Good time to buy another place?

[kishac]

Originally Posted by Electrician4you

Yeah but it may not always produce a positive cash flow. It’s doing it now. Dont fall in that type of thinking trap. I’ve had times where a rental was vacant for months. It’s rare but it does happen. In one case the tenant left in November. Try filling a empty rental in Nov Dec. pretty tough. Try filling it with someone that can actually pay the rent, isn’t running from debtors, old landlords, has income, doesn’t lie about everything, etc,
I rather wait eat the mortgage and get a qualified tenant.


It’s really up to you and your finances. How badly do you wanna or not wanna be a LL. There are positives and negatives to that aspect. Remember that the bank will look at your length of time of being a LL and having the rental and they will only use a percentage of that income generated by the rental. So the rental may not be as much of a asset as you think.

Really....imo the property taxes are not the biggest factor imo. I bought another house. My property taxes were higher but it wasn’t unaffordable.. For example my last place taxes were 3600. My current house taxes are 5,000. I still own the other property

This is great advice. I was a landlord before and it often takes much longer than expected to find the right tenant, and to vet that applicant thoroughly. You'd be surprised how many applicants you'll get that have poor credit scores, are reluctant to show proof of income, are reluctant to provide references, but they dangle a deposit check to try to get the place.


As the above post correctly noted, the banks will only use a percentage of rental income for financing considerations. I believe the number is around 75% but I can be wrong.

[kishac]

Originally Posted by HB2HSV

In an earlier thread I mentioned I have a rental property in Los Alamitos. As life has it, we find ourselves possibly moving back to OC. So the logical choice is to move back to our rental, or keep the rental and buy another property.

I’d be interested in your opinion of pros & cons of either approach. How’s the real estate market this year? Do you expect an increase, neutral, or a drop in the market?

Nobody can predict the markets (if I could I would be rich but I'm not) but my guess is that it may continue increasing after a lull last winter. My rental lease is coming to an end so I've been attending some open houses as a potential buyer, and I've noticed an uptick in traffic in recent months. Interest rates rose last year but seem to have fallen recently. The number of quality listings seems rather stagnant or declining in my area.


I guess it comes down to..do you want to potentially build extra long term wealth (being a landlord) or do you value the peace of mind of you being your own tenant? If I were close to retirement age maybe being a landlord would fill my free time, but trying to balance corporate job/child rearing will cross my stress threshold if I added being a landlord on top of that.


Pros and cons with everything. It's up to you.


As for your question on what renters prefer and Zillow offer some interesting insights especially on homes that were bought recently and immediately converted to rentals. For my area I found it surprising that condos/townhomes that are newer and modern were (rental) listed for prices similar to older single family residences that sold for $100-$150k more. So even with HOA dues factored in, the math on the newer condo/townhomes properties seemed more favorable even when including HOA dues which cover landscaping and exteriors. Your results may vary depending on your area.

[HB2HSV]

Thanks for all who replied. Your comments are much appreciated and challenged my thinking from different view points. At the end, I am satisfied with my thinking and decision.

Many of you warned me the challenge of finding qualified long term tenants. I am happy to report so far I don’t have this issue. 10 years ago we needed to relocate out of State for my job so I had no choice but to rely on property management firm to advertise, screen, do credit check and recommend potential tenants. Also this PM firm provides a property supervisor to handle tenants and correspond with me on maintenance issues. I guess I am lucky to have selected the right PM firm as it’s mostly problem-free for me in the last 10 years. Oh it had its issues with tenants and maintenance, including I ended a tenants’ lease and moved them out. But thanks to the PM firm who handled the details it’s been largely problem free for me.

Next question was if I can handle occasional “negative cash flow” while continue with my primary residence mortgage expenses? I can comfortably say yes. We made some money from the sale of our out of state home plus managed save some money for a decent down payment for a new house. The anticipated new mortgage expenses will be well within my current monthly debt/income ratio.

Do I want to continue be a land lord and build long term equity for our future? For sure that’s our desire hence this thread. I think over the long run (10 year horizon) the OC real estate market will continue to rise. When we left 10 years ago it was 2008, the beginning of housing crash, my only regret was being out of state and not able to take advantage of the bottom in SoCal housing market. Sure there were few years the rental has negative cash flow but we ploughed through the hard time and now enjoying the positive cash flow and property appreciation.

But going forward is not a slam dunk. For one, there is our current house we need to sell before buying the next house. Second, in a way we’re fortunate there’s no set time that we have to move. So instead of making a rushed decision, we’re going to sit tight to let things settle down to know when & where we’re moving to.

Thanks again for allowing me to think-out-loud and help me with this decision making process.

[HBliving]

Welcome Home! Hope you enjoy your move back! : )

[Electrician4you]

Great. It sounds like you are pretty experienced with the ins and outs and what to expect. Having a good PMC helps. There are plenty out there that are worthless and shouldn’t be in business. And yes if you can hang on to So Cal property in the long term its a good thing. Plenty sell and move away and cannot buy back in