Seeing advice on how, or if, I should start with Real State

San Diego, California
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Seeing advice on how, or if, I should start with Real State

Jonathan Camacho
Member since 2022 · 13 posts · 6 votes

Hello, 

I was hoping I can get some input from other people on whether or not I should invest in real state in my current situation. I was hoping I can tell you about myself and get some advice. My wife and I currently live in California and are renting a house here. We tried to buy our first home with a VA loan at the beginning of last year but got outbid every time and then rates started going up and we were priced out of the market. We are both professionals and make about 300K a year together. We had about 100K for a downpayment. After we didn't get a house and decided to sit on the sideline I started thinking about using the money we had (plus some that we have saved until now) and buy real state instead, long term rentals to be specific. I have been following BP for a while now, read some books on real state (local and out of state), and thought about my buy box. My question is, since we are renting, would it be better to buy a house now that rates are starting to come down? or should we go for it and make an investment purchase? considering that I think we would have to invest in out of state properties because California is just too expensive, and also, I believe we would have to buy something in this couple of months since when rates come down I believe prices will go up and we will get caught in bidding wars again. I should also mentioned that we have all of our paperwork in order, about 500 dollars a month in debt, and excellent credit scores.

Thank you in advance. I think I would mostly appreciate if I can get input on whether to put all our money to buy our primary residence and use that to buy real state, or just rent for now and use all of our money to buy real state.

Thank you, Jonathan

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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y

@Jonathan Camacho

I would start with owning your own home first so you understand the maintenance, care and cost of home ownership.

Where I disagree with you is thinking home prices will shoot up when rates come down - there is really not a huge correlation as they did not drop substantially when rates went up. The macro issue at play is people make X and can spend 28-38% of income on buying a home. If wages have not gone up significantly how can prices? While there may be a FOMO bump when they get to a certain point rates have dropped for like 9 straight weeks and homes continue to sit longer and have prices come down.

Sorry for being long winded but I recommend owning first

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  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    house hack locally

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y

    @Jonathan Camacho

    I would start with owning your own home first so you understand the maintenance, care and cost of home ownership.

    Where I disagree with you is thinking home prices will shoot up when rates come down - there is really not a huge correlation as they did not drop substantially when rates went up. The macro issue at play is people make X and can spend 28-38% of income on buying a home. If wages have not gone up significantly how can prices? While there may be a FOMO bump when they get to a certain point rates have dropped for like 9 straight weeks and homes continue to sit longer and have prices come down.

    Sorry for being long winded but I recommend owning first

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    2Reply
  • Jonathan Camacho
    OP
    Member since 2022 · 13 posts · 6 votes
    2y
    Quote from @Nicholas L.:

    house hack locally


     Hello Nicholas, 

    Thank you for your reply. I hav been thinking about that and although it might be a little difficult to do that with 2 kids I think that is definitely a possibility. Do you think It would be better to find a duplex or triplex? or buy a house with an ADU? I think price wise houses in this area are in the same range (a small duplex costs the same as a 3bed 2 bad with an ADU) I understand the types of loans I can get are different and we would be using a VA loan (wife is in the military) for our purchase. Thank you again for your reply.

    Jonathan

    0Reply
  • Jonathan Camacho
    OP
    Member since 2022 · 13 posts · 6 votes
    2y
    Quote from @Chris Seveney:

    @Jonathan Camacho

    I would start with owning your own home first so you understand the maintenance, care and cost of home ownership.

    Where I disagree with you is thinking home prices will shoot up when rates come down - there is really not a huge correlation as they did not drop substantially when rates went up. The macro issue at play is people make X and can spend 28-38% of income on buying a home. If wages have not gone up significantly how can prices? While there may be a FOMO bump when they get to a certain point rates have dropped for like 9 straight weeks and homes continue to sit longer and have prices come down.

