Costa Mesa, CA · Member since 2015 · 13 posts · 1 vote
Hello BP!
I will cut to the chase. I am in a dilemma and need some experienced advise. Right now I am renting an apt in CA for $1800 for a 1bd/ba. Now that I some money saved up, my plan was to put a down payment(FHA loan) on an apt for around 200k-250k, size, condition, and location is similar to my current apt. The mortgage would be right around 1500-1700ish, so it would be cheaper than my current apt rent. I plan on only living here for a year to fulfill the fha requirement, then plan on using that equity/saved up money for a SFH rental which I would also do an FHA loan on and move in. My question is, would it be advantageous of me, to put a down on an apt, and have my monthly payments go towards my mortgage/equity as opposed to just renting?
I feel it is a good decision and one that would help save me money and build equity. However, after the 1 year mark I plan on moving out. When I move out, this unit will not cash flow since mortage is 1500-1700 and I can only charge about 1500-1700 for an apt this size. Factoring this in, would it still be a good move to buy an apt as opposed to renting?
@Steve Lee based on what you shared, no I would not buy the unit. Assuming your mortgage is $1500-1700 for something similar to your apartment rented for $1800, you will probably end up paying more per month than renting. There are other ownership expenses like repairs, taxes and HOA. Also consider if you sell at the end of one year, that realtor fees will eat up any potential profit. You may argue the prices are going up fast in your market, but the market has been hot and is due for a pull back at any time. What happens if the market drops and you are stuck there? I would personally save up cash and try to buy a duplex, so you can live in one half and rent the other.
@Steve Lee based on what you shared, no I would not buy the unit. Assuming your mortgage is $1500-1700 for something similar to your apartment rented for $1800, you will probably end up paying more per month than renting. There are other ownership expenses like repairs, taxes and HOA. Also consider if you sell at the end of one year, that realtor fees will eat up any potential profit. You may argue the prices are going up fast in your market, but the market has been hot and is due for a pull back at any time. What happens if the market drops and you are stuck there? I would personally save up cash and try to buy a duplex, so you can live in one half and rent the other.
How about this example. Right now I spend 1800 on rent, that is $21.6k a year that I am pissing away on rent money that I will never get back. If I decide to rent for 2 years, that's already $43.2k that I just threw away on rent. Would it not be smarter to mortgage a similar apt with similar monthly mortgage payments as opposed to just throwing 1800 away every month? I understand the mortgage may be more than 1800 a month, but at least some of that is going towards equity. Also, I may decide to just stay here for a few years, which would spread out the realtor fees if I decide to sell years later. My objective is to have my payments go towards something rather than just throw it away, cash flow is not a big concern unless I decide to rent it out later. What do you think?
Renting is not throwing away money, it is inexpensive for housing. The costs associated with ownership are far greater and the amount of your payments going to pay down a mortgage are initially minimal.
Stay where you are and you will be able to save more money than if you buy and move..
Ok sounds good, this seems to be the consensus. But just for my confirmation, you do understand where I am coming from right? My reasoning/thinking isn't too stupid right? haha
Your reasoning is consistent with most but is not necessarily correct. Owning a home is a life style choice not an investment. The majority of people believe renting is throwing away money when in fact it is the least expensive form of housing there is.
If you buy a property to temporarily live in it needs to be a multi plex not a apartment, condo or SFR. None of those are practical unless you rent out rooms but in the end they will not likely make for profitable rentals. No cash flow.
Thank you for the help. This seemed like a no brainer in my mind, but not a single person agreed with me(I posted this question elsewhere). I am very glad I consulted this community, looks like I have much much more to learn.