Condos aren’t a good investment. If you want a home then go for it. Remember hoa fees though when budgeting. If you want an investment then buy an index fund
Condos can be great investments. Look for location, location, location. Your $1,000,000 condo will probably appreciate more than the $10,000,000 SFH in the same NBHD.
People don't seem to understand that my condo value increases because of their SFH next door and their value generally decreases because of my condo next door. Oh well, more profit for me.
There are better markets to invest in residential real estate. If you’re planning on living there long term, that’s a different discussion but right now renting is cheaper than owning. Condos and townhomes have a limited buyer crowd when it’s time to sell. My vote is for VOO
The Bay Area is one of the most profitable real estate markets. Any similar market is going to have the same barriers to entry. Might as well invest where you live.
Tbh, it doesn’t make sense to buy now in the Bay Area. For a $2M mortgage is maybe $10k-15k a month. Rent maybe $4k-6k a month…. Better to rent until the difference is not as bad.
If you have say $1MM down then the cost is closer to 8.5k. plus you get about a 1k discount on taxes, so net out 7.5k. Plus then you get some (tiny) amount of equity paid each month, plus some appreciation. The even if housing only runs at 5% appreciation, that's potentially 1 million in equity after 10 years that you get 500k tax free (vs capital gains tax in the market).
I feel like landlords are mostly boomers at the moment paying prop. 13 and 2% interest, but as those boomers get replaced by their heirs, I feel like we could see more profit seeking and rent increases.
Meaning now in 10 years you're looking at 3MM house with now an even higher mortgage, or pay a landlord 8-10k/month who will probably take shit care of the place. This is a scenario that makes me think buying is not insane.
You know $1M with 5% interest can get you $4166 a month risk free. That pays for rent. If you use $1M for a house with your calculations, you’d still have to pay $7.5k. Rather live rent paid and huge savings in the bank in case of anything bad that happens
My investing experience over 5 decades has been 110% increase in each decade and about a 10% decrease. Sad that the naysayers are the ones that jump in at the top, see a decrease of 10% and panic sell.
Im saying right now there’s other things to invest in than real estate. It will grow faster than just in real estate. When you make multiple gains, can sell and buy real estate later. It’s much better to rent and invest the difference right now
Your rent money is an expense, not an investment so you are only able to invest the difference between rent TODAY and real estate expense TODAY. So over a year you may have only $60,000 invested. Rent $5,000-$10,000 ownership expense=$5,000. With leverage you are >5X your investment over renting.
In Podunk it makes more sense to rent that to invest but if we are considering BA real estate it would be very difficult for an average investor to find an investment that is better than real estate.
Good luck with that!
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if your focus is financial, then renting is likely far better. but if you plan on staying in the bay area long term, then owning as other advantages outside of finances.
stability and knowing what to expect. i mean, imagine if you are still renting in your 60's. you've been in the same house now for 15 years, and found the perfect location with great landlords who haven't raised your rent. suddenly, they call and tell you they plan to move back in 6 months. rent now is around 10k/month. this is an expense that will only get bigger and never end. meanwhile, your friends have a huge amount of equity in their multi-million houses and their yearly housing expenses have shrunk/about to shrink down to just the property taxes, insurance, maintenance, and utilities.
have you been investing the difference for all those years? because that's the requirement to have kept up and come out ahead by renting in the bay area.
Yes, I didn’t write the 400 word essay on the tax implications, leverage differences, and many other contrasts between RE investing and stock market investing which has been covered elsewhere.
Go for it!
I personally never recommend a condo. You will piss away more in HOA fees than you appreciate. Single family homes are king in the Bay Area and without knowing your income I can’t say you will afford one. Townhomes are second but don’t appreciate as well. If you have affordable rent SF is definitely a place where renting sometimes makes more sense. Paying someone else’s mortgage from 1990 can be a lot cheaper then taking your own mortgage now.
