3

Note: I've read a few similar questions around the site but many are investment focused only and don't factor in housing questions.

Right now, my husband and I are pulling in about $50k/year. My husband is self-employed and I work full time. We're young (22, 26) and have no significant debts, but we live in Los Angeles so cost of living is high. No kids, don't want kids.

At the moment in time I probably have $2000 in savings total, and just received a raise at work (included in $50k estimate) so I would finally start considering myself stable and can really start budgeting efficiently. I have created an account on betterment.com because I've heard great things about it, but haven't quite started investing money yet.

We're looking to move, as I currently live 42 miles from work. Just to see, I applied for California's CalHFA low income housing and we are pre-approved for around a 200k house with no down payment. This is enticing because 2 bedroom apartments tend to be out of our comfortable price range ($1500+) and we'd like to have 2 bedrooms for my husband's music studio (he is a musician - and this would be a tax write off). Those familiar with CA/USA tax laws will also know the other tax benefits to owning a home.

Because he is a musician (and I am too, part time) and we love sun, we're sure we want to stay in LA for at least the next 10 years. After that, we may move to Germany with his family, with possibility of taking over a farmhouse. Renting out our condo in LA while living in rural Germany would give us a very comfortable lifestyle without doing any work.

What is the best way for us to get ahead financially? Should we take the plunge and get a condo in our price range to keep and rent out, or stay in an apartment where payments would be lower and budget for other investments?

  • 1
    Wrong question. You can not treat a house as both home and investment property and get valid results. As a home, compare it to renting. As an investment -- more accurately a business -- it has to produce rental income. – keshlam Apr 24 '16 at 3:59
  • 2
    @keshlam As I said, for now we will be living in it, but in 10+ years we may leave and rent it out. Does that make sense? – user41430 Apr 24 '16 at 4:01
  • Then at that time it becomes a business and hopefully an income source. Until then it's a cost. – keshlam Apr 24 '16 at 4:03
  • 2
    @keshlam right, but due to where I live, rent prices are fairly outrageous. So i would be paying into equity instead of paying rent. I guess my question is more about home buying rather than investing? – user41430 Apr 24 '16 at 4:07
  • 1
    Right, but buying means a new batch of ongoing costs too, from upkeep to insurance to repairs to having to take time off work to meet tradesmen, all of which are built into you rent now. Do not assume that a house would be better financially. Run all the numbers, for your particular housing market; you may find that renting is comparable or cheaper. – keshlam Apr 24 '16 at 4:29
2

It is fine to think about options you may have when X to Y years down the road you move out of the condo. The reason you move may be kids, or job opportunities, or a shorter commute, or wanting to move back to Germany.

The thing is that nobody can tell you what the investment situation may be when you move out of the unit. You may want to sell, you may need to sell; but the market may say no way to sell and get back what you owe - so you have to become a landlord. Or the prices could go through the roof, and selling makes the most sense.

In those ten years the local market could crater because the water system is full of lead (see Flint Michigan), or the biggest industry moves. Other bad things could be overbuilding so that there are too many condos on the market. On the good side the neighborhood could become the place that young people graduating college in the mid 2020s want to live. Of course you can't ask them because they are currently in 6th grade.

Decide what make sense for you now. What is the likelihood that you will have to move in 2-3 years. What about 3-7 years.

I would only start evaluating the investment part if I had lived there awhile and now had to plan what to do when we are ready to move out a year or two from then.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy