Dear BP family, I have a difficult decision to make and would like your opinion. Decision: I'm looking to move to Pasadena, CA in June. Should I buy or should I rent? Background: • I love Pasadena! I regretted moving away few years ago and would love to move back. • For a 1-bed apartment, the rent is ~$1900 • To purchase a 1-bed condo with FHA, the downpay+closing is ~ $15,000; monthly payment is ~ $2300 (including PITI, PMI & HOA) • My investment goal is to purchase 1 property a year, which is why I don't want to put 20% for a primary residence • A multi-unit in Pasadena is out of reach for me. I don't have enough for 20% down. And the rents are not high enough to qualify for multi-unit FHA Options: • Buy a condo in Pasadena with FHA. Hold on to the rest of my cash in case an investment opportunity comes up later 2016. • Rent in Pasadena. Purchase a multi-family as "primary residence" somewhere the numbers make sense. • Others (please advise).

Hello @Fay Chen, Thanks for posting about this. I think a lot of people are running those scenarios, too! In fact, I am doing similar calculations for Pasadena! While I am focusing my search in Pasadena; but I'm open to surrounding areas, too (Alhambra, San Marino, Altadena, even as far north as La Crescenta/Montrose, La Canada). I'm POSITIVE that there is a way to finance a small multi-family using FHA or a similar program in that area. Since you have some time to search until you want to move in June, it seems that you still have enough time to find a property whose numbers will work for you. There's an article by Logan Allec about how he purchased a small multi-family via FHA in Santa Clarita here. A couple of questions: 1) How have you been searching: Redfin et al? Or realtors? Craigslist? 2) Are you working with a lender now (e.g. to get pre-qualified) or are you looking for a property first? Have you considered private money? Also, here's a list of "Low and No Money Down Mortgages" from "The Mortgage Reports." https://www.biggerpockets.com/forums/50/topics/262800-for-2016-low--and-no-money-down-mortgages Let me know your thoughts! RD

Hahaha....well, trust me, my ability to live by the beach is completely dependent on the fact that I rent instead of buy ;) Yeah! Keep me posted on how it starts going!

There are personal reasons for buying vs renting that you will need to figure out on your own. As for the investment side, if you are buying in Pasadena, that is an appreciation play (both forced and market appreciation), not a cash flow play. IMHO, the best way for an appreciation play is to buy a distressed SFR at a discount (motivated private seller or bank REO, smallest, ugliest, least expensive home on a nice block with no HOA), then roll your sleeves up and put in some serious sweat equity while you live there, then rent some rooms to offset some of your mortgage. Then, after 2+ years you can choose to sell at profit (assuming you bought and renovated it right, make sure you do) or rent it if/when rents go up enough to turn it cash flow positive. Rinse and repeat as necessary and desired. This is how I got my start right up the road in Glendale, CA and the reason I can now afford to raise my family a mile from the ocean in Huntington Beach. Save up a decent down payment, make sure you have sufficient and stable income to hold as a primary indefinitely if you need, and make sure you get a really good deal ... if any of these elements are missing, keep renting and saving and don't pull the trigger until you figure out how/when they all come together. Don't let your emotions or fear of "missing out" get you into a bad deal. Good luck!

Congrats Faye! I think you stopped by my house in Glendale at one point to talk RE ... was bummed for you when I later found out you were struggling with property out of state (I hope that got resolved BTW) and am glad to hear that you have now purchased locally, even if not in your first choice location. Something you can afford to hold and can put some sweat equity into is a winning combo, and it sounds like that's what you got, and centrally located to boot!

@Fay Chen @Michael Choi sounds like El Sereno for the win. Rumor has it 1031 may be at risk of changing http://www.1031taxreform.com. I look at multi families regularly in Pasadena and South Pasadena, its my dream investing area, working my way up to it, and I hope you make it out here!

@Fay Chen Over the weekend I talked to my neighbor who is a contractor and 'buy and hold investor' who owns over 10 multi units in Los Angeles and few out of states as well. I would say he is quite savvy investor and according to him, he guarantees that El Sereno is going to be the next HP. All the things you mentioned about ES he pretty much said the same thing plus due to rising cost of HP people are boiling over to ES. He thinks ES will gentrify sooner than Boyle Heights and just bought a triplex all cash. I think you made a great move! As for retail scene in ES, HP was kinda like that three years ago especially on Fig. Now it's totally gentrified and shocked how fast investors and entrepreneurs moved in, crazy. Now I'm trying to convince my neighbor to be my mentor lol. @Nabil Suleiman I'm still playing around with the idea of selling but not 100% sure. I plan to either refinance and use the money to purchase another multi or use 1031 to purchase 4-plex in South Pasadena or other location where the numbers makes sense. But if there's any chance I decide to sell I'll let you know : ).

Buying a one bedroom condo is the WORST MISTAKE any real estate investor can make.... you get zero help from roommates helping pay your mortgage, and you have to pay HOA fees. No, don't do it. Rent, save up and just buy a 3/4 bedroom house, duplex, or keeping renting and buy an investment property elsewhere that's cheaper.

@Fay Chen Just a few random thoughts after reading the thread (interesting read by the way). -- I've looked at condos in Pasadena and some of the HOAs seem pretty outrageous ($600 - to almost $1000). HOA period, dissuades me from condos, but that's just me. One of the things about HOAs is that if they were low, the association is often not very well funded, which could lead to poor upkeep/condition of the building, impending HOA increases, or special HOA assessments later on. If you'll be purchasing a condo with low HOA pay special attention to the overall condition of the property. Ask about how well funded the HOA is. And check for deed restrictions that would make it difficult to sell. On the other hand, paying a high HOA pretty much just sucks and makes renting rather than buying a bit more attractive. -- Pasadena has appreciated a lot in the last few years. A nice chunk of it has come from Chinese buyers, especially younger folks with parent money. This makes it harder to not overpay especially with FHA. I don't see this letting up. But if it becomes less convenient for these buyers due to global economic or geopolitical reasons, Pasadena would be affected more so than other communities, IMO. -- I'm sure you've considered adjacent communities. I really like west Alhambra up by Main and Poplar, and further west into El Sereno. Some of the homes are gorgeous, and cheaper than Alhambra, San Gabriel and of course South Pas. I think there are much better appreciation opportunities here. Also I really like the Lincoln Corridor in Alta Dena is interesting with the Cafe de Leche and all. Congrats for moving so far along in REI! Good luck on your next property!

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To Rent Or To Buy?

Fay Chen

Investor · Bothell, WA · Member since 2015 · 214 posts · 104 votes

Dear BP family,

I have a difficult decision to make and would like your opinion.

Decision: I'm looking to move to Pasadena, CA in June. Should I buy or should I rent?

Background:

I love Pasadena! I regretted moving away few years ago and would love to move back.
For a 1-bed apartment, the rent is ~$1900
To purchase a 1-bed condo with FHA, the downpay+closing is ~ $15,000; monthly payment is ~ $2300 (including PITI, PMI & HOA)
My investment goal is to purchase 1 property a year, which is why I don't want to put 20% for a primary residence
A multi-unit in Pasadena is out of reach for me. I don't have enough for 20% down. And the rents are not high enough to qualify for multi-unit FHA

Options:

Buy a condo in Pasadena with FHA. Hold on to the rest of my cash in case an investment opportunity comes up later 2016.
Rent in Pasadena. Purchase a multi-family as "primary residence" somewhere the numbers make sense.
Others (please advise).

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To Rent Or To Buy?

To Rent Or To Buy?

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