Need advise. I am looking to buy a single family home in bay area. Homes are so costly here, 750 to anywhere over million . If I buy a home in bay area, all my savings will go into making 20% down.
We have immediate family living in Texas. We also want to invest in Texas (may be Dallas and or its surrounding cities) and may be re-locate to that place sometime in future .
If I buy a home with 20% down in bay area as primary residence I will end up with one home. My current rent is 2K per month. My expenses for home will increase to somewhere between 3.5k to 4k. New tax laws will not allow that much deduction.
For the same amount of cash, I can make downpayment for 3 homes in Texas.
Monetarily I keep thinking it makes sense to buy homes in Texas while the interest rates are still low and eventually move there and live in one home and still keep renting the remaining two.
Any pros and cons?
You're trying to compare buying a primary residence vs cash flow investments. I say buy the rentals and move to Texas.
You'll be wealthier in 5 years with the equity built vs speculative gain in the SF housing market. One downside is that property tax in Texas is high, so you're essentially paying income tax in CA AND high prop tax in Texas.
I would tend to agree with @Ronald Rohde . If you plan on moving to Texas in the future buy there and rent in the Bay Area for now. You will be out of state investing for a while but it sounds like you already have a support network in Texas, being that your family is there and can possibly oversee/help out with any potential rentals you purchase.
Buying in the Bay Area is, for the most part, playing the long game as a hold. If you plan on moving in the next 5 years you had better hope the market holds and houses keep appreciating or you will be stuck with either taking a one time loss when you sell or a loss every month when you have to rent it out.
Personally I love investing in the Bay Area, but all my deals are long-term holds. I plan on turning all my real estate over to my sons when I pass, hopefully building generational wealth in the future. It ultimately comes down to your endgame and how you want to get there.
Best of luck.
I made the decision about 6 years ago, I had 2, $500,000 houses in CA collecting about $2,200/ month rent each, and I sold those when I found out about DFW Metroplex area. In TX I could buy a house for $100,000-$120,000 and get $1,200-$1300/ month rent. They don't appreciate in value like CA, but you are not speculating so much TX, prices are moving up consistantly, because of the demand. We did get hit hard on the CA houses when it crashed. Taxes are about 2% as compared to 1.25% in CA, but the cost of the houses 1/3.
We even moved from CA to TX, 2 years ago after 47 years there and it was the best move we made, there is no state income tax in TX, but they make it up in the property taxes. Labor to rehab a house is much less expensive too.
Where in Texas are people seeing these strong rents besides Dallas?
As a general statement, from what I've always heard from investors & podcasts, etc.. your net cashflow will be much greater as whole by investing a certain amount into several cheaper out of state properties rather than investing the same amount into one CA property.
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