All Forum Posts by: Peter W.

Buy where you will live.  I would recommend your sister house hack in Columbus and I would recommend you house hack wherever you live.  If she househacks and sells after 3 years, you probably still end out ahead vs. renting for 3 years.   And you can make the decision to hold vs. sell when the time comes around.  I chose not to buy when I was in grad school because I was only going to be there for 2 years, it was a mistake.  I would have done very well in those 2 years (essentially rent free living and appreciation would have covered most of my selling costs) and I ended up living there for 5 years.  Life moves forward, but it was a missed opportunity.

 Don said exactly what I would.  Buy a property in a neighborhood you would be willing to live in where rent is $400-500 more than your mortgage (including escrow for taxes and insurance), learn the laws, set up your bookkeeping strategy, collect rent, build up your reserves, learn the basics of taxes, make repairs.  Preferably something which is turnkey or close to it (no major renovations required).

Good luck and best wishes

I think taking on a major repair for your first investment property is a bad idea.

My recommendation is to start with a something turnkey, see how it goes and then try something a little more challenging.  I personally found with my current life situation (45-50hours/week W2+small kids); anything more than turnkey was too much for me.  And that's something you want to know before you try a major rehab project.  If you do want to go through, I would contact your local building inspector and tell him what you are wanting to do (bring someone else's uncoded work up to code) and see what the process entails.  That'll give you some idea on how easy/hard he is to work with.  So inspectors are thankfully that you are trying to do it right and will be easy to work with (for instance when I was bringing a basement up to code--it had an unpermitted bath and finished room) he didn't make much of a fuss (fix dangerous electrically and let everything that is there be) But I've heard a lot of horror stories, where the inspectors will come in and add tens of thousands of dollars to your project or be totally unresponsive.

You didn't talk much about total financial situation.  Goals, needed income. But real estate is hard to live off of initially in the current environment (generally see high price to rent ratio and higher interest rates).  It varies by cities but finding things with significant cash flow with 20 or 25% down is challenging in the current environment.   I suspect that is especially true in California.  Where I am in Rochester, NY (midwest), I found a good deal if I can get it to cash flow even (mortgage payment including taxes and insurance is 75% of rent).  The point being, is real estate is a long game, you'll invest in properties at 20-25% down and then start reaping the rewards in 5-7 years.

Keep beating the door on banks.  You don't have income, but many banks have investment packages that should work for you and many don't.  Again, find some local investors and talk to them.

Your current plan is to take the 500,000 buy the property for 400,000 plus closing and then spending 90k, which leaves you with no reserves.

Finally, California has very friendly tenant laws, which will vary by town, so you need to talk to some California investors and read up on local laws to figure out where you want to operate.

Good luck and best wishes

Not a good loan rate.

Here are the "current" rates for my local credit union: 

FLFCU Loan Rates  These are probably about .5% lower than what we would actually get today based on how mortgage rates have shifted.

As others have mentioned, even at a good rate, you're going to have a hard time finding a deal which will cover your HELOC/Equity Loan and investment note. You're probably best waiting. Even if you got the rate at 6%, I would still be hesitant as you are risking both properties if things go south.

 No one really knows.  I read its 125% several years ago (in an academic paper).  It's clearly dependent on interest rates and GDP growth.  In a low rate environment (like Japan) you can probably push 150% or more, because the interest is so low (0.79%), it doesn't take much growth to counteract it. I think you estimate it though, if GDP growth>interest rates*(debt/GDP ratio) then you have a manageable debt load. Traditionally countries (that comeback) will devalue their currency to increase exports (and money coming into the country).  But as reserve currency, US isn't really able to do that, hence the tariffs. Another danger is you need austerity to help balance the budget but austerity contracts your economy.  

Japan has been on life support for year with a GDP/debt ratio above 2 for forever, but they have almost no interest.

What we are finding now too, because we are the reserve currency, is that we can print dollars and export our inflation to other countries.  That's why our inflation was only like 8% while in other countries such as Turkey it was 60%.

I am not the expert that some of the other folks are, so take my advice with a grain of salt.

I think the 3k price point, (unless you are in a major city) is tricky.  The income requirement is between 108k (at 3x income) and 126k (at 3.5x) which is generally enough for folks to be able to save up and buy a house (again doesn't apply to the expensive costal cities).  Plus there aren't that many folks make that kind of money.   I try to target $1500-$2000 as a price point.  I have one property at that price point and I got it rented through a combination of luck (they were desperate to move into the neighborhood to keep their kids in the same school district) and the fact that I thought a 3 generation family with 3 dogs was perfect for the house while most landlords thought it was too much (we'll see who is right).  

With that said, I suspect you need to be targeting your marketing better--who can afford 3k a month and wants to rent (instead of buy) a single family home with four bedrooms in the suburbs.  And if you want to get 3k on the high end, what can you offer that the other folks are not.  I believe @James Hamling wrote a post once on this market expressing that he targeted recently divorced parents who would typically stay for 3-5 years while the divorce was finalized and their personal life stabilized but needed a home in their children's school district in the meantime.

Finally, assuming this is a median house (worth about 529k) your money is likely better put somewhere else than in this deal, because most folks where wouldn't buy a 529k house that rented for only 2800-3000$.

So, no, I don't see how Biden mis-managed debt. You don't take into account the pressure of Wall Street and political parties. Facts don't go away by ignoring them. No mis-management.

Here's what I see here, you've given the reason why Biden mismanaged the debt (political pressure and pressure from wall street) and claim that the reason negates mismanagement.  Maybe it was a forced error, but an error nonetheless. I don't mean to pile on because I appreciate you being the counterbalance to V.G. (which is helping me learn).

Likewise, it can be true that Biden mismanaged the debt, and Trump is boondoggling his second term. Just because Biden dropped the ball doesn't mean Trump isn't also.

Edit: Thank you to everyone posting kindly on the thread, it's been helpful to my understanding, especially when there are disagreements.