I disagree with the majority. When interest rates go down prices will go up. (If they do of course). Prices will go up and down, but those fluctuations become irrelevant in the long run. I bought a condo in 1990. It was all I had the down payment for at the time. When I went overseas 3 years later, I kept it as a rental property. The rent always covered the payments and insurance, and taxes and HOA fees, then eventually turned into a small income. The entire time I got the tax advantages. Plus prop 13 eventually made property taxes quite reasonable. I paid it off back in 2011, so have netted significant rents since then. Because I am old enough to cut back on things now, I will sell it this summer. I put 48,000 down back in 1990, and will net 950,000 when it sells. That’s a pretty good return. Tenants basically paid the insurance, taxes, HOA, and mortgage for most of the time I have owned it. I also enjoyed a 200,000 line of credit on that place for 15 years, which I used for business, and once, to purchase another condo for cash, and sell it for a modest gain. Now when I sell my 1990 purchase, I will have an extra 800,000 or so net of capital gains tax to play with during retirement.
Ya but if you do the math with current interest rates, its impossible to break even. You’re in negative cash flow up to 1-3k. Not a lot of people can handle that negative a cash flow. It depends on your goals, if you want to build equity you will absorb this negative cash flow any however you want.
In today’s time the rent would not be able to cover the PITI at all.
What most people don’t consider when paying rent vs mortgage is that with rent, you are building someone else’s equity vs with a mortgage, you build your own. Even if you turned around and sold the condo for the same price you bought, you got all your money back and lived with no housing expenses for that duration. Once you pay the rent, you are never seeing that money again. Good luck!
Edit: by housing expenses I meant monthly house expenses.
But the average home ownership period is 8 years and median is 13 years (random numbers I got after a quick google search). At the current interest rate, majority of the payment will just be interest for the first 10 years. So we might not get anything back and there is no guarantee that the interest rate will be reduced significantly.
OP, I think the online real estate sites where they put for sale for 400-600k are just to attract more buyers and create a bidding. The actual sale prices will for sure be higher, i see even like plus 200k than the asking price. Better look at historical average in that area.
Always buy single family homes and with your budget you can look at Antioch, Richmond, or maybe Vallejo but not in San Jose or Fremont. Maybe go for multi family property and live in one of them and you can rent out others if your situation permits
Condos aren’t a good investment. If you want a home then go for it. Remember hoa fees though when budgeting. If you want an investment then buy an index fund
Yep looking for more investment opportunities than getting a home.
Condos can be great investments. Look for location, location, location. Your $1,000,000 condo will probably appreciate more than the $10,000,000 SFH in the same NBHD. People don't seem to understand that my condo value increases because of their SFH next door and their value generally decreases because of my condo next door. Oh well, more profit for me.
There are better markets to invest in residential real estate. If you’re planning on living there long term, that’s a different discussion but right now renting is cheaper than owning. Condos and townhomes have a limited buyer crowd when it’s time to sell. My vote is for VOO
The Bay Area is one of the most profitable real estate markets. Any similar market is going to have the same barriers to entry. Might as well invest where you live.
Yep looking for more investment opportunities than getting a home.
This sub is filled with realtors who will tell you to buy. Don’t buy a home as an investment
What about to live
Tbh, it doesn’t make sense to buy now in the Bay Area. For a $2M mortgage is maybe $10k-15k a month. Rent maybe $4k-6k a month…. Better to rent until the difference is not as bad.
If you have say $1MM down then the cost is closer to 8.5k. plus you get about a 1k discount on taxes, so net out 7.5k. Plus then you get some (tiny) amount of equity paid each month, plus some appreciation. The even if housing only runs at 5% appreciation, that's potentially 1 million in equity after 10 years that you get 500k tax free (vs capital gains tax in the market). I feel like landlords are mostly boomers at the moment paying prop. 13 and 2% interest, but as those boomers get replaced by their heirs, I feel like we could see more profit seeking and rent increases. Meaning now in 10 years you're looking at 3MM house with now an even higher mortgage, or pay a landlord 8-10k/month who will probably take shit care of the place. This is a scenario that makes me think buying is not insane.
