7 replies to this topic

[boethius]

Hi All,

 

I will soon have $80K in net proceeds from sale of my current house and have the following 2 options I'm considering, but could use some input on what might be the best option:

 

1. I work in Folsom and live in Elk Grove (it's one reason I am selling in Elk Grove and trying to buy in Folsom), which is a 40-minute drive each way for 5 days a week.  That's about 1.5 hours a day I can use for other things.  Plus living closer to work means I can go home for lunch or tend to my pets or family members more easily, when needed.

 

2. I recently learned some family members who currently live 10 minutes away may be moving to the mid-west.  Since I and other family members may want to stay close to them so that we don't end up in a situation where we only see them once or maybe twice a year, I am reluctant to buy a "forever" house in Folsom, using up all of the $80K net proceeds from sale of my current house and tying me down in Folsom because of the financial commitment.  It may also be harder to rent a $400K 4bd/3ba/2k sqft house out (going rate seems to be about $2450+/mo), so if I ever want to leave Folsom (for maybe the mid-west) to be with family, I may find myself stuck and unable to do so.

 

Becuase of 1 and 2 above, I'm considering the possibility of not renting an apartment (going rate for 2bd/2ba apt off Iron Point is about $1400-1700 depending on the size) since I would not be building equity that way.  Instead, I'm considering buying a 2bd/2ba/2car condo in Folsom, living there for at least 1 year, then renting it out for at least $1500/mo (I see this is more do-able with tech workers looking to rent an apartment but want an attached 2-car garage as well, which apts don't usually come with, than renting out a full house for $2450+/mo.

 

The condo I'm looking at is about $260K, with a rather high HOA of 272, and requires a hefty 20% down payment due to requirement by many lenders.  The monthly payment (after adding everything but insurance) comes out to = ~$1500. 

 

So I figure at the very least, I would have a renter paying down the principal and helping me build equity.

 

But I've learned the reason there's a requisite 20% down on condos whereas with houses you can have a 5% down option is due to some additional risk factors associated with condos.. like lawsuits against the HOA and if the renter vs owner ratio is allowed to become so unbalanced towards renters as to reduce the quality of life for owner-residents and bring values down for all.

 

This has me wondering if a condo would really be a good idea or not for my purposes explained above.  I find the idea attractive and it allows me to have $30K of net proceeds remaining that I can apply towards the down payment on a house in the mid-west should that end up being where I settle.  Buying a 400K house in Folsom right now wouldn't leave me with any funds for a down payment to buy a 2nd property in the mid-west.

 

But I'm concerned about what additional risks come from buying a condo for the purpose/intent I have in mind, and whether I would be better off just renting an apartment and investing that $50K donw payment elsewhere...

 

I would be very interested in your input on what might be the better way to go in my case (rent an apt/house and invest the $50K down that would be used on a condo purchase in other ways vs buy a condo and later rent it out and build equity while leaving enough funds to put down on a 2nd property in the mid-west).

 

I do know that many condo communities set limits on owner vs renter ratios to maintain a healthy quality of life.. so I do have a concern that the HOA policy could change at any time and turn the condo into a non-rentable unit.. then I could find myself having to pay 2 mortgages if I end up moving to the mid-west and the condo rental policies change at some point to become more restrictive.

 

Would it be better to just rent an apartment for now?

 

[Steve Heard]

One thing's for sure, you've given it a lot of thought! 

 

Just make sure you don't get paralyzed by worrying and end up missing out on opportunities.

 

I can think of several clients I had over the past few years who were worried about which way to go, and missed out. One, for example, wanted to buy a rental in Broadstone. He thought $300K was too much and that if he waited they might come down. I just sold a similar model to what he was looking at for $390K.

 

That's not to say you've got to rush out and buy, but I think you've analyzed it enough to make a decision. We can't predict the future, but we do know that homes go up in value, regardless of the type of home, over time.

 

I've never heard of a 20% downpayment requirement on condos. I've sold several to people using FHA financing with 3.5% down. You are correct that lenders are more careful with condos and have more rules in place because of past litigation issues with builders, people not paying HOA dues, and too many renters. 

 

Some condo HOA such as the Madrone, have a moratorium on non-owner occupied units to combat the 'too many renters' issue.

 

I think Vessona, Esplanade, Rivage and Union Square are all fine condo communities here in town, and would not shy away from any of them.

[mac_convert]

I wouldn't recommend a condo next to Russell Ranch because only 20% of the complex can be rented and are! My friends had to sell their place for a loss to get out when they purchased a "home." If you're looking to move away in a few years you might be better off to rent. Homes are slowly rising, but they will drop again when the bubble bursts. If the bubble has burst when you want to move you'll be in a world of hurt. If you can rent the home out and "wait" the market out then buying would be a good option. 

 

$400K is actually pretty cheap for home in Folsom.

[rip]

With your future plans in flux, renting is your lowest risk option.  Lots of relatively safe places you can stash your home proceeds until you know where you are going to land in the long term.

[caligirlz]

As I said in the other forum, there are very few, if any, brand new homes in Folsom for $260k, however I see you are now considering a condo. 

 

I think you also mentioned a multi-family household. I heard recently of another family in that situation. The HOA has required that the family can not park more than 2 cars in the driveway/garage (they have 4 or more), therefore, there is a daily shuffle of cars which are being parked at a local shopping center. 

 

If you really, really want to to live in Folsom, I'd suggest renting to  check it out. 

[caligirlz]

 

I can think of several clients I had over the past few years who were worried about which way to go, and missed out. One, for example, wanted to buy a rental in Broadstone. He thought $300K was too much and that if he waited they might come down. I just sold a similar model to what he was looking at for $390K.

 

 

I remember people telling me to not buy in 2011. But thankfully, I listened to my realtor and not them.

[Steve Heard]

I remember people telling me to not buy in 2011. But thankfully, I listened to my realtor and not them.

He sounds awesome!

[caligirlz]

He sounds awesome!

indeed