Need home buying/investment property advice from experience folks in Folsom and surrounding area (Orange: sale)

[ecsdude]

Hi All,

I value the experienced advice on this forum and could use some advice and input from experienced folks out there.

I work in Folsom and have been making the 1.5 hr / day total round-trip commute from Elk Grove to Folsom for the past 7 years, 5 days a week. I decided to sell my house so I can live in Folsom or closer to Folsom, and also because there has been a considerable amount of equity built up thru mostly appreciation and partly principal pay-down over the last 2-3 years. Prior to this, the home value fell to about $20K-30K below the purchase price. So I felt now was a good time to sell and free up the equity for flexibility, other investment opportunities, and greater security. I'm due to close on the sale of my house early next month.

Additional Info: some family members may move to the mid-west in 3 years or so. If that happens, I may want to move there so we can all keep together. Plus, large brand new
homes out there can be had for $260K (4bd, 3ba, 2300-2500sqft).

So now, based on the above, I'm trying to decide on the best financial decision between the following:

1. Rent a 2bd/2ba, 1-car garage apartment/condo in Folsom for $1500 (also thought about renting outside of Folsom but the commute time, wear and tear, and gas would probably negate any cost advantage of renting out of Folsom).

2. Buy a condo in Folsom for around $235K, making my total monthly payment $1500 (which includes tax, HOA, etc), which would be same as renting, except I'd be paying
down principal and building equity with this option. If in 3 years, family moves to the mid-west and I wish to follow suit, I can rent it out to Intel, Micron or other gainfully employed renters in Folsom. At the very least, if it does not appreciate much compared to a single family detached home, I would be paying down the principal and building equity. I would be putting only 5% down and not paying off my car/student loans, so I can keep $50-70K of the net proceeds from the sale of my house, that can be used for a rainy day fund, investment fund, and down payment on a new house should I move to the mid-west.

3. Buy a single family detached home for $270K or so, on the outskirts of Folsom, somewhere safe, has growth potential and a solid future as a rental. In this scenario, I am told that it has more likely a chance to appreciate in value than a condo in scenario #2. As the house would likely be 3bd/2ba, 2-car garage w/ yard. But the downside would be it'd have to be outside of Folsom, so safety, home value stability, and rental demand compared to Folsom would be a concern. Here two, I'd be able to pay down principal and build equity, at least, and hopefully also experience some gains due to appreciation in value. I would be putting only 5% down and not paying off my car/student loans, so I can keep $50-70K of the net proceeds from the sale of my house, that can be used for a rainy day fund, investment fund, and down payment on a new house should I move to the mid-west.

4. I ruled out a 4th option of buying a very nice house at $420K putting me at my loan maximum and down payment maximum, due to being too high-risk (it'd consume all of my net proceeds from the sale of my house, leaving me with no rainy day fund or down payment for a new house if I move to the mid-west) and tie me down more than the other options should my family situation change. I'd have to sell it first before I can move anywhere else, and I'd probably break even, at best, after closing costs.

So, I essentially have 3 viable options to consider, really (options 1-3 above).

Does anyone have input on which option may be the most financially sound and yield the greatest returns over the long run, given my situation as described above?

Some people say that renting an apartment isn't throwing away money, since you're paying for a roof over your head, and sometimes renting is cheaper when considering all total costs of renting vs owning, and that if the savings difference by renting is enough, if invested, you could have a near break-even bottom line result between renting vs owning.

Thanks in advance. If I missed providing any pertinent info, please let me know.

[caligirlz]

Originally Posted by ecsdude

I work in Folsom and have been making the 1.5 hr / day total round-trip commute from Elk Grove to Folsom for the past 7 years, 5 days a week. I decided to sell my house so I can live in Folsom or closer to Folsom

Additional Info: some family members may move to the mid-west in 3 years or so. If that happens, I may want to move there so we can all keep together. Plus, large brand new
homes out there can be had for $260K (4bd, 3ba, 2300-2500sqft). Sorry, no way!

I live in Folsom. I actually lived in an apartment before I bought, which afforded me the opportunity to check out all the neighborhoods extensively, by walking and drive-throughs, at various times of the day and days of the week. Highly recommended. What looks nice by car looks totally different by foot.

Either rent or buy what you can afford. I would suggest renting first, then buying. You may even find that Folsom isn't for you. I have known others who have made that decision. Some here on the CD forum.