    Sorry for being long winded but I recommend owning first

    Hello Chris,

    Than you for you thoughtful reply. I appreciate the input and I think it would definitely help to see ins and outs of maintaining a property. You make a good point about the rates, my concern is that here in San Diego prices and wages are so decoupled that it is really expensive to buy a house right now, although not impossible, and with good planning I can stay within my budget and not stretch, but any changes or FOMO from other people buying when rates go down would price me out of the market again. My intention was to buy for example during spring or winter of this year, or invest the money in properties out of state at any point considering any other market I can think of is cheaper that California (well you know maybe not NY or DC) since I can only either buy a house here or invest the money elsewhere but not both for now. Thank you again for your reply. I Should also mention we are a military family using a VA loan for our purchase and have about 100K for a downpayment, but also about 200K in stocks I could liquidate. Do you still think it makes more sense to buy here and then invest in other markets? or should I use the capital to hopefully buy a few other properties (I was planning on using the BRRRR method to buy distressed property in another state) and start a portfolio of cash-flow properties? I apologize for the very long reply but I see you are a top rated investor and contributor and I am just starting here and it is difficult to fully explain our situation, so the more insight I could get from you the better. Thank you again!
    0Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    2y

    In some areas it is a lot cheaper to rent than to buy.  If that applies to your area, then buying elsewhere to rent is not a bad idea.

    You mention you are in the military.  What are the chances of you having to move in a few years?  That also affects whether you'd want to buy your own house or keep renting.

    Start looking in other states where you are familiar with the town-either because you or your wife grew up there, had family there, etc.  Start looking at how much rentals would cost and how much they'd rent for.

    2Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    @Jonathan Camacho

    i'd look at a whole bunch of properties, all different configurations, to determine if any would be a good fit for you and your family.  only you can decide if a primary both ( 1 ) makes financial sense for you, and ( 2 ) fits your lifestyle.  if you don't want to house hack, then don't.  but there's no rush.  spend 3 or 6 or 12 months looking.  everyone wants to look at 3 properties and get their first offer accepted.  what if you looked at 50 or 100 and made 10 or 20 offers?

    now, with that said, would I advise you to continue renting just in order to buy a random rental thousands of miles away that you cash flow $27 a month on, just to "get a deal"?  no i would not.  it is very, very tough to cash flow right now in a random market where you have no competitive advantage.  if you want to continue to work on out of state investing in parallel with everything else, that's great.  but read this thread, and proceed with caution.

    https://www.biggerpockets.com/forums/48/topics/1159104-overl...

    0Reply
  • Jonathan Camacho
    OP
    Member since 2022 · 13 posts · 6 votes
    2y
    Quote from @Nicholas L.:

    @Jonathan Camacho

    i'd look at a whole bunch of properties, all different configurations, to determine if any would be a good fit for you and your family.  only you can decide if a primary both ( 1 ) makes financial sense for you, and ( 2 ) fits your lifestyle.  if you don't want to house hack, then don't.  but there's no rush.  spend 3 or 6 or 12 months looking.  everyone wants to look at 3 properties and get their first offer accepted.  what if you looked at 50 or 100 and made 10 or 20 offers?

    now, with that said, would I advise you to continue renting just in order to buy a random rental thousands of miles away that you cash flow $27 a month on, just to "get a deal"?  no i would not.  it is very, very tough to cash flow right now in a random market where you have no competitive advantage.  if you want to continue to work on out of state investing in parallel with everything else, that's great.  but read this thread, and proceed with caution.

    https://www.biggerpockets.com/forums/48/topics/1159104-overl...

    Thank you so much for that insight Nicholas! I definitely do not want to rush into anything and I know I still have months of learning ahead to be able to make a choice, and I understand I would need to be thorough with my research and connections if we invest out of state. Everything you say make sense. The thread you post is very helpful too so thank you for taking the time to show me that. 
    Thank you again for your help!
    1Reply
  • Account Closed
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    2y
    Quote from @Jonathan Camacho:

    @Jonathan Camacho: We focus on cash flow and tax write offs. There is a balance to be found there. In a typical neighborhood, you ca n find a variety of options for investing. We find properties "off market" and that allows for great latitude in how we invest. 

