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I've been looking for a home to buy to take advantage of the $8k tax credit. In my tax bracket, that's the equivalent of $12k of income. I've got about $12k in savings that I'm ready to invest, and this just seems like the perfect opportunity to quickly double my initial investment and serve as a buffer against any further drop in real estate prices. I've got great credit and a solid job, so there is nothing particularly keeping me from buying. I could afford payments on a $200k mortgage (although I'd prefer not to stretch my budget unless I was getting a GREAT deal).
Here's the problem -- I'd need this home to serve as my primary residence for 3 years in order to keep the tax credit. I'm currently living in Dallas, TX, and for a number of reasons, it makes sense for me to stay in Dallas for at least another year, but I just can't see myself here any longer than necessary. I don't want to be here for the next 3-5 years. If anything, I've been looking for somewhere I could enjoy spending the next 5-10 years of my life. From what I've seen of Tampa, it seems *perfect*. I'd love to move there as soon as I can -- ideally, around June 2011. But it would be unwise to move right away.
What I'd like to know is if it would be possible to buy a primary residence in Tampa now but stay at my current job and delay moving there for about a year. Although I could afford payments on both a home purchase + my rental in Dallas for the next year, it would be helpful to rent out my new home for the first year to help with costs until I can get there. From what I understand, an FHA loan requires one to live in their house for at least 12 months before renting it out. Is that set in stone? Is there any way, do you think, that I could rent it out? I don't care if I rent it below value -- it would just be to help subsidize my payments. If things got really bad, I could move back in with my parents for the remainder of the next year to eliminate paying rent, as well, but I'd like that to be a last resort.
If I can't go the FHA route, is it possible to get a traditional loan with less than 20% down? If so, I haven't heard how, so I'll assume it's not possible. I'll have about $17k in the next few weeks (plus the $8k tax credit once I file my taxes, which is as soon as I close on my house, so that I can claim the credit). If I needed to put 20% down to get a non-FHA loan, I could work things out to come up with a maximum of $30k to put down, including that credit, which puts my max purchase price right around $150k. So while it would be ideal to put 5-10% down, I would be able to do a relatively cheap place for 20%.
As a young professional (23), location, people, and night life are important to me, and I'm looking for a place I can grow into over the next 5 years. I've seen a number of condos in Harbour Island that are going for $150k or less, and according to HCPAFL.org, their last sale price (in 2008) was close to $250k. I've seen a few similar deals in Hyde Park. Now, I'm not suggesting that prices will return to previous levels (although I think they will rebound somewhat once the job market improves), but for me just getting a (previously) $250k house for 40% off is a steal. Even in Dallas (where homes are known to be really cheap), I'd have to pay at least as much for a similar sized place in a similar type of location, and it comes without the beach!
I'm planning to fly out to Tampa and check out a number of properties this weekend, but I'd love it if anyone could give me some advice.
Does anyone know if it would be possible to buy a home in Tampa that qualifies as a "primary residence", in the next several weeks, but delay moving there for about a year to finish out obligations at work / school? If so, would it be possible (primarily from a legal perspective) to rent it out in the meantime? If so, would I need to go with a non-FHA loan?
Worst case, I believe it would be 100% legit to buy it with an FHA loan, move my stuff there and stay with my parents in the meantime, but it just seems so inconvenient to have to do all that when it's essentially the same situation. Any thoughts?
If you read this far, I appreciate it, and I also appreciate any insight you might have!
If I were you I would postpon the buying unless I can move NOW..
For the FHA for the non-resident for one year may be tough. Talk to a good broker and they will advise you better but as far as I know you can't rent a house and say it's primary residence but that will be in a year in a year and let me rent in the mean time. Doesn't sound good to me and I am no broker.
Also, if you are not resident, you won't be able to get a homestead--translation you will have more to pay on propery tax.
I know you want that 8K badly but there is no sign that housing has bottomed out (no one can tell until after the bottom) so may be the house you are looking will be 8k cheap next year, may be not. Underlying economics says we will be at least flat for some time if not going down. So, why hurry?
FHA on condos are tough to get because of all the foreclosure.
Good luck and I admire that you are trying to do all the good things at a young age
Do you know regarding the homestead exemption whether you have to be living there Jan 1st to claim it for that year? I understand that's how it works in Texas, so I wouldn't be receiving it this year regardless.