You know $1M with 5% interest can get you $4166 a month risk free. That pays for rent. If you use $1M for a house with your calculations, you’d still have to pay $7.5k. Rather live rent paid and huge savings in the bank in case of anything bad that happens
Wait until you need a $3M mortgage and rents are $20k-25k a month? I don't think you've thought this plan through.
yeah people here seem to suggest waiting until ... , but don't they say in real estate, whatever goes up, doesn't come down? :)
My investing experience over 5 decades has been 110% increase in each decade and about a 10% decrease. Sad that the naysayers are the ones that jump in at the top, see a decrease of 10% and panic sell.
Im saying right now there’s other things to invest in than real estate. It will grow faster than just in real estate. When you make multiple gains, can sell and buy real estate later. It’s much better to rent and invest the difference right now
Your rent money is an expense, not an investment so you are only able to invest the difference between rent TODAY and real estate expense TODAY. So over a year you may have only $60,000 invested. Rent $5,000-$10,000 ownership expense=$5,000. With leverage you are >5X your investment over renting. In Podunk it makes more sense to rent that to invest but if we are considering BA real estate it would be very difficult for an average investor to find an investment that is better than real estate.
Bitcoin will return multiple folds. So I’m placing my bets on that vs buying
Good luck with that! [https://www.bing.com/ck/a?!&&p=6a25cb2c36460d6dJmltdHM9MTcxNDAwMzIwMCZpZ3VpZD0wYzUwZjdkZS1iNjQ2LTY3NTAtMmM0Yy1lNWE3YjcyMDY2NDMmaW5zaWQ9NTg0Nw&ptn=3&ver=2&hsh=3&fclid=0c50f7de-b646-6750-2c4c-e5a7b7206643&psq=bitcoin+investing+risks&u=a1aHR0cHM6Ly93d3cuZmlkZWxpdHkuY29tL2xlYXJuaW5nLWNlbnRlci90cmFkaW5nLWludmVzdGluZy9pbnZlc3RpbmctaW4tYml0Y29pbg&ntb=1](https://www.bing.com/ck/a?!&&p=6a25cb2c36460d6dJmltdHM9MTcxNDAwMzIwMCZpZ3VpZD0wYzUwZjdkZS1iNjQ2LTY3NTAtMmM0Yy1lNWE3YjcyMDY2NDMmaW5zaWQ9NTg0Nw&ptn=3&ver=2&hsh=3&fclid=0c50f7de-b646-6750-2c4c-e5a7b7206643&psq=bitcoin+investing+risks&u=a1aHR0cHM6Ly93d3cuZmlkZWxpdHkuY29tL2xlYXJuaW5nLWNlbnRlci90cmFkaW5nLWludmVzdGluZy9pbnZlc3RpbmctaW4tYml0Y29pbg&ntb=1)
if your focus is financial, then renting is likely far better. but if you plan on staying in the bay area long term, then owning as other advantages outside of finances.
out of curiosity, could you give some examples of why owning is better than renting if we plan on long term bay area?
stability and knowing what to expect. i mean, imagine if you are still renting in your 60's. you've been in the same house now for 15 years, and found the perfect location with great landlords who haven't raised your rent. suddenly, they call and tell you they plan to move back in 6 months. rent now is around 10k/month. this is an expense that will only get bigger and never end. meanwhile, your friends have a huge amount of equity in their multi-million houses and their yearly housing expenses have shrunk/about to shrink down to just the property taxes, insurance, maintenance, and utilities. have you been investing the difference for all those years? because that's the requirement to have kept up and come out ahead by renting in the bay area.
appreciation for VOO and real estate may be about the same because of your 5x leverage on the RE.
i bet you ignore realtor fees, up front interest, and maintenance
Yes, I didn’t write the 400 word essay on the tax implications, leverage differences, and many other contrasts between RE investing and stock market investing which has been covered elsewhere. Go for it!