    0Reply
  • Bradley BuxtonBusiness Member
    Real Estate Agent · NV · Member since 2023 · 1k+ posts · 713 votes
    2y

    @Jonathan Camacho

    Every house is an investment. Buy a house you can live in as a primary that would cash flow when you move out. CA does have good appreciation. The other option is to find a house you might want to move to later out of state. We have helped some clients in Reno, NV and Incline Village find properties with VA assumable loans. It's a great way to get into a very low interest rate loan. The downside is that you have to cover the difference between the loan amount and the purchase price.

    1Reply
  • Jonathan Camacho
    OP
    Member since 2022 · 13 posts · 6 votes
    2y
    Quote from @Bradley Buxton:

    @Jonathan Camacho

    Every house is an investment. Buy a house you can live in as a primary that would cash flow when you move out. CA does have good appreciation. The other option is to find a house you might want to move to later out of state. We have helped some clients in Reno, NV and Incline Village find properties with VA assumable loans. It's a great way to get into a very low interest rate loan. The downside is that you have to cover the difference between the loan amount and the purchase price.

    Hello Bradley,

    Thank you for the reply, we really want to stay in San Diego but if we make the purchase now it really might not be our forever home and like you say we might use it as a rental property. Thank you for your input. I appreciate it!
    0Reply
  • Jonathan Camacho
    OP
    Member since 2022 · 13 posts · 6 votes
    2y
    Quote from @Account Closed:
    Quote from @Jonathan Camacho:

    @Jonathan Camacho: We focus on cash flow and tax write offs. There is a balance to be found there. In a typical neighborhood, you ca n find a variety of options for investing. We find properties "off market" and that allows for great latitude in how we invest. 


     Thank you Mike! I will check out the things you sent. I was thinking about that actually, my best case scenario would be to find an off-market property and use sellers financing, or at least one of those. Thank you for your reply, I will take a look at what you sent

    0Reply
  • Account Closed
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    2y
    Quote from @Jonathan Camacho:
    Quote from @Account Closed:
    Quote from @Jonathan Camacho:

    @Jonathan Camacho: We focus on cash flow and tax write offs. There is a balance to be found there. In a typical neighborhood, you ca n find a variety of options for investing. We find properties "off market" and that allows for great latitude in how we invest. 


     Thank you Mike! I will check out the things you sent. I was thinking about that actually, my best case scenario would be to find an off-market property and use sellers financing, or at least one of those. Thank you for your reply, I will take a look at what you sent

    I sent you a DM. It's that little bell thingy in the upper right part of your screen.
    0Reply
  • Twana RasoulBusiness Member
    Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
    2y

    @Jonathan Camacho

    You are better off in San Diego and your capital invested would be less in san diego than some other random market and your overall returns will likely be higher in the long term here...With a VA loan I highly recommend you house hacking for your first place...even if you are married even if you have kids. You can be in a 2 unit property with 2 houses on one lot. My wife and I are currently looking for our next primary property but we currently house hack and we have a 4 year old and a 2 year old.


    I do not recommend going out of state at all...there is no better way to purchase in a place like San Diego than house hacking multifamily with a VA loan. You can build up from that, its just about getting started with low money or in your case you can with no money...here is how I got started in San Diego.

    I started off in San Diego with low money down and the first property my wife and I purchased was under 400k as that was what we could afford in 2014 and by 2017 we were purchasing our 3rd property and it was still under 400k, not in particularly great areas...so first 3 properties were are single family homes or Condos (in East County)...then we house hacked a duplex in 2019 and fully renovated those units, and we are currently submitting plans to put 2 ADUs in the back. In 2020 we did a cash out refinance on the first 2 properties we purchased and pulled out over $250k between those units ....we used the $250k to purchase a triplex in La Mesa Village in the first half of 2021 (we are currently adding an ADU to make it 4 units). At the end of 2021 we sold the condo we purchased in 2017 (put less than $40k down initially) to do a tax deferred 1031 exchange and purchased a ugly/tiny 4plex in Golden Hill but I was selling 1 unit to buy 4 in a better area so I was happy.....in 2022 we purchased a 4plex with low money down, also in east county using a small bank that did this type of loan at the time....