I don't know of any brand new SFH with the qualifications you listed are available in Folsom for that price. Rancho Cordova meets that price range. You may want check RC which is a reasonable commute to Folsom, or other areas that would better meet your price range would be Orangevale, or even up the hill to Cameron Park, Shingle Springs or Rescue.

FYI - Folsom has restrictions about multiple families living in one house.

[NinaN]

And if you get a condo, make sure you talk to the HOA about the potential to rent it out later as many have restrictions on number of rentals.

[Curmudgeon]

Originally Posted by caligirlz

I live in Folsom. I actually lived in an apartment before I bought, which afforded me the opportunity to check out all the neighborhoods extensively, by walking and drive-throughs, at various times of the day and days of the week. Highly recommended. What looks nice by car looks totally different by foot.

Either rent or buy what you can afford. I would suggest renting first, then buying. You may even find that Folsom isn't for you. I have known others who have made that decision. Some here on the CD forum.

I don't know of any brand new SFH with the qualifications you listed are available in Folsom for that price. Rancho Cordova meets that price range. You may want check RC which is a reasonable commute to Folsom, or other areas that would better meet your price range would be Orangevale, or even up the hill to Cameron Park, Shingle Springs or Rescue.

FYI - Folsom has restrictions about multiple families living in one house.

Actually, WAY! Large houses can be had in parts of the Midwest for not much, there's no Mellow-Roos, and HOA fees, if any, as well as property taxes, can be comparatively miniscule.

[ecsdude]

Originally Posted by Curmudgeon

Actually, WAY! Large houses can be had in parts of the Midwest for not much, there's no Mellow-Roos, and HOA fees, if any, as well as property taxes, can be comparatively miniscule.

Yeah, I was really shocked to see that in Ohio, I can get a 2015 build that is about 2500 sq ft, 4bd, 3 ba for $191K.

[derekjones]

You may want to recheck those numbers.

For option number 2 with buying a condo for roughly $235k and putting down 5% your monthly payment would be more like $1700 including the average hoa of $200. Also you'd want to check with the hoa's about renting out those condo's. I have a client that has been looking for investment condo's in folsom and most of them allow owner occupied only due to occupancy ratio's.

For option number 3, you may find a fixer sfr in folsom for around $280 but move in ready homes start around $310k.

Option 1 may be your best bet unless you want to move to another area or increase your budget.

[ecsdude]

Originally Posted by derekjones

You may want to recheck those numbers.

For option number 2 with buying a condo for roughly $235k and putting down 5% your monthly payment would be more like $1700 including the average hoa of $200. Also you'd want to check with the hoa's about renting out those condo's. I have a client that has been looking for investment condo's in folsom and most of them allow owner occupied only due to occupancy ratio's.

For option number 3, you may find a fixer sfr in folsom for around $280 but move in ready homes start around $310k.

Option 1 may be your best bet unless you want to move to another area or increase your budget.

The way I checked the numbers is by using the metrolistmls.com calculator.. took $235K @ 5% down and got the monthly payment amount, multiplied 235K by 0.0125 and divided by 12 to get a rough estimate of taxes, then added on top of those 2 figures with the HOA and insurance.

1049.80 P&I
207.00 hoa
244.80 tax
60.00 insurance
---------
1561.60 total monthly cost


As for buying a fixer, I want to avoid that because it adds to my total cost.. ideally I find something $270K or less that's move-in ready. In Folsom, I've seen 3/2 w/ garages in the older parts of Folsom behind the Walmart go for $350K, so that rules that out. I would probably have to look at Rancho or homes elsewhere on the outskirts of Folsom, if there are any that are safe, growing, and with good renting potential.

[derekjones]

Only thing missing from the equation is PMI which would be ~$165/month.

[hd4me]

You may want to look at the Sunriver area in Rancho Cordova (closest to Sunrise). That's considered a low crime neighborhood for Rancho. You may be able to find a house for under 300k. The other areas that are good areas in Rancho south of 50 I wouldn't recommend as rentals because you'd have to factor in the HOA fees or if no HOA all of the newer developments have Mello Roos and prices start around 300k. Another area to look into would be the Mather area just south of Rancho in unincorporated Sac County.They have HOA fees but the HOA takes of your front lawn and I believe its about $70. Stonecreek would be another area to look into as they have no HOA and a modest Mello Roos assessment but not sure if you'll find anything for less than 300k.