A new property came on the market in my (expensive) area. We're in the shadow of Vail ski resort, a mix of old ranching, new recreation, trust funders and up-valley commuters. Between the mountains and National Forest, land is scarce so prices are high.
Asking price of $725,000.
The main house was built in 1898. Remodeled in 2000 really nice (little dated, but I expected much worse). Floors aren't creaky, modern plumbing and electric, steel beams stabilizing the ground floor (as viewed from dirt crawlspace). So I think the remodel was extensive and done well.
Carriage house log cabin out back is super cute. About 500 sf plus loft with bedroom. Nearly vertical ladder type stairs, peaked roof does not have a ton of head clearance up top.
Big nice yard. Zoned commercial, so there are options (including maybe a run at Airbnb in carriage house), but highest and best use is likely residential for now. Grand old style home, lots of character and nicer than I thought it would be. My wife loved it.
Current situation: Early 30s, both live and work in town in professional jobs (CPA, real estate appraiser). If eventually one or both of us wanted to start our own business or work from home, it could be done in this commercially zoned property. We currently own 2 properties in town: 1 newer 3 bedroom home plus 1-bedroom carriage house above 3-car garage. Grosses $4360/mo, nets $1450. That helps offset our current primary: older 3 bedroom plus 1-bedroom lockoff, which is rented below market to great neighbors/dog sitters for $975/mo. Our total monthly cash flow is $28 (living for free, plus $28 - this factors vacancy and collection loss, mortgages, reserves for replacement, etc. - I'm the appraiser...).
We have nearly saved up $140,000, which happens to be about 20% for the new listing. By renting our current house at $2400 and the new carriage house at $1500, our monthly cash flow increases to $375 and we'd be living in a great house, but no garage (it snows a lot here, current house has a 2-car garage).
First of all, I must thank this forum, Mr. Money Mustache and the recession for getting us started on our real estate journey, and our gainful employment for saving up a bunch and the stock market (betterment account) for giving us an extra $10k or so for free. It's incredible that 1) we actually have a 20% down pmt saved up for a property that expensive, and 2) that, after running the numbers, it actually is cash flow positive.
However, $140k is a **** ton of cash to earn $4500/yr. That's a 31-year payback... I want to make sure the deal makes sense now, because I have no idea where the future is heading. We would like to accumulate more real property at this age and hopefully start a family soon and hopefully retire early. One thing about this market is that it is somewhat similar to California or NY, with the scarcity and appreciation. Our first house from 2013 has gone from $405k purchase price to about $700k now. Rents have increased about 5%/yr. I don't want to buy on speculation that these circumstances will continue, but it's a stable market and I see no downward forces in the near future.
So is it a good move or a stupid buy?
