[Silicon Valley]: House hack 2 bedroom condo or continue renting?

Question

Hello BiggerPockets,

I am 26 and have been working in Silicon Valley for 4 years now. I am currently living with my girlfriend and a roomate in a 2 bedroom apartment in Santa Clara for $3,500 a month, where $2,000 of the rent is covered by me and $1,500 of that is covered by the roommate. I would like to buy a duplex, however duplex prices are not cheap around here (not sure if I will qualify and that might also stretch me too thin). As an alternative, I am thinking about purchasing a 2 bedroom condo or similarly sized property, and splitting the cost between my girlfriend and a roommate.

Should I continue renting with a roomate or should I puchase a property and rent out a room? I'm pretty concerned about market prices right now, but I also don't want to wait indefinitely for a market correction.

I was also thinking that I could purchase the 2 bedroom condo now, and if a correction took place in the next few years, I could double down and take advantage of the cheaper prices by purchasing a second property such as a duplex.

If I purchase now (potentially the peak of the market), roughly how long might I be "stuck" in that property (in the case of a correction) before breaking even again?

-Patrick Mosca

Diane G. · Answer

@Patrick Mosca - I have 4 rentals in Bay Area, so let me share my view on the market...

As upstairs mentioned, it is always "too expensive" to buy here, but this is around it feels different... It used to feel "too expensvie but still safe", now it feels "too expensive and unsafe to buy"....

You are now paying $2000 a month to rent... if you buy now, I am just guessing, you will be paying $5000 for the same condo that you are currently living in....Why pay $3000 more to hold an asset that is flat at the best, possibly going down?

I can tell you most people that bought since 2018 are likely regreting now, because today price is lower than Jan/Feb/mar already...

And RE is not like stock, that changes direction every day.... With RE, once a trent starts, it takes 3-5 years to run the course....

So be patient...

Mike Yee · Answer

Patrick,

When we can afford to buy a house regardless of types (condo, townhouse, etc), try to buy one in a good location any time because we need a place to call home. If you plan to relocate to other areas of the country in short term, it may be better idea to rent and downsize to save money.

Also, diversify investment portfolio.

Diane G. · Answer

Timing is a BIG factor when it comes to RE investing... You need to buy it right on the front end....

Patrick Mosca · Answer

Thanks for the feedback everyone. I'm going to start by getting pre-approved, so that I can have a better understanding of which options I have available. I'm definitely not in a hurry, so I will likely be spending the next few months reading books and visiting properties before I make any major commitments.

I understand that timing the market is not really a feasible option, and timing shouldn't have a huge impact over the long term. I'll instead focus on spotting and moving in on a good deal.

Arlen Chou · Answer

@Patrick Mosca it does not sound like you are in a hurry.  If that is the case I would spend the time to get my finances ready.  Get yourself pre-approved and wait for winter to come.  Typically prices go down in the winter months and the people who are selling have some need to sell.  If the market does adjust you will be ready and can be more selective.  Also, I would refrain from signing any long term leases on your current place.

Jay Hinrichs · Answer

since your asking for opinions.. for one that was raised in Cupertino and bought first home in Milpitas second home in palo alto.. the prices have always been too high..  it was too high when I paid 80k for a new build in Milpitas

and it was way too high when I paid 180k in palo alto for a little 3 and 1 that was old and needed remodeling and that was in 82 ish.. LOL..

but if your career is there. I say buy.. take advantage of thse low rates of an owner occ mortgage.. then your building equity instead of building your landlords equity. .. and since you can get roommates all the better.

then if you want to buy again you have a rental in your portfolio already..

Frank Wong · Answer

Hi Patrick,

I would look at the total cost of owning vs renting.  Ask yourself can you see yourself living in the condo for the next 5yrs?   This will help with perspective.  In your case, you have rent or mortgage shared by a roommate which helps out.

As for the top of the market.  No one really knows what will happen with prices.  It surely cannot sustain this upwards momentum forever without a pause.  The when is the million dollar question.  I do like your idea about having cash reserves to double down down the road.  The key to surviving a downturn in a market is holding power and not being overly leveraged.

If buying doesn't feel good don't do it.  Whatever decision you make its gotta feel good. No regrets.

Real estate is a long-term play.  Money is made buying up, flat, and down markets.

[Silicon Valley]: House hack 2 bedroom condo or continue renting?

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