I agree with much of the other's advice. However, if you are looking at financial security and it's either all in on stocks or all in on real estate, I'd be thinking about some diversity of asset classes.Originally Posted by Geila
I agree with much of the other's advice. However, if you are looking at financial security and it's either all in on stocks or all in on real estate, I'd be thinking about some diversity of asset classes.
After going through all I did with my parents properties, I would never want to be a landlord again. I know one day we will be downsizing due to the physical challenges of the property. My MIL is still with us and we wouldn't consider moving until she is gone. But I'm on Zillow several times a week checking out what is available just so I can get an idea of where we want to go. The older I get the more close community is important to me. In my younger days property in the boonies would have attracted me. Not any more.
I have toyed with the idea of purchasing a smaller home now and renting to my son until we are ready to move but I don't want to have him feeling like he would be stuck there if something else opened up for him before I was ready.
I will say that I totally get wanting to buy real estate, and in our 20 years of marriage we have actually bought and sold eight houses, and three of those were rentals or flips, so I have certainly not always taken my own best counsel, and I love to buy real estate, so to be honest, I might buy something, but I would not see it as either buying real estate or staying in the stock market, if that makes sense.
But yeah, knowing us, we might buy the house 3 hours away if we loved it and loved the town and thought things were going to get more expensive there.
Thanks for the responses everyone. To answer a few questions:
1. The time frame is really to do with Dh's work timeline. It could be as early as 3 years or as late as 5.
2. We have lots of family in the area including a family member that would serve as property manager who actually likes doing that kind of stuff and already manages other properties.
3. The thought behind buying now is that we would have a house all ready for us when the time comes. We did several scouting trips and found one house (that didn't sell immediately because it was priced too high) but that has everything we want and is in one of the best neighborhoods. The price has been lowered a few times and we think we could buy it at a reasonable price since there's not as many buyers now.
4. We would not be selling our current house until 2-3 years after we move for several reasons, including making sure the move is the right choice (we've both lived our whole lives in the Bay Area and Dh's work is heavily tied to the bay as well). We would rent out our current house during that time; this is a very strong rental market where we live. We have up to 3 years to sell for capital gain purposes.
A couple of you mentioned that a house you want to live in is not necessarily a good rental and I want to ask why that is. The house in question is definitely one that I would want to live in. What would make it not a wise rental property?
you have to run the numbers, make the business case, to see if it is a money making proposition.
Since you tied, in your initial post, your stock market investments to this rental idea, I assume you are viewing it as a moneymaking effort.
Tybee - have you done well with real estate investing? Several family members have tried to invest in real estate by buying multiple properties and have not done well at all. Lost most of them to foreclosure because they bought right before the recession or used those interest only loans that were popular then. I know lots of folks do well, just not sure how well the average person does. I'm not sure what separates the successful investors from the unsuccessful ones. Maybe enough capital to withstand market and financial fluctuations?
The town in question has a strong real estate market right now, from what I've seen (well-priced houses selling in one day), and I imagine it will get more expensive. But the job market is not great due to its size. So it's kind of a 50/50 situation.
Last edited by Geila; 11-24-19 at 2:59pm.
We have had many homes and sometimes made money and sometimes lost. We probably would have done better in the stock market.
Generally, a house that is a good rental property returns a certain amount after you have covered all your expenses. It makes you a certain amount of reliable income. It will be dependent on the area--so in SC where we lived, you would look for 3 beds, 2 baths because you want to rent to a Marine family-- you want to be in certain neighborhoods convenient to the bases, you want to be near certain schools, etc. Up here in Michigan, I really have no idea, except that we could not afford a house in town, which would be a good rental. I suggest you go to something like the MrMoneyMustache real estate forum and read some of the post there, the stickies where they talk about expenses and cash flow. I would read a couple of books on investing in real estate. I would look at Frank Gallinelli's What Every Real Estate Investor Needs to Know About Cash Flow, which has some great formulae where you can plug in the numbers on the property that you are looking at. If the house does not meet the guidelines (for example, one guideline is the 1% rule, that you can rent it out for 1% of value per month, so that you pay 300,000 for the house and you rent it for 3000 a month--and that is just one starting guideline) then you do not buy it as a rental property.
Whether you buy it as your own property and keep it rented to keep it sidelined for you, with someone else there paying utilities, etc., is another question.
The house we rented out was in that latter category. It was in another state and it was already rented out.
The tenant stopped paying rent. Then, the tenant broke in after he was no longer there and stole our tools. Then, the tenant took his parents prisoner at gun point and holed up in the house.
(Can you tell I am not a fan of owning property in another state?)
If I were to landlord again, I would get a property manager and I would have nothing to do with the tenants.
One problem with getting the house you love and then renting it to someone else is that it may become damaged by them. Or, it could work out fine.
We flipped two houses and that worked out okay--one we lived in while fixing it up, and one we didn't. We did not make a ton of money on either but it was fun and interesting and creative and I really enjoy working on houses. But it was also stressful when it came to selling, and I took less money so that I could get the money out of it to give to one of my kids, who needed it for a downpayment on his own house. So we have not made much money in houses but we have always had nice places to live and covered our costs and moved on to the next property, no huge regrets, I guess.
Our situation is so different than yours--if I had 850 equity in Bay Area house and 3 more years until I could move, I would not not buy the other house; I'd put the money in something safer if I was worried about the stock market, and I'd do my buying in 3 years when I was ready to go.
Another book I would highly recommend for you guys is The Happy Couple's Guide to INvesting in REal Estate, by Chakib and Jihan Jaber. It has another take on the whole question and they actually recommend traveling to a different area to invest, exactly what you are doing. It's a fun read and very thought provoking.
But read, read, read!! There is so much out there, and it's so easy to do the background reading and you may find you want to do something or you don't, just from what you learn in your reading.
A simplified distinction-- people invest in real estate for income, and they invest in real estate for appreciation. It sounds like you are seeing this possible purchase as the latter?
There is no monolithic “real estate” investment. Each property needs to be analyzed for investment potential.
If you aren’t so much into looking at it as an investment, then the comments about long-distance landlording and impact on your life are more relevant than making a business case.
Last edited by iris lilies; 11-18-19 at 7:18pm.
There are currently 1 users browsing this thread. (0 members and 1 guests)
Posting Permissions
Reply With Quote