The market has held really steady here, and lots of people are moving here, so buying in Dallas makes sense, but I'd really like to get out of here, and if I'm going to move, it doesn't make a whole lot of sense to wait 3+ years. It feels kind of like putting my life on hold -- for $8k. Especially when the Tampa area sure seems perfect (minus the economy). Buying a non-primary residence is also an option, but it would require putting 20% down, and I wouldn't be able to use that $8k as part of it. The $8k would be a nice buffer against falling prices. I see it essentially as limiting my downside while creating opportunity if the market does start to turn around -- once the economy picks up, there will be a lot more demand. My guess is people right now are willing to make deals.
I realize that buying in a downtrend can be risky, but do you have any reason to suspect that it will continue to crash? ie, are people moving out of the area? Are companies leaving the area? It seems to me like once the economy picks back up and more people can find jobs that the housing market will adjust accordingly. It just seems like the area itself is quite desirable minus the economy.
Naturally, I don't plan to buy just any property to get the $8k, but specifically looking at affordable, 1-bedroom condo's that are in the low $100's, it seems like there is not a whole lot lower they could go unless people are forced to leave the area. Maybe I'm crazy, but it seems strange that a condo right on the water in Florida with amazing beaches would be so much less than a condo in the middle of Dallas, surrounded by land and nothing to do!
1) Do you know regarding the homestead exemption whether you have to be living there Jan 1st to claim it for that year? I understand that's how it works in Texas, so I wouldn't be receiving it this year regardless.
The market has held really steady here, and lots of people are moving here, so buying in Dallas makes sense, but I'd really like to get out of here, and if I'm going to move, it doesn't make a whole lot of sense to wait 3+ years. It feels kind of like putting my life on hold -- for $8k. Especially when the Tampa area sure seems perfect (minus the economy). Buying a non-primary residence is also an option, but it would require putting 20% down, and I wouldn't be able to use that $8k as part of it. The $8k would be a nice buffer against falling prices. I see it essentially as limiting my downside while creating opportunity if the market does start to turn around -- once the economy picks up, there will be a lot more demand. My guess is people right now are willing to make deals.
I realize that buying in a downtrend can be risky, but do you have any reason to suspect that it will continue to crash? ie, are people moving out of the area? Are companies leaving the area? It seems to me like once the economy picks back up and more people can find jobs that the housing market will adjust accordingly. It just seems like the area itself is quite desirable minus the economy.
Naturally, I don't plan to buy just any property to get the $8k, but specifically looking at affordable, 1-bedroom condo's that are in the low $100's, it seems like there is not a whole lot lower they could go unless people are forced to leave the area. Maybe I'm crazy, but it seems strange that a condo right on the water in Florida with amazing beaches would be so much less than a condo in the middle of Dallas, surrounded by land and nothing to do!
Thanks again for the feedback!
Yes it's Jan 1 and application dead line in March 1 and here is the county site for Tampa.
I have looked closely at the housing market for the last couple of years and bought myself house last summer and from the few sample I have, housing price is still going down. Not as drastic as before though.
Every month the Greater Tampa Bay realtor assc. releases sales statictics and there my be some improvement (as in not crashing) but still in the downward trend. Here is the latest summary
1-bedroom condo, you can even get it even for less than 100K. If you have the patience to wait a short sale (you may loose the 8K) you are in for good ddeal. I can't stress this enough: Then again getting finance for a condo which is not your primary residence may be tough. There is a resaon there are so many of them in market and not a lot of buyers--tight financing! If you ask realtors they will tell you most of the transaction on those cases are cash
Those statistics are great. Thanks again for all your help.
A third option just occurred to me that would be inconvenient but might solve the problem. My company has a work from home 2x / wk option. I could potentially fly to Dallas Tuesday morning and fly back Thursday night for 6 months while finishing things up here. It would be cheaper than paying rent twice. Then it would qualify as a primary residence, solving all the big issues -- FHA approval, size of downpayment, tax credit, homestead exemption. I guess it just depends how badly I want to live there -- time to put your city to the test!
Either way, I can't wait to get there this weekend and check out the area!
From reading other threads and talking to friends, Hyde Park and Harbour Island seem to be great places to look. Are there any others that you would recommend I check out?
My goal is to be around other fun, young professionals and preferably walking distance to restaurants. One thing that particularly bothers me about Dallas is how stuck up and rude people are who make 2/3 what I make. I'd rather be around people who are successful but just fun and friendly to be around. I'd also love spending time at the beach in the summer, so it would be nice if that wasn't tooooo far away!
