Originally posted by @Stephen Tanquary:
@Jon KhalilI've spent a lot of time recently looking into house hacking in OC as well. I live in Fullerton where there seems to be a decent amount of duplexes (unlike anywhere else in OC). I have to agree with what people have said so far that $250k seems pretty impossible unfortunately. I see it's been a year since this post? Any updates on your journey?
@Rob Massopust You mentioned look into a Condo and holding for a few years. Do you still thing that's a good course of action? I'm wrestling through that myself right now. We're currently pre-approved for $500k and are wanting to get into the real estate game (Currently living in Fullerton). So far it seems like our only options are homes in areas we don't want to live in, fixer-uppers, and condos. Do you think buying a condo and living in it ourselves for a couple years to build equity and save and then maybe move into the OOS real estate investing game is a decent option? Or do you think going OOS right of the bat and continuing to rent our apartment?
Yeah its tough question.
You have to look at your immediate needs and objectives. We are in a suspended animation mode with real estate. No one really knows how long and what impact this is going to have. You have to buy on fundamentals and not factor in much appreciation if any save for what might trend with inflation.
The big question is if you buy something now and its on par with what you are paying in rent then thats a push and you have all the benefits of owning your own place, both psychologically and economically, if you are buying for speculation of it going up in value I would discount that. I would make this a 7-10 year plan. I know there are areas that might suck and the schools might be an issue so you have to factor that in. So if you can make the payments on a 30 year loan and the prices go down can you hold till they recover.
If you buy a fixer condo and fix up and hold will you get the extra gain in equity hard to say for sure based on past models that was true. Prices have not budged that much so far but once we get past this forbearance and things start to unwind its a different story. Big question is how will the lenders fare? Well they are already going to get bailed out, 62% of the first stimulus is going to the banks [remember they write the rules. So hard to tell where that is going to go.
You mentioned about a duplex or the ADU angle. Have you looked into that. A SFR will hold value more than a condo and it gives you more ways to make money. If you can find a SFR and do an ADU or what is called an ADU conversion or Junior ADu it might accomplish what you are looking for, the challenge is the qualifying and the building. Can you buy with a friend or relative? Because then you can take a large SFR, do an ADU conversion and you each occupy one side. It allows any SFR to convert to a duplex legally.
Buying OOS is good if you can cash flow and use that to offset you rent. But will have all the same challenges but lower price point and rent point. You could also house hack buy buying close enough where it makes sense as an owner ie Pomona but not live there long term. Harder to pull off becasue its hard to cash flow anything in So cal right now.
California is in whats called a cyclical housing market, it goes up and goes down dramatically. vs Ohio is in a linear market, it barely moves. Most feel that CA is going to trend lower this time but there is still pretty high demand despite the slowdown and difficulties, question is will that stay.
Bottom line, if you do not have to do something immediately I'd wait 3-6 months and see where this ends up. The only caveat is if you wait and lending gets tougher then it will be hard to get an low down loan and if prices drop that much investors are waiting on the sideline to pick up any deal that hints of positive cash flow.
But study your market,[Fullerton is a good area, La Habra too, undervalued compared to rest of OC] hone in on prices, dollar per sq ft, what is trending, any distressed sales [there will still be minimal for a long time] once you know a good deal and you can get financing [keep checking with lender on programs]. I have a lender that will do Zero down, no MI and low APR for what is called a census tract loan up to $510k - these properties usually in areas that are up and coming but its designated by a street to street basis. 3-5% down up to $759k
Good luck keep me posted interested on what you find.