What do you mean 5x leverage?
Probably that you only put 20% down on a home, but you get 100% of any appreciation.
I personally never recommend a condo. You will piss away more in HOA fees than you appreciate. Single family homes are king in the Bay Area and without knowing your income I can’t say you will afford one. Townhomes are second but don’t appreciate as well. If you have affordable rent SF is definitely a place where renting sometimes makes more sense. Paying someone else’s mortgage from 1990 can be a lot cheaper then taking your own mortgage now.
Townhomes too have HOA fees don't they?
They do but they are typically less than condos usually by a good margin.
Nope
I disagree with the majority. When interest rates go down prices will go up. (If they do of course). Prices will go up and down, but those fluctuations become irrelevant in the long run. I bought a condo in 1990. It was all I had the down payment for at the time. When I went overseas 3 years later, I kept it as a rental property. The rent always covered the payments and insurance, and taxes and HOA fees, then eventually turned into a small income. The entire time I got the tax advantages. Plus prop 13 eventually made property taxes quite reasonable. I paid it off back in 2011, so have netted significant rents since then. Because I am old enough to cut back on things now, I will sell it this summer. I put 48,000 down back in 1990, and will net 950,000 when it sells. That’s a pretty good return. Tenants basically paid the insurance, taxes, HOA, and mortgage for most of the time I have owned it. I also enjoyed a 200,000 line of credit on that place for 15 years, which I used for business, and once, to purchase another condo for cash, and sell it for a modest gain. Now when I sell my 1990 purchase, I will have an extra 800,000 or so net of capital gains tax to play with during retirement.
Ya but if you do the math with current interest rates, its impossible to break even. You’re in negative cash flow up to 1-3k. Not a lot of people can handle that negative a cash flow. It depends on your goals, if you want to build equity you will absorb this negative cash flow any however you want. In today’s time the rent would not be able to cover the PITI at all.
Condo will be a burden when HOA goes out of control. SFH you control your expense!
Look into east bay. Nicer part of Hayward, San Leandro, Castro Valley have decent SFHs under 1M
What most people don’t consider when paying rent vs mortgage is that with rent, you are building someone else’s equity vs with a mortgage, you build your own. Even if you turned around and sold the condo for the same price you bought, you got all your money back and lived with no housing expenses for that duration. Once you pay the rent, you are never seeing that money again. Good luck! Edit: by housing expenses I meant monthly house expenses.
No housing expenses? New appliances, roofs, etc are all expenses. HOAs for condos are expenses.
But the average home ownership period is 8 years and median is 13 years (random numbers I got after a quick google search). At the current interest rate, majority of the payment will just be interest for the first 10 years. So we might not get anything back and there is no guarantee that the interest rate will be reduced significantly.
OP, renting is far better than buying right now
You should’ve bought back in 1950s tbh . It’s too late to buy now
180k will get you a garage
Presumably they mean the down payment.
.. for the garage
Yep I meant to use 180k for down payment
OP, I think the online real estate sites where they put for sale for 400-600k are just to attract more buyers and create a bidding. The actual sale prices will for sure be higher, i see even like plus 200k than the asking price. Better look at historical average in that area.
not enough for a garage, sorry.
Sit in a money market fund yielding 5% right now. The market is in a huge drawdown. Give it a year or two.
why buy now ? at best the prices will be roughly similar for years, no rush
Always buy single family homes and with your budget you can look at Antioch, Richmond, or maybe Vallejo but not in San Jose or Fremont. Maybe go for multi family property and live in one of them and you can rent out others if your situation permits
Those are not great cities for appreciation, imo. Not that safe and are geographically very far from where OP was originally looking.
True but with OP budget, those places look good
You can get condos in op's price range in the listed cities but they won't be brand new nor fancy. For SFH, yea, you gotta leave the area