    So between 2021 to 2022 we purchased most of our units (11 units) with little money out of pocket since 2 of them were from cash out refi funds and 1 was from a 1031 exchange. If we didn't purchase those initial properties we would have never been able to do the above and the properties that we purchased were retail and not in great areas but it was better that we purchased than not doing anything and letting time pass by. They were all "base hit" deals at best but it worked for us, and of course if we purchased value add and in slightly better areas we could have done even better but we did not have the funds initially to take on properties that needed work.

    I had a few mid west properties for a bit and sold those off...from that experience I can say for me, I would rather have 16 units in San Diego than a ton of units than a ton of doors out of state  in a cheap market with a bunch of expenses

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  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    2y

    @Jonathan Camacho

    Your circumstance necessitates various considerations, and the decision to buy your primary house or invest in real estate is entirely personal, based on your financial goals, risk tolerance, and lifestyle preferences. Here are some considerations:

    Advantages of purchasing a primary residence include stability, tax benefits, and potential for appreciation.
    The drawbacks are High prices in California, opportunity cost, market uncertainty,

    Pros of investing in real estate include diversification, cash flow potential, and potential appreciation.
    Cons include management responsibilities, market risks, lack of stability, and so forth.

    Determine your long-term financial goals. Consider your investing horizon and whether there are any attractive investment options available right now. Investigate prospective investment opportunities and verify you are comfortable with the accompanying risks and logistics. Consult a financial advisor, real estate agent, or investment advisor for tailored advice based on your unique financial circumstances and objectives.

    There is no one-size-fits-all solution. Consider the benefits and downsides depending on your priorities and financial goals. Consider obtaining advise from professionals who can offer insights tailored to your situation.

    Good luck!

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    0Reply
  • Jonathan Camacho
    OP
    Member since 2022 · 13 posts · 6 votes
    2y
    Quote from @Twana Rasoul:

    @Jonathan Camacho

    You are better off in San Diego and your capital invested would be less in san diego than some other random market and your overall returns will likely be higher in the long term here...With a VA loan I highly recommend you house hacking for your first place...even if you are married even if you have kids. You can be in a 2 unit property with 2 houses on one lot. My wife and I are currently looking for our next primary property but we currently house hack and we have a 4 year old and a 2 year old.


    I do not recommend going out of state at all...there is no better way to purchase in a place like San Diego than house hacking multifamily with a VA loan. You can build up from that, its just about getting started with low money or in your case you can with no money...here is how I got started in San Diego.

    I started off in San Diego with low money down and the first property my wife and I purchased was under 400k as that was what we could afford in 2014 and by 2017 we were purchasing our 3rd property and it was still under 400k, not in particularly great areas...so first 3 properties were are single family homes or Condos (in East County)...then we house hacked a duplex in 2019 and fully renovated those units, and we are currently submitting plans to put 2 ADUs in the back. In 2020 we did a cash out refinance on the first 2 properties we purchased and pulled out over $250k between those units ....we used the $250k to purchase a triplex in La Mesa Village in the first half of 2021 (we are currently adding an ADU to make it 4 units). At the end of 2021 we sold the condo we purchased in 2017 (put less than $40k down initially) to do a tax deferred 1031 exchange and purchased a ugly/tiny 4plex in Golden Hill but I was selling 1 unit to buy 4 in a better area so I was happy.....in 2022 we purchased a 4plex with low money down, also in east county using a small bank that did this type of loan at the time....

