Buying & Selling Real Estate Discussion

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Dong Yan
  • Real Estate Investor
  • Irvine, CA
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shall we rent out our primary or buy the new investment propertie

Dong Yan
  • Real Estate Investor
  • Irvine, CA
Posted May 17 2022, 14:30

Hi everyone

We stayed in our current home for many years,the neighborhood we stay is very desirable and convenient.

But the high school is getting more and more competitive. It will no longer be a good choice for my younger daughter, who is very laid back and does not like to study hard. In this case ,rather than investing on another rental, we are thinking about moving out highly competitive school district.

In addition, With the current market,  the investment properties are all super expensive,very hard to get the positive cash flow, we are thinking about buying a new home, my current home can be rented as an investment property.But over the years, we made tons of upgrade to the existing house, the rent isn't that appealing due to all the upgrade we made to the existing home.

Shall we  buying an investment property or buy a primary home in our situation?

The Pro of buying an investment property is that we can borrow less money and the rate is high right now.

The con is we can't transfer my younger daughter to the less competitive school. And the existing market doesn't offer us any good deals to have the positive cash flow.

The Pro of buying the primary house is we can still get the cash flow we needed , transferring my younger daughter to a less competitive school but rates is super high and the primary house cost a lot of more than the investment property .

Any advised will be highly appreciated!

Stella

Orange County, California

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Leo Quinones
  • Real Estate Agent
  • Orange County, CA
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Leo Quinones
  • Real Estate Agent
  • Orange County, CA
Replied May 18 2022, 19:23

Hi Stella,

It really depends, because criteria changes a lot when you're buying for personal reasons vs investing. There are a so many factors you need to consider, such as:

• What is your primary home worth? How much rent will you be receiving? What is your return on equity? Could my investment be moved elsewhere to a higher performing property?
• What is your replacement property cost? How much will your down payment and payments be? Are you comfortable with the payments?

**Investment Property: this can go in so many ways. Hard to say without requirements/budget/goals

It seems to me like you have a lot of options right now. I would suggest starting by running your numbers first on your primary home to see how much rent you would be receiving and running numbers on your replacement property. If the numbers don't make sense for you personally/financially then maybe it would be a better move to just stick to purchasing another investment. 

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Andrew Garcia
  • Lender
  • Silver Spring, MD
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Andrew Garcia
  • Lender
  • Silver Spring, MD
Replied May 19 2022, 13:41

Hi @Dong Yan, I am not going to advise on whether you should change schools since that is a personal matter.

If the only comparison is between renting out your current residence and buying a new primary and keeping your primary and buying an investment property, I would go with buying a new primary. They get better rates and it seems like you really want a low rate.

Rates are still historically low. Depending on your scenario, you are probably looking at rates in the 4s or 5s. Today, I just locked a loan at 4.375% so the rates are still very low. It all depends on your scenario though.

Hope this helps! Let me know if I can be of any assistance.

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Dong Yan
  • Real Estate Investor
  • Irvine, CA
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Dong Yan
  • Real Estate Investor
  • Irvine, CA
Replied May 19 2022, 14:06
Quote from @Leo Quinones:

Hi Stella,

It really depends, because criteria changes a lot when you're buying for personal reasons vs investing. There are a so many factors you need to consider, such as:

• What is your primary home worth? How much rent will you be receiving? What is your return on equity? Could my investment be moved elsewhere to a higher performing property?
• What is your replacement property cost? How much will your down payment and payments be? Are you comfortable with the payments?

**Investment Property: this can go in so many ways. Hard to say without requirements/budget/goals

It seems to me like you have a lot of options right now. I would suggest starting by running your numbers first on your primary home to see how much rent you would be receiving and running numbers on your replacement property. If the numbers don't make sense for you personally/financially then maybe it would be a better move to just stick to purchasing another investment. 

