Buying a home in Bay Area vs rental investment

[Sheeva R.]

Hi all! 

My husband and I are just getting acquainted with this awesome board and were hoping to get some advice. We moved to the Bay Area a few years ago and live in a new three bedroom townhome we rent for 3900/month in mountain view. We have been saving up for a downpayment and have about 120k so far. We would like a single family home w a little more space and a yard for our family. I am wondering from a financial perspective does it make sense to try to buy a place in the area or should we try to find a good rental that is cash flow positive with the money we have saved and continue to rent for the time being? Also the question I have is now a good time to buy in Bay Area or should we wait until prices soften? Any help or insight would be appreciated!

[Dan Cho]

Hi Sheeva welcome to bigger pocket. From a purely financial perspective the choice should be easy, you should be buying as even if you get a great deal on a cash flow property you would just be handing over that income over to your rent. Be advised though Bay Area is the hottest market in the nation thus cap rates are extremely low 2-3%. 

Tough question when to buy, everything can be looked through hindsight. Think of it like the stock market if you could predict it you be a billionaire. Look at it as a long term investment and base your numbers on this. Also I recommend looking at a FHA loan where you can put down 3.5% down payment.