Buying multiple properties in year 1 - can I keep this up?
Jumping in to real estate was a well-calculated move. I live in San Jose, and this market is notorious for making people lose faith in their ability to purchase.
I bought my primary residence in May of 2017 - a brand new million dollar 3 story 2200 sq ft home and closed on a 500k vacation/rental in Lake Tahoe right before the new year.
The primary was financed with 10% down and the rental was financed with 20% down.
I strongly believe the the community I purchased my primary in has massive potential upside, and have been blown away by the prices i've seen my neighbors sell their properties for within just a year of owning.
I'm sharing this in the "success stories" section because I can't stand how discouraged people get, and I truly despise the mindset of "i'll just wait for the market to crash"
We need to find a way to make it work - no one will do it for us
You seem to be implying/assuming that anyone in their right mind would buy your 1m home. No thanks.
If you're into technology or other avenues of creating wealth in your area, kudos to you. Real estate in your area in my view is not it, though.
Respectfully Nick I'd rather rub it in your face later that I can buy your 1m home with cash after investing in the real estate that more predictably generates wealth in other areas of the country. Note that I'd just mention I could but would likely not! :)
Sure, lots of people have ridden the appreciation wave but the kool aid (it'll always go up) conflict of interest attitude in certain markets kind of muddies everything for me. For instance, if I'm more into creating the perception that my property will keep appreciating because I bought that 1m property and need it to appreciate - this is where I hear statements like 'oh it will just keep going up, people keep moving here' etc. That 'conventional wisdom' can be a trap to those without critical thinking skills. All that said, you and others with the outlook might be right and the intent here is not to rain on your parade with regards to your house purchasing. Congrats there, seriously.
Originally posted by @Jim Goebel:
You seem to be implying/assuming that anyone in their right mind would buy your 1m home. No thanks.
If you're into technology or other avenues of creating wealth in your area, kudos to you. Real estate in your area in my view is not it, though.
Respectfully Nick I'd rather rub it in your face later that I can buy your 1m home with cash after investing in the real estate that more predictably generates wealth in other areas of the country. Note that I'd just mention I could but would likely not! :)
Sure, lots of people have ridden the appreciation wave but the kool aid (it'll always go up) conflict of interest attitude in certain markets kind of muddies everything for me. For instance, if I'm more into creating the perception that my property will keep appreciating because I bought that 1m property and need it to appreciate - this is where I hear statements like 'oh it will just keep going up, people keep moving here' etc. That 'conventional wisdom' can be a trap to those without critical thinking skills. All that said, you and others with the outlook might be right and the intent here is not to rain on your parade with regards to your house purchasing. Congrats there, seriously.
Generally speaking, the appreciation here in the bay area is so massive that IF and I repeat IF you can weather the storm you'll come out alright. It's not so much that your property won't recover, it's can you make those massive payments until it does.
The generic (yet real) example would be if a home has increased say 150% over it's 10-11 year low, and then dips 25%, 30% or even 50% (highly doubt it's dipping 50% but hey whatever) in theory you'd still be alright. Now the people who just bought, put minimal down, they will be underwater.... BUT if they can keep making the payments historically they'll bounce back. Even if they don't they'll be paying down a balance.
Here's more info and link to the graph that was posted earlier (note some areas appreciated far better than others..)
https://www.bayareamarketreports.com/trend/3-reces...
And if you want to see crazy appreciation
The analysis below uses second-quarter MLS data to determine where prices rose the fastest in the most recently completed quarter. Note that only single-family homes were included in this study, and that communities with less than five transactions were excluded.
- Woodside — up by 122.2 percent — After ranking No. 6 for annual price appreciation in the first quarter, Woodside took the top spot on the second-quarter list. After reaching a three-year low of $1.8 million in the second quarter of 2017, home prices in the San Mateo County city climbed to $4 million in the second quarter.
- San Francisco District 6 — up by 98.6 percent — Home prices in the city’s District 6 — which includes Lower Pacific Heights, Hayes Valley, and Alamo Square — climbed to a three-year high in the second quarter, with a median sales price of $3.57 million. As in Woodside, the appreciation was so significant because prices in District 6 were at a three-year low in the second quarter of 2017.
- San Francisco District 8 — up by 55.0 percent — In San Francisco’s District 9 — which encompasses neighborhoods like North Beach, Russian Hill, and Nob Hill — the median sales price ended the second quarter at $3.56 million. A $16.5 million sale in mid-April helped boosted the year-over-year price gain.
