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Old 01-08-2019, 08:42 AM   #1
Dubbington
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Rent current Townhouse & Buy in Concord, where's Ok?

Wife and I would like more room than our 980sqft with 2 dogs (30lbs each) and 3 cats. The thought of having a child in my townhouse gives me hives due to lack of space.

It's roughly doubled since buying 9 years ago however I'd like to keep it as a rental which means roughly I can take out about $160k and still cover all the costs (taxes, hoa, mgt including cash out) via current rent prices.

That cash out would be a down which puts us in the $750k range roughly for a house. That means leaving danville/San Ramon and looking into Concord, Martinez. We both work in Walnut Creek and want to stay relatively close to family in San Ramon/Danville.

What are the areas to 100% avoid in Concord? I really like homes south of Cowell, they are big lots. Treat and YV can be terrible in the morning heading to 680 I know that. Anything passed Cowell and it's a parking lot in the morning right?

Is this overall an ok idea in the current market? Outright selling means we'd have more to put down so a more $$$ house could be had BUT I don't want that monthly payment, the increased property taxes and losing the flexibility of having a rental.

Keeping my townhouse as rental would allow us possibly leave the area for work and come back if we needed to for whatever reason.
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Old 01-08-2019, 10:23 AM   #2
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I'm in a 1000 sq ft townhouse with 2 boys and it works for us. Our 20lb Boston Terrier passed away last year after being in the townhouse for 10 yrs. We know where our boys are at all times . No plans to move. House will be paid off by the time our oldest starts college in 6 yrs.

$160K meaning a HELOC towards a new home? That sounds risky to me, you're betting two homes and a lot of your money on the housing market when prices are at an all time high. Add to that a HELOC repayment that kicks in when you could have expensive kids running around. Your dual income could possibly go down to one income depending on kids: desire to stay at home w kids, kid has medical needs, daycare is too dang expensive etc.
IMO your current position is ideal, your single income can support your home. This gives you HUGE flexibility with the mrs/kids and saving a crapload of money towards retirement, college fund etc.
also, rentals don't make you a ton of money.
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Old 01-08-2019, 11:16 AM   #3
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He's probably referring to a cash out refi.
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Old 01-08-2019, 11:22 AM   #4
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Sell it and move to Vallejo.
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Old 01-08-2019, 11:37 AM   #5
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I wouldn't keep it with the numbers you're suggesting. If you could keep the rental, feed it a little each month if needed, and have enough for a new down and mortgage, and have money left over for repairs on both houses, it seems okay.

But what you're describing sounds really stressful and doesn't leave much room when life happens. Sounds like you'd be really stretching. Only way I'd keep it in your situation is if you moved out of state in order to buy a new, much cheaper house, while still keeping your hooks in CA if you ever want to come back. At least that would be my only rationale for keeping my house and buying another. Otherwise, the math doesn't work, unless you have a very large income.

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Old 01-08-2019, 11:40 AM   #6
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He's probably referring to a cash out refi.
so you're stuck with the mortgage for an additional X years. Less risky than a HELOC I guess. Still not ideal for when life happens.
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Old 01-08-2019, 12:09 PM   #7
Dubbington
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There's next to no room in my current place for additional baby/child stuff. The 2nd bedroom is my wife's closet. Current bedroom is about 85% me. I was there 7 years before she moved in mind you and I've unloaded 5-7 garbage bags of clothes past year to make room.

The 2nd bedroom has a murphy bed I suppose we could get rid of and make it the nursery. Not sure where the wife's clothes would go or baby items etc.

Everyone says to 'purge' but that to me just means throwing stuff and $$ for the sake of throwing it away. My garage is my workshop and has no room either.

As for pulling $$ out for the down on a new place, I can see it being somewhat risky but if the numbers work out, they workout. Invetors do it all the time, take equity from one house to get another and fill it with a renter. Also, rents aren't going down, maybe home values a little in a few years but rents certainly wouldn't.

Buying out of state would be amazing but wife's job is at local hospital and she loves it. My parents, sisters, nieces and nephew would also be tough to leave despite knowing it would be a good financial move.

Mortgage, prop taxes, and insurance on a house $750k with 20% down is around $3,700.

I can rent my 2/2 for around $3,200 which is close to what it would be after pulling out $150k.

Current mgt is really low at under $2k with mgt, hoa, prop taxes.

Another option is converting attic to a loft, adds about 250sqft but would cost about $15k to do. That would help a lot, just gotta decide if putting $15k into my place in the market is worth it.

We could also just rent my place and go rent something bigger.

We plan to meet with a financial planner to go over all this too, see what they think. I'm sure I'm not looking at something.
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Old 01-08-2019, 12:29 PM   #8
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In the early years of our marriage we rented a 2bed/2bath apartment. the 2nd bedroom was just for her stuff. It took a while, but she managed to chuck a huge amount of crap. The arrival of our 1st son accelerated that process. Today she's a bit of a neat freak and super organizer, go figure .
You should really throw stuff away that's not needed. You'll do it anyways if/when the babies arrive. Better do it now while you still have good sleep and not a new parent-zombie .

btw you should read up on all the new 2018 tax changes regarding interest deduction and property tax deduction.

"investors do this sort of thing all the time"...not sure if they involve their primary residence to do it though. investors did the whole ARM thing all the time back in 2005 too. do what works for you.
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Old 01-08-2019, 12:33 PM   #9
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Also, rents aren't going down, maybe home values a little in a few years but rents certainly wouldn't.
Maybe not by you but we're seeing rents fall on the peninsula, south of Mountain View.
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Old 01-08-2019, 12:37 PM   #10
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this won't end well
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Old 01-08-2019, 01:59 PM   #11
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Assuming you will rent your 2/2 @$3200/mo sounds like a bad mid-term assumption, to me. You may get someone desperate for the first year, but they'll churn out as all the multi-family housing starts to come online (Oakland has +8,000 units in the next 18 months, alone), putting pressure on rents.
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Old 01-08-2019, 07:39 PM   #12
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Stay away from townhomes along Clayton / Treat all the way to Clayton / Bailey. It's Tweeker Central over there.
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Old 01-09-2019, 07:29 AM   #13
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This is NOT the time to be buying.

Hold tight, save, and wait for the inevitable downturn. Keeping your current place as a rental is a good long-term strategy. If you play your cards right and save while you position for upcoming buying opportunities, you might not have to loot as much of your equity as you might today.
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Old 01-09-2019, 07:36 AM   #14
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I have been in the rental game for a bit and here is a list of things I haven't seen tossed in yet.

You will have to claim the rent payments as income to both CA and the Feds.

You will want to have home insurance and personal liability insurance to cover you just in case.

You will also be on the hook for any repairs they call you about so be prepared for leaky toilet and faucet calls. Not sure how much your HOA covers but anything they don't you do.

In CA you will have to make quadruple sure your renters have good payment history because it is a nightmare to kick someone out in CA for non-payment of rent and you could be on the hook for at least 2 or more months of having to pay the mortgage for that place while you are in the process of kicking them out. CA is very renter friendly.
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Old 01-09-2019, 12:41 PM   #15
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Buying at the top of the market in wobbly area like Concord or Martinez is a mistake. Hell even Pleasant Hill is a crap shoot. Prices have really leveled out and may be heading down in the next six months if rates continue to climb. If something terrible happens like 2008, you better be in a position to hang on to your newly acquired boat anchor for years, if not decades to get back above water. Might be tough to afford, but holding out for a dump in Walnut Creek is a better bet especially since you are a handy guy.

You can still get into a duette in my neighborhood for sub seven figures and get about 1600-1800sqf.
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