Where to go from here???

Question

Hello all BP friends, if you are reading this post I personally thank you as all opinions are appreciated. My family has recently moved to the Sacramento California area within the past 18 months. Leaving Las Vegas in the rear view, I still have a few investment properties there that have fairly low Mortgage Loans and Cashflow nicely. I currently pay $1550 a month in rent for a 3/2/2 house. The market here are starting to pop up way more homes for sale then sold in the past 60-90 days. Are rent is really a great price, and my landlord has asked if we are interested in buying but at a 330k price tag knowing how much updating it needs is hard for me to pull the trigger. I would rather downsize and try to find a home off market below ARV. But given the average rent for this home in my area would run $300-$400 more per month I am stuck with do I move and purchase and receive all the tax benefits from ownership? Or - Do I stay put and wait the market out and try to purchase during the slower months in November and December and try to get a mortgage that's lower then my monthly rent now? I know the price at what you pay, appraised value, and adding equity are all factors to be taken into account. But if you have ever been in my position and have some personal experiences to relate I am all ears...

Thank you, Jared

Chad Deihl · Answer

Of course we cant predict the future, but the Federal Reserve meets at the end of July...  were expecting a 1/2% interest rate reduction.... if that does in fact happen, that can make a drastic difference in both qualification and price range.

Waiting on a market to cool off is fools gold... get in where you can because these low rates will not last forever.

Just be sure you have a plan and dont be caught unable to afford them when a correction happens.  People will always need  place to rent and 75% of all the rental income can be used on top of your own to qualify for your next place.

Brian Serina · Answer

Everyone's waiting for the Sacramento market to cool off and it keeps appreciating.  Those waiting today will have wished they bought two years from now.  Same as two years ago...

Ernie Sazo · Answer

Hi Jared, Welcome to the Sacramento area. I was born and raised here. I agree with Wes, comp the property minus the repairs. Since you live in it you would know exactly what it needs, in repairs, actually  take a good look it may need upgrades, sounds like you may be in an older part of Rancho, knowing the area's, I would say that's about average Market price. But, since you already live in it and the owner already hinted he's interested in selling it to you. I would ask more questions just in a curious way for more information to get a better idea for negotiations. Such as why does he want sell? Is he motivated ? Tired of being a landlord? etc.. Maybe, he was just throwing it out to peak your interest in purchasing? However, if he owns it free and clear, and has owned it for the past 30 years. You may be able to negotiate some good terms in your favor. Good luck !

Wes Blackwell · Answer

@Jared Palacios

If you decide to purchase the property you're living in, get a rough idea of what it's worth in current condition and then costs to make repairs, and ask for at least a 3-4% discount since you're not using a realtor. But buyer beware if this is your first purchase as you may get hustled by your landlord.

Send me a PM with the address and I'll let you know what the comps are showing it's worth so you'll have an idea if the asking price is even fair.

Chad Deihl · Answer

Ps - If youd like I can give you a free market analysis for your home you're renting.  It's quite possible the owner may just be testing the waters with you.  I'll let you know if they're asking too much.  Just might need a negotiator ;)

Jared Palacios · Answer

@Brian Serina I do believe that many Bay Area people are moving over this way because the price per sq. Foot is so drastically different. And most people commute anyway but would have a 300k-500k mortgage instead of 1.2-1.8 Million dollar price tag.  The question is more so is $1550 rent a smarter cost then a 330k mortgage with only 3% down. If i was able to owner finance i could avoid Mortgage Insurance but id be paying $500-$650 more per month.

Arlen Chou · Answer

@Jared Palacios first things first, you should do an analysis of the SFR that your landlord is willing to sell you. The $330k price may be good or might be bad, but without knowing the actual location it is hard to comment. Are you saying that the $330k is market price? That is technically an off-market deal and it might be a good one. That is where I would personally start my analysis. You might be able to negotiate good terms since you already live in the place. Maybe he will even seller finance.

Good luck to you!

Jared Palacios · Answer

@Arlen Chou thank you for the reply. So fair market Value for this house would be around 325-350k, it is in Rancho Cordova CA 15 minutes East of Sacramento. The house has an addition but its a enclosed porch that is included in the square footage and half the garage (2 car is now 1) if a large laundry room with cabinet storage.

Vikrant Dessai · Answer

@Jared Palacios I have been buying  investment properties in Sacramento for couple of years now. There have been people moving in from all around and especially the Bay Area which is keeping up the appreciation in home values and the demand for rental units.

You might want to consider getting a duplex to stay in one and rent out the other unit?

Where to go from here???

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