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Wife and I moved to Houston about 3 years ago from Orange County, CA to start a business and buy a house. We realized that Houston is not where we want to be long term and we are starting to plan our "return" strategy.
One of the possible scenarios for our return is to buy a condo or town home in Cali after we save enough for a 15 to 20 % down payment, rent it out to cover most of the mortgage until we accomplish our goals in Houston (sell business and house) and then return to Cali with a place ready for us. Of course there are a lot of moving parts, number crunching, reserve money to establish ect.
Absentee landlording is a big risk even for experienced landlords. The amateurs invariably get burned by tenants that don't pay rent, destroy the property, and take many months in court to get rid of.
If you use a management company, you share your money with them and it's still no guarantee that you won't get burned.
In an HOA people hate renters and will complain to the HOA every time your tenant slips up and you'll end up getting fined.
Besides, to get a mortgage on a rental often requires 30% to 40% down and if you lie to the mortgage company when you apply, that's fraud and comes with serious penalties.
My opinion for the two cents it's worth: Save as much as you can and buy when you are ready to relocate and move in.
1. The companies that "manage" the condo corporations thrive on creating financial hardships for owners in order to generate more revenues from "late fees", "payment plans", "collection fees", etc.
2. As part of that objective the management company will heavily promote either a "no renter" scheme or an expensive and useless "background check" scheme where the condo corporation requires the owners to pay (typically the management company or an affiliate) to perform a "background check". There will be fees for these and you are essentially at the mercy of the management company for this absurd racket. You also have no assurance that the condo corporation board won't adopt a "no renter" resolution or something that makes it basically impossible for you to be able to depend on renting.
3. If you violate either the "no renting" resolution or the "requires prior approval of the board (i.e., management company) scheme" you will then be subjected to "fining" and "late fees" for not paying the fines. The management company and aligned condo attorney will then threaten you with foreclosure to collect these fees.
4. It's a mistake generally to consider purchasing a condo to begin with. It would be a bigger mistake to purchase a condo in another state with the expectation of renting it out and moving there at some point in the future. Also as noted by adjusterjack - because the condo is not your primary residence it would be considered investment property. You will be required to have higher down payments, stricter (i.e., even more lender friendly) provisions in the security instrument, and a higher interest rate loan for investment property.
Some excellent points given. I had hitch that his wasn't a good idea. Plus I hate the fact that renters would be destroying my property where one day I will be living in.
My wife is worried that if we don't buy in the next few years we will be priced out of the S. Cali homes. We're kinda are already .
I'll go with option 2 as Adjusterjack mentioned. Save as much $$ then buy when ready to move back.
Wife and I moved to Houston about 3 years ago from Orange County, CA to start a business and buy a house. We realized that Houston is not where we want to be long term and we are starting to plan our "return" strategy.
One of the possible scenarios for our return is to buy a condo or town home in Cali after we save enough for a 15 to 20 % down payment, rent it out to cover most of the mortgage until we accomplish our goals in Houston (sell business and house) and then return to Cali with a place ready for us. Of course there are a lot of moving parts, number crunching, reserve money to establish ect.
Is this a reasonable plan?
Will you have gain on sale of home in HOU? If so, you will pay capital gains tax on it if you sell it and have not lived in it for 5 out of the past 8 years, thanks to the new tax bill being voted on.
Wife and I moved to Houston about 3 years ago from Orange County, CA to start a business and buy a house. We realized that Houston is not where we want to be long term and we are starting to plan our "return" strategy.
One of the possible scenarios for our return is to buy a condo or town home in Cali after we save enough for a 15 to 20 % down payment, rent it out to cover most of the mortgage until we accomplish our goals in Houston (sell business and house) and then return to Cali with a place ready for us. Of course there are a lot of moving parts, number crunching, reserve money to establish ect.
Is this a reasonable plan?
I work for a credit union. Some credit unions have a category, Future Primary Residence. In your situation, if rental income is needed to qualify, you would have to buy as an investment purchase. If you can qualify and carry the payment, it's a 2nd home and you can put as little as 10% down, but more importantly, use the primary residence rate. This is where the industry doesn't go crazy if they find someone renting a 2nd home. It's more or less a qualifying issue. It's weird. I am the last person to suggest you misrepresent yourselves - it's just a different attitude with 2nd homes.
FWIW, almost every 2nd home loan I've done in the past 3 year has been a Future Primary Residence, someone targeting a location for where they want to live in the future. It's more common (w/ credit unions) than you would think.
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