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I qualify for 350k mortgage and there are two plans i have with it:
Plan A:
I buy two small townhomes each worth 170K, one for my residence and one for renting out.
Plan B:
buy one big single family home for 340K and bank on its appreciation.
there are pros and cons for both the plans ,,
a discussion on this would be greatly appreciated
thanks,
andy
I think a lot of it is going to depend on where you are planning to buy. Is a townhouse going to be where you are planning in living for 5 years? Some townhouses appreciate more than others, some get very little appreciation.
A home, in a new community in a great location might get more appreciation. But again, it all depends on where you will live in the triangle, where will you need to commute to work, etc.
I could discuss more if I knew more about the location you were thinking about buying in the triangle (north raleigh versus knightdale versus cay, etc)
The way you worded this makes it seem like you aren't looking for a permanent home/residence. It appears like you are only interested in buying something to reap monetary benefit in the future. Nothing wrong with that, although I'd rather spend the money knowing I was getting something I'd be happy with for a long time. If you are simply buying for financial reasons there is nothing to discuss, your success will depend on many different variables that none of us can predict... If you are buying something because you really like the property and see yourself being there a long time then you can't forget about appreciation and investing in an additional townhome and just choose the property that satifies your needs the best...
thanks for the response.
I am looking in western cary and morrisville.
I currently live in an apartment and my need for space is very limited as of now. ( its me and my wife ... and i would not be having a child for atleast 5 years to come ) so a 1400 sq ft townhome would be enough for me.
Well..........that is an interesting dilemma! I think there are definitely some good townhome communities in morrisville, and I do think that finding a person to rent wouldn't be too difficult because people want to live close to the park. If you buy in a new neighborhood you will probably see more return on your investment, than if you buy a resale property in morrisville. The downside to morrisville is the airport noise, and you also need to find out where 540 would come through and steer clear of that!
Well, I can say I had to be a landlord for about 10 years. I bought a condo in 1988 (to live in) that depreciated more 50% in value, so I was stuck renting it out when I wanted to live somewhere else. Let's just say that is the LAST time I want to be a landlord - between the people I had to evict, and the guy who refused to pay his rent because their was a water leak from the unit above - ugh!
The Triangle seems to have very modest home appreciation overall - an average of 5% a year or so. I've never bought new, but I don't think I'd buy a more expensive/larger house than I really wanted, just for the potential future appreciation.
My advice would be buy the house you need/want, and invest the rest of the money. Unless you've been a landlord in the past and like the whole "tenants and toilets" bit!
Buying two townhouses and renting one out would most likely be the better investment. But this all depends on the tenants if you get someone that parties all the time or just doesn't help take care of the place you may have all kinds or repairs to pay for. You may not be able to find people to rent it or may have tenants that you have to evict which can be a long process even if they aren't paying rent. Also I notice you say you qualified for 350K but usually if you buy a house at the max that you qualify for then your going to end up being house poor because all you money goes just to mortgage payments. I qualified for a 250k loan but in reality I really could only buy a 170k house and have the money to enjoy it. It really just depends on what you want to do I think to many people forget that a house isn't just an investment its where your going to live.
Where's the townhouse? If it's in a suburban area (like North Raleigh or Cary) then don't bother....from what I see on craigslist and other rental sites, townhouse rentals in those areas are a dime a dozen! You'd have to put it out there pretty cheap to hook in anyone probably.
Now if it's in like central Raleigh, or another "downtown" area in the Triangle, or next to a college area, then you could very well make some good rental money from it....those type of townhome rentals are pretty high in demand.
I would add another question: when you did your loan approval, did you tell them about your plan? Qualifying for $350k for your primary residence is very different from qualifying to purchase investment property.
Just keep in mind, if you haven't already checked in to it, that for the investment purchase, you'll need minimum 20% downpayment, and the qualifications are much tighter than for your primary residence. To the bank, the risk is higher that if you fall on tough times, you'll let the payments slide on the rental long before you'll risk your own home. It may not be as simple as $350 for one or $175 each for two on your pre-qual.
I also agree w/ pp - finding a townhouse that will appreciate in this area takes some good research - some townhomes near Brier Creek have done quite well, some nice condos near NCSU haven't gone up at all in 5 years.
They're increasingly tough to find in a good area in your price range, but if you're patient, you may want to look for a small single family residence as a rental instead of a townhouse. The demand for entry level housing, especially in an area with good schools and low crime, makes this a rising segment in the market. But, you need the time to wait for the right property, then you need to be ready to move on it quickly!
Consider a third option: For your own residence, find a nice single family home in the mid 200s, and put the extra money into a cd or savings account (some online banks are paying 5% interest, not bad!), putting aside your monthly savings on payments until you have the 20% for your investment property. In the meantime, research your neighborhoods - one without too many other rentals, good schools, low crime, etc. Once you've got your downpayment, wait and pounce, so to speak. When you're more in control of the timing, you'll have a better chance of making a good investment decision than if you just buy whatever's available now.
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