You mentioned 1-bedroom condo's under $100k. Are they nice? I'm looking at this from a 5+ year perspective, so I'd rather get something I LOVE than just something as cheap as I can get it.
You also mentioned short sales -- do you know if they're going through easily with traditional financing, assuming you make it your primary residence? Any major drawbacks? Dallas had some great deals last summer, but they're mostly gone by now. As low as prices have dropped, I'd rather buy sooner rather than later to avoid missing a great opportunity again.
Every month the Greater Tampa Bay realtor assc. releases sales statictics and there my be some improvement (as in not crashing) but still in the downward trend. Here is the latest summary
After looking at this report I would say there are some good positive to take from it. For Jan of this year there were more homes sold than last year and there is a lot less inventory, meaning a higher percentage of homes which are on the market are being sold. Also, for the month of Jan the number of months inventory has dropped significantly in comparison to the last 3 years. I think the selling price is continuing to go down while there are short sales and repos sitting out there. But I think once those are scooped up you will begin to see an upward trend. Perhaps another year or so.
Congrats on being such a forward thinking, financially responsible young man.
Quote:
Originally Posted by rmf
this just seems like the perfect opportunity to quickly double my initial investment and serve as a buffer against any further drop in real estate prices.
Do you really think this is a good time for a traditionally long-term hold asset like real estate to be doubling your anything? If lucky it might, who knows. But why use your own money or our housewarming gift to you, the tax credit, to buffer a further possible drop when you can find property already priced lower than sold comps to hedge for you?
Quote:
Originally Posted by rmf
I'd need this home to serve as my primary residence for 3 years in order to keep the tax credit....would be possible to buy a primary residence in Tampa now but stay at my current job and delay moving there for about a year.
I don't know those rules but you could investigate if these apply: To maintain homestead, you do not have to live there. In Florida, you can rent it out for 1 year starting Jan 1 but not for a consecutive year. Alternatively, you could collect rents from a housemate and also not live there so long as you maintain access to the home and have your own space there. Perhaps a 2-bedroom would satisfy such a condition.
Quote:
Originally Posted by rmf
If I can't go the FHA route, is it possible to get a traditional loan with less than 20% down? ... I could work things out to come up with a maximum of $30k to put down, including that credit, which puts my max purchase price right around $150k. So while it would be ideal to put 5-10% down, I would be able to do a relatively cheap place for 20%.
Just to note how perceptions come into play: If you have only 5 or 10% then you could buy a more expensive place but you'd have less in it. Yet the difficulty of coming up with a full 20% only allows you to buy what you call cheaper, yet you'd have more in it. Wouldn't you think you'd have to put less into the cheaper and, if not, then is it really cheaper or just less expensive? Personally, I prefer to buy cheap on the cheap, but I pay cash so does that make me even cheaper because not only do I reduce my tax burden but I also pay no interest? Ok, just playing with my cheapishness. My motto: better to be cheap than a sheep.
Back to your question, from talking to my banker a few months back, 20% loans are being made on houses but, at least at that bank, not at all for condominiums (at that time they wouldn't touch them--I don't know if that's yet changed) and they might take a chance on a townhouse but they will scrutinize the hell out of it.
Quote:
Originally Posted by rmf
As a young professional (23), location, people, and night life are important to me, and I'm looking for a place I can grow into over the next 5 years. I've seen a number of condos in Harbour Island that are going for $150k or less, and according to HCPAFL.org, their last sale price (in 2008) was close to $250k. I've seen a few similar deals in Hyde Park. Now, I'm not suggesting that prices will return to previous levels (although I think they will rebound somewhat once the job market improves), but for me just getting a (previously) $250k house for 40% off is a steal. Even in Dallas (where homes are known to be really cheap), I'd have to pay at least as much for a similar sized place in a similar type of location, and it comes without the beach!
Where to begin! There are no "real" beaches in Tampa proper, but they are not far. Know where you are moving to before you buy there.
As to stealing, 40% off what you might think is a $250k house is only a deal if that house ever should have sold for $250k. Recall that Japan dropped about 80% and we don't know where all this is headed. I happened to have just caught a knife in Tampa myself so maybe I'm not all that bright. Time will tell.