- Atherton — up by 40.0 percent — While Atherton‘s annual appreciation slowed from the first quarter, when it was the No. 1 Bay Area housing market for that metric, home prices here are still eye-popping, closing out the second quarter at $6.65 million. Nine homes sold in Atherton had eight-digit price tags, three of them higher than $20 million.
- Glen Ellen — up by 33.3 percent — This small Sonoma Valley community had a second-quarter median sales price of $1.25 million, with two-thirds of homes selling for higher than $1 million.
- Sonoma — up by 30.5 percent — At $895,000, Sonoma‘s median sales price hit a three-year high on a quarterly basis. Prices ranged from $231,000 for what appears to be a fixer-upper from $7.1 million for a compound outside the city.
- Menlo Park — up by 19.8 percent — Menlo Park‘s $2.88 million sales price rose by nearly $500,000 since the second quarter of 2017. The largest real estate transaction was a $10 million-plus home that found a buyer in a brisk 18 days.
- San Francisco District 3 — up by 19.6 percent — Tucked away in the city’s southwestern corner, District 3’s median price of $1.32 million reached a three-year high in the second quarter. In what is becoming a rarity for single-family residences in San Francisco, 10 homes sold for less than $1 million.
- Novato — up by 18.9 percent — For the first time in at least three years, homes in the Marin County city of Novato reached the seven-digit range, climbing to $1.1 million.
- San Francisco District 10 — up by 16.1 percent — Encompassing neighborhoods such as Bayview and Hunter’s Point, San Francisco’s District 10 saw the median sales price end the quarter at $1.07 million, a three-year high. Prices in District 10 have been steadily climbing each quarter since the beginning of 2017.
- San Mateo — up by 16.1 percent — San Mateo‘s median price ended the second quarter at $1.75 million, with only two of the more than 160 homes sold garnering less than $1 millio
https://blog.pacificunion.com/the-bay-areas-10-fas...
One thing that's different but important is lot of people made a LOT of money off tech. They dumped huge bonuses into these house and aren't usually the 3.5% down FHA buyer with no savings. Now, that money also implies tech will be around to keep funding the house, but that's a different story...
Originally posted by @Nicolas Casebolt:
@Nick Colvill you have been going against everything people say that is not your opinion. You come off as strange and insecure. To most people your “investment” strategy seems idiotic. Which is fine not everyone has the same idea/plan. If you don’t agree with someone just move on and say point taken. Also doesn’t make sense to buy a house and then a vacation spot but have to wait a year to maybe invest in a rental property. Also how/why would you take a equity loan to purchase a rental? You only put 10% down. If you have the liquid cash like you say you do then A) why would you only put 10% down on a primary residence B) why then would you have to borrow against that property to invest in a rental? Something is not adding up. Either you don’t have the money or you have A LOT to learn. Seeing how you respond to everyone’s advice I doubt you will learn.
Why would you say taking your equity and using It to fund another real estate investment is idiotic? It appears that it’s very common
I think people who have never lived in an area like this have some horribleness misconceptions about our real estate
Originally posted by @Victor G.:
@Nick Colvill Congrats on your local purchase. I like to buy local in So Cal because I’m really hands-on and like to have properties close enough where I can still drive to them within a 2hr radius.
isn't 2 hrs about 10 miles there? lol
Don't make assumptions about what anyone on this site knows first hand.
My first primary residence was purchased in 1987 about a year after I graduated college. We were told by everyone, including the the lawyer at the closing we made a great buy and it could only go up, because real estate only increased in value in that "high appreciation market". It was in an area that was in commuting distance of NYC, walking distance to a commuter train, people were building everywhere, and real estate was HOT, as were job prospects.
It was worth about 1/2 of the purchase price within 2 years when the market dipped. That was not fun. Luckily we didn't max out on debt and were able to save most of one of our salaries for a 20% down-payment on a house, but it took a few years. We moved out of state, and we rented the place out as it was too small to start a family (at a loss, another lesson learned), and dealt with it long-distance for about 5 years until the market came back enough to sell it. (Sadly, you have to amortize the property at the value it is worth when converted to a rental, not purchase price).
