All Forum Posts by: Kelly Nolan

Thanks @Amit M.That’s what I was thinking too.

Re moving, we are pretty ambivalent either way for the next 2 years between moving or staying , want to do what makes most sense financially. Doesn’t seem to make sense to buy now and pay a higher mortgage or rent out and be negative cash flow for 2 years.

I’ll closely track the market and interest rates. Given our flexibility, when might be a good time to take the plunge in your opinion? Any market signals I should look out for?

We're not interested in selling our current apt. We think it'll appreciate quite a bit over the next few years at least, as the area is growing. Even afterwards, it's going to be a great passive income. Downtown SF is always going to be a strong rental market.  As I mentioned,  we have the ability both in cash reserves and our combined income to afford to this house now. It's just that we don't NEED this house right now, but will in a couple years.

I know I"m saying rare and I shouldn't have said that. There are other houses that will come on market in the near future at the same price that I'm sure we'd be just as satisfied with, this one just does seem like a particularly good value.  But again "value" is a little different in this case, because we're going to hold on to it long term, so it's more a "value" to us that we can easily make a 1.55m even nicer with a few fairly inexpensive changes.

Thanks all the advice. We're leaning towards just waiting (keeping our downpayment money in equities) to buy in 1-2 years for a few reasons

1. I'm expecting a steady appreciation in this market. I know some up and coming areas are growing super fast, but this one has been steady historically. 

2. If we buy right now, we'll for sure bleed money (though not a huge amount long term), and all the risks of maintenance with tenants and potential vacancies. That's a decent amount of hedging for a steady-appreciation market.

3. If interest rates increase, we can always refi later when they're down

Yes, I have no idea what the market will be like in 2 years, and maybe i should take advantage of the "soft' market and low interest rates, but i feel like i'm hedging against a small potential that things will be very different in 2 years, and I know i shouldn't speculate...If there's something I haven't considered in this, please let me know

Thanks @Jeff Pollack. In discussing this more with my husband, we are pretty torn. Do we buy a house now, be negative cash flow for 2 years but lock-in the price

or wait for  2 years to buy? Does it matter? I’m not attached to this particular house, but I am a little afraid of getting priced out. Right now, the down payment would deplete about 80% of our liquid cash.

You’re absoliutely right, our investment strategy is focused on creating long term wealth and simplyfing our investments.

Thanks @Mark Schwab that's helpful. I realize the prices/mortgages here give investors sticker shock, but for those of us that plan to stay here and raise a family long term, we have a harder time buying a home AND investing in real-estate. I might try to look for homes with in-law suites that I can rent out separately short-term or airbnb out, but this is very restrictive. 

re investing: My husband and I have FT jobs and don't have the time or comfort to invest in large properties out of state.  I'm more interested in having a few more expensive properties (less management) to rent out than a large portfolio.  E.g. We have a condo in San Jose that we bought ~8 years ago for $250k all cash, fand is generating 30k/year cash flow positive. Our current condo in downtown SF was bought 5 years ago $650k. we put about $70k of work into it and It'll rent out for about $55k/yr cash flow neutral but only because we have a 15-yr fixed, otherwise it'd be positive. Granted, these were great deals. But this is the type of real estate we're interested in, though I don't think these types of deals exist in the bay area anymore. Again, this is very anecdotal and we have been pretty fortunate, but just wondering why most investment strategy on here focuses on optimizing # units? I'd rather buy fewer, higher-end units in good but growing markets. Is that a poor strategy in terms of return?

Thank you all so much for the advice. Yes - we are planning to live in the bay area long term. At least until we retire

Unfortunately, renting a home in the area we'd like to live with our family is out of question.  I'm trying to balance quality of life with investment, and having a family home is part of quality of life.Not to mention the rental area in that area is pretty non-existent for single family homes.

There is no way we can afford both an apt building and a home right now. I am a little afraid of getting priced out in 2 years like @Mark Schwab mentions, when we are ready to buy if we don't buy now.  For reference, we are looking in the walnut creek area. 

Is it crazy to think that if we buy the home now, have negative cash flow for the next two years. Then the next time we have enough cash reserve, invest in something more lucrative? If we make another investment now, it's going to take quite awhile to build up the cash reserves to buy a home.

Honestly, I don't think my husband and I are  are in a place to manage an out of state apt building investment like that right now. We're more attracted by airbnb rentals in vacation areas (like palm springs), but haven't done enough research on this right now. We would not be interested in investing in a low-income area.

@Steve Hall yes, I do mean the SF bay area. $7500 would be our monthly cost including insurance/fees. The unfortunate reality is that, to buy the home we want, that is what we will have to pay. We have 1 kid so by the time we have our 2nd, we will be moving out of our apt into a home that we plan to stay in long term.

Would it make sense to buy a home, rent for 1-2 years (negative cash flow), with the intention of making it our primary residence thereafter? Please advice. Is there anything I need to think about here?

We found a home that we love in the bay area and is a good value (not for a short term investment, but as a family home. Ready to live in but with some simple cosmetic work, it will look amazing). However, we currently own our apartment and we're not in an urgent rush to move (but def can if it makes financial sense). Is it worth buying now given that interest rates are low and homes like this come around pretty rarely (i'm very familiar with the area). We have the money to buy exactly what we want now.

Here are some details: If and when we rent our current Apt at about $4500/month, we'll break even with our apt mortgage/all fees.

The home we like is in a steady growth market of 4-6% per year, but not in a high appreciation area (though who knows with all the IPOs this year in SF...but I don't want to speculate). Costs $1.55m. We'd put 20% down.  Our monthly mortgage (including insurance and all that jazz) would be $7500/month. We can rent for $6000/month. That's an 18k per year that we are paying + maintenance. We could move in immediately, but if we owned both, seems better to get the higher home rent than the apt.  Would this ever make sense to do? (I'm not so worried about tenants/evictions in this year, because it's all high-income families)

While we are ok with waiting 1-2 years to buy, we can probably find something else in our price range that we like but won't be as great of a value (most on the market are either turnkey or needs to be gutted completely, which we won't do).  Not sure what will happen to interest rates in the future and I expect a steady growth rate to be conservative, but of course, risk of that it could be higher. But not lower.

If we do wait 1-2 years, we're not planning to buy anything else in the meantime, because we will need to money for the down payment.