My husband and I are still in the "accumulation" phase on the road to ER. We recently moved to southern California, which boosted the salary income considerably, even after accounting for the higher cost of living.
The housing situation here is insane. We're right on the coast, and there's nothing here we could afford. Well, to be honest, we probably could afford *something*... but I am not willing to pour all our extra cash into a $700,000 mortgage, nor am I willing to move to a crappy suburb with a long commute just to be able to have "only" a $500,000 mortgage. Right now we're renting a fantastic condo a block from the beach, within walking distance to town and biking distance to work, so we're pretty happy with our rental.
It's hard not to wonder if we're missing something big with not owning real estate, though. The thought crossed our minds whether it would be a good idea to buy a house to rent, purely for investment purposes. The town we live in is super pricey (and very nice, to be sure), but the neighboring town is not as nice (yet), and the prices are lower. People keep moving into the area, and apparently a large company is planning to establish a major outpost in that town (thus bringing in lots of employees who will need somewhere to live). It seems like there could be potential for growth there.
So, what are peoples' thoughts on buying a property (in these circumstances) purely to rent it out and then sell later for a profit?
My husband is more enthusiastic than I am about the idea - I am pessimistic about the likelihood of finding good tenants and having them pay on time, etc, while he is of the mind that "if they don't pay the rent, kick 'em out!" I also foresee lots of problems with being able to rent it for a high enough price to cover the mortgage, with having it be vacant between tenants, and with getting nickled and dimed by expenses like property taxes and repairs. On the other hand, my husband points out that the principle of leverage would get us a lot more return on our investment in the house than we would get from that same money being in the stock market.
Thoughts? Suggested books to read? We have never owned a house (or any property) and I admit that I feel about real estate the way some people feel about the stock market - it scares me and seems like way too risky a proposition to put my money into. I know that it makes sense eventually to buy a house that we're going to live in for a long time, but so far the circumstances haven't seemed right. But I don't want to pass up the chance to move our ER nest egg forward....
The housing situation here is insane. We're right on the coast, and there's nothing here we could afford. Well, to be honest, we probably could afford *something*... but I am not willing to pour all our extra cash into a $700,000 mortgage, nor am I willing to move to a crappy suburb with a long commute just to be able to have "only" a $500,000 mortgage. Right now we're renting a fantastic condo a block from the beach, within walking distance to town and biking distance to work, so we're pretty happy with our rental.
It's hard not to wonder if we're missing something big with not owning real estate, though. The thought crossed our minds whether it would be a good idea to buy a house to rent, purely for investment purposes. The town we live in is super pricey (and very nice, to be sure), but the neighboring town is not as nice (yet), and the prices are lower. People keep moving into the area, and apparently a large company is planning to establish a major outpost in that town (thus bringing in lots of employees who will need somewhere to live). It seems like there could be potential for growth there.
So, what are peoples' thoughts on buying a property (in these circumstances) purely to rent it out and then sell later for a profit?
My husband is more enthusiastic than I am about the idea - I am pessimistic about the likelihood of finding good tenants and having them pay on time, etc, while he is of the mind that "if they don't pay the rent, kick 'em out!" I also foresee lots of problems with being able to rent it for a high enough price to cover the mortgage, with having it be vacant between tenants, and with getting nickled and dimed by expenses like property taxes and repairs. On the other hand, my husband points out that the principle of leverage would get us a lot more return on our investment in the house than we would get from that same money being in the stock market.
Thoughts? Suggested books to read? We have never owned a house (or any property) and I admit that I feel about real estate the way some people feel about the stock market - it scares me and seems like way too risky a proposition to put my money into. I know that it makes sense eventually to buy a house that we're going to live in for a long time, but so far the circumstances haven't seemed right. But I don't want to pass up the chance to move our ER nest egg forward....