The past speaks volumes. Look not just at the last sale but at the entire history of sales on that unit and of comps in that area. Go back 20 years or as far as records allow. Was the last sale at peak bubble $250k in 2005/2006? But the sale before that was in 2001 for $140k and before that it sold for $50k in 1996? Looks like one hell of a deal, huh? But even at 40% off 250 that 150 price is still an 8.16% annual rate of return since 1996.
Since real estate generally tracks inflation plus maybe a point or two, perhaps such numbers are justifyable in an area which has been gentrified or some depleting oceanfront, but on Harbour Island?
Base you bid not on the appearance of a number but try to find some fundamentals even if they do not seem to be currently in play. Look at the incomes in the area. Most importantly, look at the price : rent ratios because why would someone buy if it is cheaper to rent. And why not buy if buying is cheaper than renting. FWI, Tampa's bubble prices peaked at 23.5 x's rents. I found a long term (15-year average) factor (though I do not know which 15 years were included) being 14.9, but the one you need to keep your eye on is the 1st quarter 2000 ratio being a 12.4, as 1999 is when prices started shooting up from a stable 1990s.
So what does that $150k 1/1 apt rent for? Quickly perusing realtor.com, I see a 1,084 sq ft 1/1.5 asking $1,300 (so theoretically worth $193,000 based on price : rent). And craiglist has this a (http://tampa.craigslist.org/hil/apa/1604764890.html - broken link) water view 1/1 for $1,600. So by the realistic 2000 price rent ratio, you've got 1600 x 12 x 12.4 a property theoretically worth $238,000 minus however association fees, which can be steep, factor into that little formula. If you bought at $150k and can rent at average $1350, you've got a price rent factor of 9.25.
Is that the steal of the century? Um, no. As I just paid 20% less than all my Tampa area comps in 2009, including two which sold after I bought, my price/rent ratio, even after I fix the place up, comes in at 7 : 1 (It makes me blush in embarrassment every time I look at my cheap house.) Did I get the deal of the century? I'll let you know if this doesn't tank too much further. After all, I've got some cushion.
So, assuming rents don't come down and that they get their asking price on those Harbor Island rents, assuming your association fees don't go wild in the future, $150,000 might be a good deal there. Might not. Only time will tell. Time from both the past (it's sales history) and our future. May it not be too painful.
After looking at this report I would say there are some good positive to take from it. For Jan of this year there were more homes sold than last year and there is a lot less inventory, meaning a higher percentage of homes which are on the market are being sold. Also, for the month of Jan the number of months inventory has dropped significantly in comparison to the last 3 years. I think the selling price is continuing to go down while there are short sales and repos sitting out there. But I think once those are scooped up you will begin to see an upward trend. Perhaps another year or so.
I have kind of the same interpretation like you. Sales volume has picked up through out 2009 YOY even though the price has declined--which is one part of the puzzle. Now the other part is demand has to be driven by lower unemployment rates. Only then we will have a sustained recovery.
I have kind of the same interpretation like you. Sales volume has picked up through out 2009 YOY even though the price has declined--which is one part of the puzzle. Now the other part is demand has to be driven by lower unemployment rates. Only then we will have a sustained recovery.
Truem unemployment in Jan of 09 was 8.9% now it is 11.6%. I am planning my move in July but if that rate continues to climb I am going to have to give great pause. On the other hand, the pace that the unemployment rate is growing appears to be slowing down a bit, which I would think means it will begin to dip. Also, I suppose the 'stat' could dip because people have ran out of benefits. At any rate, it would be look upon as favorable and probably assist the economy is a positive way.
After looking at this report I would say there are some good positive to take from it. For Jan of this year there were more homes sold than last year and there is a lot less inventory, meaning a higher percentage of homes which are on the market are being sold. Also, for the month of Jan the number of months inventory has dropped significantly in comparison to the last 3 years. I think the selling price is continuing to go down while there are short sales and repos sitting out there. But I think once those are scooped up you will begin to see an upward trend. Perhaps another year or so.
Could be totally bogus "current" inventory. We've no idea how many units are being kept off market by the banks attempting to stabilize prices. I might imagine the shadow inventory (never mind the many private owners who would like to sell but simply haven't yet listed as well as upcoming foreclosures which) would be offered for sale as inventory-in-the-sunshine depletes. And if the current inventory is bogus than the months worth of inventory based upon current rate of sales (assuming even that the current rate remains at least as strong) is also bogus.
So it is pretty easy to take the very same data and come up with a very different conclusion.
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