25 year living in poverty in the Bay Area, need help escaping it. (Salem: real estate, rentals)

[Perma Bear]

I'm 25 with assets of approximately 155k and an income nearing 60k. Because I live in the Bay area area this relegates me to poverty. Is it possible I could use a small amount of money such as 40k as a downpayment to. It a multifamily unit and get off the bottom of the ownership food chain?

[CAjerseychick]

not sure about " multi family unit"s but def a duplex or SFH....

But factor in costs for managing a property long distance...

(we will be doing this with about your same $ numbers, not long distance though as we are here)....

[oregonwoodsmoke]

Is that income going to come with you? Because salaries are a lot lower and good living wage jobs are hard to secure.

I think that $40,000 down payment gets a traditional mortgage for a house of about $200,000. That's going to be hard to find in any of the big cities. Move out to a smaller town or away from the big cities and you might be able to find that.

There are first time home buyer mortgages that require less of a down payment, so your $40k might qualify you for a bigger mortgage. You might want to contact 3-4 banks and speak to their loan officer and see what they can do for you.

Personally, I don't think "cheaper real estate" is a very good reason to pick a new state to live in. There are lots of states where real estate is cheaper than it is in The Bay Area of California (like probably 49 other states that are cheaper than the Bay Area of California), so you have lots of options for real estate and maybe should be considering a lot of other conditions that you might require before you choose a state to move to.

[Perma Bear]

Originally Posted by oregonwoodsmoke

Is that income going to come with you? Because salaries are a lot lower and good living wage jobs are hard to secure.

I think that $40,000 down payment gets a traditional mortgage for a house of about $200,000. That's going to be hard to find in any of the big cities. Move out to a smaller town or away from the big cities and you might be able to find that.

There are first time home buyer mortgages that require less of a down payment, so your $40k might qualify you for a bigger mortgage. You might want to contact 3-4 banks and speak to their loan officer and see what they can do for you.

Personally, I don't think "cheaper real estate" is a very good reason to pick a new state to live in. There are lots of states where real estate is cheaper than it is in The Bay Area of California (like probably 49 other states that are cheaper than the Bay Area of California), so you have lots of options for real estate and maybe should be considering a lot of other conditions that you might require before you choose a state to move to.

In theory it could but I'm going to just buy it as a rental. What about Salem? That looks like a nice temperate area.

[Silverfall]

Originally Posted by Perma Bear

In theory it could but I'm going to just buy it as a rental. What about Salem? That looks like a nice temperate area.

It would be tough to find something that wasn't junked out or in a bad location for $200,000.

[Perma Bear]

Originally Posted by Silverfall

It would be tough to find something that wasn't junked out or in a bad location for $200,000.

I don't know, I mean when I google houses in say Salem I see pretty nice inches for 200k. They'd sell for a million here.

[oregonwoodsmoke]

Originally Posted by Perma Bear

I don't know, I mean when I google houses in say Salem I see pretty nice inches for 200k. They'd sell for a million here.

Too bad you can't just teleport them to California. I suspect that if you go into a slum in some place like, say, Bakersfield, you could buy a cheap junked out house for $200,000 and still be in California.

If you are buying a rental, it is difficult to manage a rental out of state. You get a property manager to oversee the rental, but who is going to oversee the property manager? If you buy cheap rentals in bad areas you are going to get cheap destructive tenants. Good tenants won't rent a crappy house.

If you buy a junked out house, how are you going to renovate it? Who is going to oversee the contractors?

For a rental, you will have to have 20% or more as a down payment and the interest rate will be slightly higher. You have to get a commercial mortgage, not an owner occupied mortgage. Again, talk to a mortgage broker and see what you can do about mortgages.

[oregonwoodsmoke]

PS: I did Bakersfield a disservice. There are really nice houses near $200,000 and the cheap junked out houses are considerably cheaper than that.

Let's not be hearing how nobody can afford a house in California.

[Silverfall]

Originally Posted by Perma Bear

I don't know, I mean when I google houses in say Salem I see pretty nice inches for 200k. They'd sell for a million here.

You can get a small cottage that is really nice for under $200k but you were talking duplexes. I agree with OWS that you aren't going to get good tenants in dubious locations and the rents will be lower.

Generally, with non-owner occupied properties you want to put down 25% to get the better interest rate. You will pay the investor rate and not the homeowner occupant rate so keep that in mind. Property managers generally charge in the 9-11% rate here and you will need to hire one since you are out of state.

So recrunch your numbers and make sure that it works the way you think it will.

[Larry Caldwell]

You will have better results from your South Carolina post. Housing in the South is still pretty inexpensive compared to Oregon.