In escrow on my first purchase – seeking council
Hi everyone,
I'm in contract to buy an 80-year-old $790k home in Santa Cruz, CA (listing was $90k over this). Property has an un-permitted ADU. I plan to rent both units. This would be my first property.
I'm looking for:
a) sage advice from those more experienced than I am, and
b) to know what questions you would be asking in this scenario
Backstory:
I'm estimating the mthly PITI will be around $4400/mth, plus another $1000-$1200/mth for repairs, vacancies, legal, etc. That puts me at $5400-$5600 I'll need per month, and I've been testing the rental market and think I can get at least $5400.
In exchange for getting into my first house and building wealth long term I'm willing to cover $100-$200/mth out of my own pocket.
On paper it's not a killer deal, but this is a tough market and I'm looking at it as a buy-and-hold. I'm trying to get into the market rather than sit on the sidelines, but my biggest fear is getting trapped in a big mortgage only to watch the value of my home fall.
Thanks kindly,
Robert
Most Popular Reply
I'm in the area and feel like we're at the top of the market, but as a buy-and-hold guy, why do you fear the value of the property going down? It's likely to do so in the future from my perspective. If you numbers work you can ride it out, but I agree that it's a difficult area to find cash flow for now.
I like your numbers generally for our area (I have 2 properties), but as Jonathan pointed out, there are many factors. If you are in the city limits I would take the city planning very seriously, as any neighbor can call in that ADU and force you to spend time and money that you may not be considering now. Supplemental tax increases going to hit you? If you have a healthy liquid account for unforeseen cap-ex and whatnot, seems like a good deal considering the area. I have found that everything costs more than you think, and there is always more wrong with the property than you or any inspector will realize in one snapshot prior to purchasing. Prepare for worst outcome and hope for best.