    So between 2021 to 2022 we purchased most of our units (11 units) with little money out of pocket since 2 of them were from cash out refi funds and 1 was from a 1031 exchange. If we didn't purchase those initial properties we would have never been able to do the above and the properties that we purchased were retail and not in great areas but it was better that we purchased than not doing anything and letting time pass by. They were all "base hit" deals at best but it worked for us, and of course if we purchased value add and in slightly better areas we could have done even better but we did not have the funds initially to take on properties that needed work.

    I had a few mid west properties for a bit and sold those off...from that experience I can say for me, I would rather have 16 units in San Diego than a ton of units than a ton of doors out of state  in a cheap market with a bunch of expenses


     Hi Twana, 

    Thank yo so much for the reply. I replied to your inbox. 

    Thank you!

    0Reply
  • Jonathan Camacho
    OP
    Member since 2022 · 13 posts · 6 votes
    2y
    Quote from @Wale Lawal:

    @Jonathan Camacho

    Your circumstance necessitates various considerations, and the decision to buy your primary house or invest in real estate is entirely personal, based on your financial goals, risk tolerance, and lifestyle preferences. Here are some considerations:

    Advantages of purchasing a primary residence include stability, tax benefits, and potential for appreciation.
    The drawbacks are High prices in California, opportunity cost, market uncertainty,

    Pros of investing in real estate include diversification, cash flow potential, and potential appreciation.
    Cons include management responsibilities, market risks, lack of stability, and so forth.

    Determine your long-term financial goals. Consider your investing horizon and whether there are any attractive investment options available right now. Investigate prospective investment opportunities and verify you are comfortable with the accompanying risks and logistics. Consult a financial advisor, real estate agent, or investment advisor for tailored advice based on your unique financial circumstances and objectives.

    There is no one-size-fits-all solution. Consider the benefits and downsides depending on your priorities and financial goals. Consider obtaining advise from professionals who can offer insights tailored to your situation.

    Good luck!


     Hi Wale,

    Thank you for the reply! I am starting to understand the opportunity cost associated with various paths and the way you look at it makes sense.

    Appreciate the reply!

    0Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    2y
    Quote from @Jonathan Camacho:
    Quote from @Wale Lawal:

    @Jonathan Camacho

    Your circumstance necessitates various considerations, and the decision to buy your primary house or invest in real estate is entirely personal, based on your financial goals, risk tolerance, and lifestyle preferences. Here are some considerations:

    Advantages of purchasing a primary residence include stability, tax benefits, and potential for appreciation.
    The drawbacks are High prices in California, opportunity cost, market uncertainty,

    Pros of investing in real estate include diversification, cash flow potential, and potential appreciation.
    Cons include management responsibilities, market risks, lack of stability, and so forth.

    Determine your long-term financial goals. Consider your investing horizon and whether there are any attractive investment options available right now. Investigate prospective investment opportunities and verify you are comfortable with the accompanying risks and logistics. Consult a financial advisor, real estate agent, or investment advisor for tailored advice based on your unique financial circumstances and objectives.

    There is no one-size-fits-all solution. Consider the benefits and downsides depending on your priorities and financial goals. Consider obtaining advise from professionals who can offer insights tailored to your situation.

    Good luck!


     Hi Wale,

    Thank you for the reply! I am starting to understand the opportunity cost associated with various paths and the way you look at it makes sense.

    Appreciate the reply!


     You are welcome and all the best.

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  • Elizabeth Lisardo
    Member since 2024 · 1 post · 0 votes
    2y

    You sound like a solid buyer. Take advantage of your VA loan and start in San Diego area. Have you considered areas right outside of Diego like Temecula? Prices are stable, inventory is still on the lower side but you're not seeing ridiculous things like appraisal gaps and bidding wars way over asking price. Not sure what it will look like once rates drop.

