Hello Friends,

I have a property in 92127 area (Del Sur) where i currently leave and its has Mello Roos (MR)and high HOA even though its a new construction. I was wondering to rent my current one out and buy another one near 92131(Scripps Ranch) where there is no Mello Roos and low HOA. Reason being i can put 20% down and get current lower interest rate for the new one under 4% and not pay Mello Roos and low HOA. The only issue would be that to buy 2000sq feet house in scripps ranch would be around $1million and i have to put 20% down and hope i can rent out my current property that would cover the current mortgage and MR+HOA which i think it would as the location i am in is really good.

Any suggestions.

namal

Originally posted by @Namal Burman :

Hello Friends,

I have a property in 92127 area (Del Sur) where i currently leave and its has Mello Roos (MR)and high HOA even though its a new construction. I was wondering to rent my current one out and buy another one near 92131(Scripps Ranch) where there is no Mello Roos and low HOA. Reason being i can put 20% down and get current lower interest rate for the new one under 4% and not pay Mello Roos and low HOA. The only issue would be that to buy 2000sq feet house in scripps ranch would be around $1million and i have to put 20% down and hope i can rent out my current property that would cover the current mortgage and MR+HOA which i think it would as the location i am in is really good.

Any suggestions.

namal

When calculating costs there is more than mortgage, mello Roos, and HOA. You need vacancy, maintenance, cap ex. If you are not self managing then there is PM fees but with that high of a class property I would expect it to be eash

In Del Sur the only way a SFR is cash positive is if the equity position is high (maybe can cash flow if loan to current value is 65%). Does this mean keeping the home as an investment is not smart. Not necessarily. Historically the rent appreciation turns cash flow negative properties into cash flow positive properties. In addition, the market appreciation provides a great additional return.

The question then becomes can you do better?  I think you likely can.  I have quite a few units including one that used to be our home.  Guess which one has the worst return compared to its equity position?  our ex-home!  This is because it was purchased with a primary intent to be a good home for our (at the time) young family and not purchased with the intent to be a great rental property..

Del Sur is a great area.  You will likely find top notch tenants.  The rents will go up in the long term.  There will be good long term market appreciation.  You are prop 13 protected.  The question is how does it compare to other investment possibilities?

Another thing to consider is that you can sell taking owner occupancy for tax purposes versus if you rent it a few years then you cannot.

Good luck

Thanks Dan. Since you responded :) and thanks again as this one is my first post. Let me provide a synopsis of my current standing. I bought a small condo in Mira Mesa @2009 and stayed there for 2013 and rented it out after moving to my current property at Del Sur @2013. So i have good equity on both properties. Now interest rates dropping back to below 4% has made me wondering whether i should buy another one in probably 92130/31 zip code since due to good schools(as i have a 5 year and 3 year old ) and to be near to work for both wifey and me(work in Mira Mesa) and both zip codes have no MelloRoos as such. I was wondering whether it will be a smart move to buy another one in 92130/31 zip code under 1 million (as i it needs to be atleast 2000 sqft and SFR) and get a low interest rate and rent out the Del Sur property.

The only thing that bothers me is if i buy something around 1million and putting 20% down payment even though i can afford the loan and have a job security for atleast 5 years( cross my fingers and can't predict job security beyond 5 years), i am hesitant to get into bigger mortgage as i want to retire early let say in another 10 years and a bigger mortgage(around 800K) may turn out to be a bad decision.

Regards,

namal