We learned some hard lessons, and hope some other poster on BP will too from reading this. Obviously we continued to purchase real estate, however, we know the market is cyclical and even the experts cannot predict it. During the last dip in the market, we knew high-earners who purchased beautiful million dollar properties with low-money down who lost jobs and subsequently lost their homes and even marriages. High-income jobs are difficult to replace quickly, especially if you are tied to a location -- especially a location that corporations are fleeing. Having a strategy around how to deal with dips or loss of income is prudent if you decide to purchase property only for appreciation. Buying income property for cash-flow and using depreciation to offset rental income and tenants to pay off your mortgage is pretty fool-proof. There is a wealth of knowledge on this site, and the most successful posters are both teachers and eager students.
Originally posted by @Gretchen P.:
Don't make assumptions about what anyone on this site knows first hand.
My first primary residence was purchased in 1987 about a year after I graduated college. We were told by everyone, including the the lawyer at the closing we made a great buy and it could only go up, because real estate only increased in value in that "high appreciation market". It was in an area that was in commuting distance of NYC, walking distance to a commuter train, people were building everywhere, and real estate was HOT, as were job prospects.
It was worth about 1/2 of the purchase price within 2 years when the market dipped. That was not fun. Luckily we didn't max out on debt and were able to save most of one of our salaries for a 20% down-payment on a house, but it took a few years. We moved out of state, and we rented the place out as it was too small to start a family (at a loss, another lesson learned), and dealt with it long-distance for about 5 years until the market came back enough to sell it. (Sadly, you have to amortize the property at the value it is worth when converted to a rental, not purchase price).
We learned some hard lessons, and hope some other poster on BP will too from reading this. Obviously we continued to purchase real estate, however, we know the market is cyclical and even the experts cannot predict it. During the last dip in the market, we knew high-earners who purchased beautiful million dollar properties with low-money down who lost jobs and subsequently lost their homes and even marriages. High-income jobs are difficult to replace quickly, especially if you are tied to a location -- especially a location that corporations are fleeing. Having a strategy around how to deal with dips or loss of income is prudent if you decide to purchase property only for appreciation. Buying income property for cash-flow and using depreciation to offset rental income and tenants to pay off your mortgage is pretty fool-proof. There is a wealth of knowledge on this site, and the most successful posters are both teachers and eager students.
This is really good, thanks for sharing.
Originally posted by @Victor S.:
Originally posted by @Victor G.:
@Nick Colvill Congrats on your local purchase. I like to buy local in So Cal because I’m really hands-on and like to have properties close enough where I can still drive to them within a 2hr radius.isn't 2 hrs about 10 miles there? lol
Yes, indeed! That can very well be the case. lol
No one is knocking you Nick. In fact congratulations for being at the top of your game with a great income and great credit. I hope nothing happens to force you to reconsider your attitude, or shake your confidence, and I also hope you get that bigger and better home you are now planning to have.
We are all quite aware that someone owns all those Silicon Valley properties and mulitmillion dollar San Francsco homes. That is just not the average real estate Investor. We are also ware of the big money involved in real estate at any given time, owned by high net worth individuals and institutional investors. However, if you notice that is not the average Bigger Pockets member on here seeking a path toward financial freedom. Maybe you have already achieved that, those on this forum are mostly those that have not gotten there yet but want to learn how. Some, and I would say many are just getting started.
You live in the middle of earthquake country but you seem to feel , no sweat, whatever happens nothing can touch you, you have everything under control, you will be able to handle anything and everything that life can throw your way. I hope you can for your own sake and that of your family.
We mostly try to teach others to live more conservatively and stay well within their means , not to live out on the edge and spend every cent they have, to be able to replace everything they have in such a case life throws them a curve ball. In others words to survive all throughout their real estate investing career, to reach financial freedom and be able to keep it.
Few people can currently accomplish what you have and we are simply trying to provide them with encouragement and some guidance, answer some of their questions and concerns, provide them with feedback that is useful and will create a better understanding of how to deal with different situation they may come across and assist those we can whenever they do find themselves in a fix.
Bigger Pockets has members from every imaginable level of the experience spectrum when it comes to understanding successful real estate investing, financing,and management.
To have an income of your level and be able to have the type of great credit you have to work with is something many of use would like to accomplish as well.
So your take on the Silicon Valley market especially in San Jose, California is that one can count so much on appreciation that one does not even have to bother about cash flow income? Is this right? That is something I will take under consideration, because I in fact am from San Jose, California, and lived in San Jose from 1959 through 2013 and did not discover the same thing you have. Thank you for your insight and contribution to our forum. There might be something in what you say that I could have used to make my path to financial independence through real estate investing much easier than the one I chose to take.