Mountain House , CA Investing

[Nimit A.]

Hey guys, I'm just getting started with real estate investing and want to get started on purchasing my first rental property. I am a relatively young investor (22 y/o) and was looking into the Mountain House area as it is nearby where I live. I have a couple of questions related to this:

1. I was wondering if anyone has heard of or has any experiences with someone with not that much credit history getting a loan. I have a good income and have money available for a down payment with a credit score in the low 700s, but does anyone know if the bank would give me a good rate for a 30 year loan? 

2. I was looking into the mountain house area and it seems like the community is really good and is up and coming still. Does anyone have any experience with this area? It seems like an up and coming area for bay arears that may be getting priced out of the valley.

3. The down side to this community is that the 1% guideline would not be applicable here... In fact it would be closer to .5%. But I was thinking with the tax advantages, newly constructed homes, no property manager, it would be fine to start here. My rational is that repairs would not be a big issue and I could get warranty to offset any smaller repairs and so most of the generated rental income could be used towards the monthly payments and property taxes. I would honestly be very fine with breaking even right now as it would be my first purchase and I have no financial obligations.

Thanks a lot!

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@Nimit A. 

We're in the same boat! Although I'm in Arizona I'm having difficulty finding 1% deals in my area let alone 2% deals. A couple things! You will most definitely qualify for an FHA loan with a credit score above 700. With the FHA you only have to put 3.5 % down, but consider closing costs etc. Also until you cover 20% equity in the home you will have to pay some type of mortgage insurance..you may know about this but just wanted to mention.

Also, with that FHA you will have to live in for some period of time before turning it into a rental property.. That brings me to my next point. If this is solely a rental property and not meant for a live-in that will turn into a rental, I would advise moving away from .5% deals. It seems that's based on specific area dependent circumstances 1% can cash flow but anything less will cost you money (from what I've learned here on BP).

That being said you may want to look at investing outside CA for buy and holds (I have seen some pretty fantastic flip stories in the the hot areas of CA). 

IF you're set on investing in a .5% prop do note that there are depreciation write off benefits for properties!

https://www.biggerpockets.com/renewsblog/2014/07/3...

So looking at this property you may capture 3 out of the 4 rental property investment perks

1. mortgage pay-down

2.Tax advantaged

3. Appreciation

(Although its never advised to depend on that appreciation while making the decision to invest)