Tips For The First Time Buyer-Home or Investment?

Tips for the First Time Buyer-Home or Investment??

There are no investment rules that are “black and white” which means you can never say that in every case this is true. But these 3 basic rules have allowed me to “dodge many bullets” in changing economies . Whether you are thinking of your first real estate purchase as a home to live in or an investment for the future, these rules are great caveats and have created a blueprint for my success.

The $150K Rule: In most cases, condos are only good investments when they are very well located: downtown, oceanfront or located near hospitals/universities. If you find a great buy on a condo elsewhere (suburbs) then $150K maximum is the upper limit of what you should pay. Why? The amortization of a $150K loan at $900-$1200 month will fit the needs of most “bread and butter” renters, so in a down market, you will have the ability to attract tenants.And condos are the first sector to feel the pinch since they are usually considered 2nd choice to SFRs. In a down market on a $3000+ month debt, you may not have a large enough pool of tenants. This should make no difference if you’re buying as your primary residence or as an investment since resale value should be your utmost consideration when purchasing property.

Single Family Homes (SFR’s) are always a better investment than condos. Dollar for dollar SFR’s have a higher resale value than condos. Why? If you could spend $1200 to rent a 2 BR condo in a building with shared walls/parking/barking dogs/HOA rules etc. wouldn’t you prefer a private home with no neighbors and private parking? So would I…and most tenants would too. Of course in many cities ie.(NYC, San Francisco) one cannot find a SFR so this is a moot point. But if you have a choice of a condo with a few more amenities or a SFR with similar square footage, you will be increasing your net worth in the long run by purchasing the SFR.

Multi-units are a great way to get into the market. If you are a first time Buyer, and you have the choice of a duplex (or 2 on 1 as they are called in CA) or a SFR, choose the duplex, if all other things are equal. Why? The added expense of the higher price will be offset by rental income and that rental income most likely will be more than 50% of your debt, taxes and upkeep. Thus, you will have a tenant help pay for your expenses while the property is appreciating. Then when you really want to buy the SFR, hold onto the duplex as an investment property, leveraging the equity for your new home.

In these times, approach buying property with the mind of an investor. Look at the bottom line, and figure future appreciation into the equation. 

Call me to purchase your first investment. I offer a FREE consultation and there is no such thing as a stupid question.

DEBORAH A. STONE, REALTOR-INVE$TMENT $PECIALI$T

HOGUE AND BELONG REALTY  SAN DIEGO, CA 92103

 

 

 

 

 

 

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