HI Leo,

As you said, I have many many options and each option require tons of research and calculation:
For example my primary home were bought 10+ years ago, it appreciates 3 times as the purchased price . When I calculate the cap rate and return on equity shall I use the current market value or use what I paid?  do i include all the improvements over the years , I lost count since over the years I did tons of small and big projects to make the home I wanted.
With the current market in OC, the replacement property will cost over 1 million for sure. I will pay 30% down. the payment will be okay but the rate is so high, not sure whether it is worthy it or not.Shall I wait till the rate dropped then buy the primary home and rent the current home out?

THere are so many option, I am really lost.

If you are in my shoes what will you start with the analysis?

Stella







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Dong Yan
  • Real Estate Investor
  • Irvine, CA
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Dong Yan
  • Real Estate Investor
  • Irvine, CA
Replied May 19 2022, 14:08
that is the fantastic rate, are you handle loan for CA? If you do send me your contact I will give you a call if I need a loan

Quote from @Andrew Garcia:

Hi @Dong Yan, I am not going to advise on whether you should change schools since that is a personal matter.

If the only comparison is between renting out your current residence and buying a new primary and keeping your primary and buying an investment property, I would go with buying a new primary. They get better rates and it seems like you really want a low rate.

Rates are still historically low. Depending on your scenario, you are probably looking at rates in the 4s or 5s. Today, I just locked a loan at 4.375% so the rates are still very low. It all depends on your scenario though.

Hope this helps! Let me know if I can be of any assistance.


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Rachael Mathes
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Rachael Mathes
Replied May 19 2022, 14:52

Hi Dong! If you’d like to get an idea of what you can get for rent on your home to ensure it’s worth turning into a rental property, I’d love to help out! I have access to rental comps and would be happy to share so that you can make an educated decision for your family. 

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Robert Reynolds
  • Real Estate Agent
  • Los Angeles, CA
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Robert Reynolds
  • Real Estate Agent
  • Los Angeles, CA
Replied May 25 2022, 09:14

Hi @Dong Yan

You posted a very good and common question. I always recommend keeping your home and renting it out in most circumstances and buying a new personal residence. You can utilize a low down payment program to purchase your next home and build equity in two homes during this high inflationary market. There could be a benefit from selling your home, since I'm sure it's appreciated a ton and you can keep the first $250k in equity tax free if single and $500k if married. You can then use that money to purchase your next primary residence and several investment properties. Please reach out and we can run different scenarios to help you make a decision.

Real Estate Agent California (#02166235)

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Wang Ruiqing
  • Investor
  • Los Angeles, CA
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Wang Ruiqing
  • Investor
  • Los Angeles, CA
Replied May 25 2022, 11:00

In my opinion, it is not so suitable to invest in real estate at present. The high inflation in the United States is very serious. In the future, the value of the house is generally low.

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Dong Yan
  • Real Estate Investor
  • Irvine, CA
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Dong Yan
  • Real Estate Investor
  • Irvine, CA
Replied May 25 2022, 11:05
yes I agree

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Dong Yan
  • Real Estate Investor
  • Irvine, CA
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Dong Yan
  • Real Estate Investor
  • Irvine, CA
Replied May 25 2022, 11:07
HI Robert,
Are you the co-host for David Greene show I also email him my dilemma.
Does he receive my email?

STella

Quote from @Robert Reynolds:

Hi @Dong Yan, 

You posted a very good and common question. I always recommend keeping your home and renting it out in most circumstances and buying a new personal residence. You can utilize a low down payment program to purchase your next home and build equity in two homes during this high inflationary market. There could be a benefit from selling your home, since I'm sure it's appreciated a ton and you can keep the first $250k in equity tax free if single and $500k if married. You can then use that money to purchase your next primary residence and several investment properties. Please reach out and we can run different scenarios to help you make a decision.


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Wang Ruiqing
  • Investor
  • Los Angeles, CA
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Wang Ruiqing
  • Investor
  • Los Angeles, CA
Replied May 25 2022, 11:09
Quote from @undefined:
undefined
In my opinion, the calculation value must be based on the purchasing power of the currency at that time, compared with the current purchasing power, and it is not so appropriate to take out a loan to buy a house at this time, and now the currency is shrinking and raising interest rates.