    0Reply
  • Kenneth Donaghy
    Real Estate Broker · San Diego, CA · Member since 2016 · 355 posts · 195 votes
    2y

    @Jonathan Camacho, I agree with those suggesting a local SD VA Househack. It's one of my niches here in SD, and there are many ways to get you offer accepted in a competitive market. As the year goes on it will be come more competitive, which mean prices will rise, and capturing appreciation is really what makes the SD market attractive. I know many military investors, househacking here while at the same time investing in more cash flow markets. Happy to connect you!

    0Reply
  • Oskar Czeladko
    Member since 2023 · 13 posts · 6 votes
    2y

    @Jonathan Camacho

    I am in a similar situation (San Diego, VA loan, looking to buy my first property) and there are some insights that may be of use after looking for a home for about a year and a half.

    1. Renting at the moment is cheaper almost everywhere than buying. Due to the unique situation at the moment of high rates and high prices, jumping into a property may be significantly more expensive. As many landlords have locked in comparatively lower rates to those of today, thus their costs are much lower so the threshold for profit is lower. Meaning that even with profits from renting considered they can offer rents that are lower then mortgage at the current rate levels.

    2. Inventory: Since many folks refinanced at extremely low rates rarely anyone is willing to sell at the moment as they would have to repurchase at much higher rates, lowering the inventory causing prices to maintain high. Therefore once rates lower it may cause some small growth in price due to folk being able to afford more, however we will likely see a return to somewhat normal inventory levels driving prices down.

    3. Loans: Since the structure of amortization has one paying significantly more interest at the start than principal (within the ratio of payments) at the start many loan types seldom give you any equity in the first couple of years. Therefore, you do not really own much of the property you are paying for at the start of the mortgage. Thus, it may pay off to wait for more favorable pricing situation, as you do not have much ownership anyways.

    4. Inventory Timeline: Since when buying you are competing real time with several offers at the same time, buying a property can be significantly faster than that of selling. This is due to many sellers listing a property and waiting for an attractive offer, sometimes waiting for months until one comes along they are willing to accept. As a result, price increases are faster than price decreases.

    Overall, I am seeing that it may be best to sit on the sidelines for a bit until inventory increases and concurrently rates slowly decrease. We are seeing slow inventory growth at the moment and when conditions are more acceptable for sellers, they will begin to liquidate. As a result I think that there will be more affordability in the coming months. We are also seeing consumer debt growing quickly (likely due to increases in cost of living) and increases in foreclosures at the moment, potentially leading to another source of inventory growth. 


    P.S. Please keep me in the loop on what you are seeing. We have similar situations and some more insights may be beneficial.

    0Reply
  • Arturo Medina
    Realtor · San Diego, CA · Member since 2023 · 5 posts · 1 vote
    2y

    Hey Jonathon I agree with the idea of finding a place to house hack and figure how you could add value. After, a year or so maybe move to another place and rent out the first place. If you need any help finding places please reach out I have experience using my own VA loan to buy a condo in point loma in March 2023.

    1Reply
  • Jake BakerBusiness Member
    Flipper/Rehabber · San Diego, CA · Member since 2020 · 1k+ posts · 695 votes
    2y

    @Jonathan Camacho

    I am also in San Diego. I recommend buying a condo in 92101 (downtown) and getting a short-term rental license. Southern bankers Hill is part of this zip code as well. 

    There are still licenses available for this area and bankers hill and some parts of downtown have HOAs that allow STRs. 

    @Maxwell Ventura is an agent that helped me do this in Little Italy. 

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  • Jonathan Camacho
    OP
    Member since 2022 · 13 posts · 6 votes
    2y
    Quote from @Elizabeth Lisardo:

    You sound like a solid buyer. Take advantage of your VA loan and start in San Diego area. Have you considered areas right outside of Diego like Temecula? Prices are stable, inventory is still on the lower side but you're not seeing ridiculous things like appraisal gaps and bidding wars way over asking price. Not sure what it will look like once rates drop.


