you are more likely to do better purchasing it today than later.

    If you were purchasing this primarily as an investment my advice would be a little different such as do not pay retail, consider house hacking, your mortgage to expected rent is to tight to be cash positive with maintenance, vacancy, and cap expense added, evaluate exit strategies, etc.  But you are buying your home to live and enjoy and any investment potential is icing on the cake.

    Good luck

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