All Forum Posts by: Anwar Mai

Thanks @Sam Josh for your perspective. It's very helpful. This property is a "middle of the road" property for the peninsula. My ideal would have been in Millbrae, Burlingame, or San Mateo. This new primary residence is north of those cities. To buy a modest property in those cities with better schools would be $2M+. 

I feel like I'm buying at the top of the cycle, which may be fine since there is never a good time to buy. I thought I was buying at the top 11 years ago and now see $300k appreciation on my current home. If I buy the new home, I have the option to rent it out for a good cash flow, or sell it at what I think is a top and invest in a 10 unit with ~$10k gross income a month in CA ($20k in some parts of the country. I have to find those!)

@Amit M. a house down the block just accepted an offer for $1.6M-$1.7M. In 2 years, there is a lot of new development coming available. There are at least 570 units in South San Francisco planned. San Bruno and Millbrae also have a substantial amount of new developments currently in the planning process and could be coming available in 2 years.

Supply risks are something I'm considering. The new units coming in are condos, townhomes, and SFH. I'm also considering the increased population pressure on the school district where my kids will be attending. If the new developments offer the same size and floor plans, they may lower the value of my home if they are offered at a lower price.

Interest rate risk is also a risk. As interest rates are climbing, I should lock in my primary residence at a lower rate for the long term, albeit, higher price. If there is a price correction (an aggressive 25%) because interest rates are climbing, the monthly payments wouldn't be manageable at another $1.5M property. 

Assuming 2% appreciation in the bay area's peninsula, my $1.525M purchase is $1.586 in 2 years. That's ignoring the increase from $1.525M to $1.65M. If I start with a $1.65M value assumption from the offer the seller already received and the offer a home down the street received, in 2 years, the home could be worth $1.7M.

I think the best course of action is to purchase the "modest" $1.525M house, sell my current property, and buy an investment property with the $400k gains. This would make my family very happy. Kids would be able to have more room to run and play. Neighborhood has many kids the same age as my kids and the parents are friendly.

On the flip side, we are cozy where we are. We are currently saving ~50% of our income. We could live off my wife's income if I choose to devote my time to real estate and quit my job today. I want to keep a W-2 job so I can continue to invest in properties, whose cash flow will equal $10k/mo.

The former will delay my goals, but will make my family happy now, and also make me happy. The latter will make me happy in the future, and fairly invisible to my family. 

@Alina Trigub My wife and I have discussed the purchase at length. It seems like a good buy for the family, long term. It goes against investment basics I've read here on BP, but it would allow the kids to spread their wings.

@Andrew Johnson If I decide to do both, buy the primary, we could sell our current home for a ~$400k gain and invest ~$250k to down for a $1M 10 unit property with commercial terms. 

Thanks to you both for your feedback!

@Andrew Johnson Thanks for your feedback. I've been in my current primary residence for 11 years. I expect to stay in this house for the next 10-15 years until my kids are out of the house. My in-laws are also aging and we expect to have them move in with us and then rent their home in San Francisco.

I know I'm buying at a peak, and need to account for a correction. Since it would be my primary residence, I think I can weather the storm. For example, purchased my home in 2007 for $699k in a short sale, saw the neighbor buy their home in a short sale a few years later for $450k. Now I'm close to $1M. It will rent for $4k/mo. But it could be a multifamily...  

I do think I'm missing out on buying a cashflow multifamily somewhere else in the country, which gives me pause. I have a SFH off market deal that I'm working on closing now. It is cashflowing nicely and hope to use that money in 3-4 years to buy another multifamily, out of state. My opportunity cost is 3-4 years, potentially $300-400k. Ouch. Now I need to go find some $1.5M $20k+ mo rentals that @Mike Dymski references. Maybe that will snap me to my senses ;-)

Thanks for the replies. Guess I will need to do both. 

With the kids, I think you should buy the best neighborhood and schools possible. When I bought my current house, I was looking at Millbrae as a stretch, but settled on south city because it was realistic. Now I'm looking to upgrade and can't afford Millbrae with my current budget. As your primary residence, you should purchase the best house you can afford with your kids education and extra curricular activities in mind.

Problem with SF public schools is the lottery system, but that's a whole other discussion.

I do plan on staying in the bay area, as my family is here and I don't intend to move from the weather, activities, and economic opportunities.

Hi BP, Joined 6 months ago and learning quickly as I go. I'm at a crossroads and looking for advice. I'm in Northern California and have been looking at purchasing a 4 plex for the past 6 months. Going to an open house for a primary residence, discovered that a friend was selling their house. Their list was $1,575,000 on a 5br/3.5 ba. They would sell it to me for $1,525,000. They declined an offer of $1,650,000 that was asking for a quick close. They need to stay in their home for 2 extra months after closing rent free. After those 2 months, they would pay $6k/month for rent. HOA is $85/mo. PITI would be ~$7400/mo.

I am approved for a 4.375% loan for 30 years with 20% down. I can make the monthly payments, but it would limited the money I set aside for investment savings. For an investment property I can get 5.125% on 30 years with 25% down on a $400k investment property like a triplex or 4-plex.

Should I pass on the primary residence and invest logically? Emotionally, I love the home. Great place for my kids to grow up and the neighbors are great. Or should I put the money and invest it and have it grow, per Richest Man in Babylon, Millionaire Real Estate investor, Grant Cardone, and perhaps even what our beloved podcast hosts Mindy Jensen, Scott Trench, Brandon Turner and Josh Dorkin have done.

I currently have a primary residence that I plan to rent if I were to purchase this new primary residence. I could rent for $3500-$4000/ mo. PITI on my current primary is $3500. When I started on this journey, I was looking at putting down $100k on a 4 plex and perhaps buying others as they become available in the year. With this primary residence purchase, putting down $305k zaps my savings, and I would have to start from scratch.

The questions boils down to whether I want financial independence or if I want to be house rich and cash poor. I think I've answered my question.

Also depends on how the market moves. If there is softness in the coming 2-5 years, I would need to be ok with having a mortgage under water. If the market continues to rise in the bay area, I would be missing out on those gains. Major FOMO.

Pretty personal post. Looking for some guidance. Thanks!