     Hi Elizabeth,

    Thank you for the reply. I think we are well positioned even for this market (barely but I think we are haha). We had look into different areas with the hope of house hacking and learn about real state in the process. Unfortunately my wife's work doesn't allow for the long commute, the farthest we could go is Spring Valley to the east, and Santee north from where we live. I am also not sure what will happen once rates drop as people have had a good year or so to build up some savings, I just don't want to be priced out of the market again because of a bidding war. 

    Thank you again for your thoughts!

    Jonathan

    1Reply
  • Jonathan Camacho
    OP
    Member since 2022 · 13 posts · 6 votes
    2y
    Quote from @Kenneth Donaghy:

    @Jonathan Camacho, I agree with those suggesting a local SD VA Househack. It's one of my niches here in SD, and there are many ways to get you offer accepted in a competitive market. As the year goes on it will be come more competitive, which mean prices will rise, and capturing appreciation is really what makes the SD market attractive. I know many military investors, househacking here while at the same time investing in more cash flow markets. Happy to connect you!


     Hi Kenneth,

    Thank you for your thoughts and input. I agree with what you say about appreciation. I will reach out if I need further information. Thank you so much for the offer!

    Jonathan

    0Reply
  • Jonathan Camacho
    OP
    Member since 2022 · 13 posts · 6 votes
    2y
    Quote from @Oskar Czeladko:

    @Jonathan Camacho

    I am in a similar situation (San Diego, VA loan, looking to buy my first property) and there are some insights that may be of use after looking for a home for about a year and a half.

    1. Renting at the moment is cheaper almost everywhere than buying. Due to the unique situation at the moment of high rates and high prices, jumping into a property may be significantly more expensive. As many landlords have locked in comparatively lower rates to those of today, thus their costs are much lower so the threshold for profit is lower. Meaning that even with profits from renting considered they can offer rents that are lower then mortgage at the current rate levels.

    2. Inventory: Since many folks refinanced at extremely low rates rarely anyone is willing to sell at the moment as they would have to repurchase at much higher rates, lowering the inventory causing prices to maintain high. Therefore once rates lower it may cause some small growth in price due to folk being able to afford more, however we will likely see a return to somewhat normal inventory levels driving prices down.

    3. Loans: Since the structure of amortization has one paying significantly more interest at the start than principal (within the ratio of payments) at the start many loan types seldom give you any equity in the first couple of years. Therefore, you do not really own much of the property you are paying for at the start of the mortgage. Thus, it may pay off to wait for more favorable pricing situation, as you do not have much ownership anyways.

    4. Inventory Timeline: Since when buying you are competing real time with several offers at the same time, buying a property can be significantly faster than that of selling. This is due to many sellers listing a property and waiting for an attractive offer, sometimes waiting for months until one comes along they are willing to accept. As a result, price increases are faster than price decreases.

    Overall, I am seeing that it may be best to sit on the sidelines for a bit until inventory increases and concurrently rates slowly decrease. We are seeing slow inventory growth at the moment and when conditions are more acceptable for sellers, they will begin to liquidate. As a result I think that there will be more affordability in the coming months. We are also seeing consumer debt growing quickly (likely due to increases in cost of living) and increases in foreclosures at the moment, potentially leading to another source of inventory growth. 


    P.S. Please keep me in the loop on what you are seeing. We have similar situations and some more insights may be beneficial.


     Hi Oskar,

    Wow! thanks for the information! and for taking the time to write all of this. I agree that as rates drop sellers might be more motivated to move, increasing the supply. Here in San Diego is already very difficult to find a deal as it is, always having low inventory and the highest cost per sqft in the country, but I think our VA loan, with an always lower rate than the conventional and possibility for no money down puts us in a better position, at least to be able to weight opportunity cost and increase savings rate. I will keep you on the loop on what I am seeing right now and I appreciate if you do the same. we are looking in areas from Spring valley to the east, chula vista to the south, all the way to Poway. As I think someone mentioned here, it seems that time in the market is better than trying to time the market haha.

    Cheers man, Hoping we get a house soon

    Jonathan

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