Wednesday, 23. June 2010
I live in Sacramento, CA, and it is one of the cities that has been hit hardest by dropping house prices. I am a 19 year old college student living with my parents. I work as a freelance videographer/video editor and bring in anywhere from 00-00 a month. I am also working on starting my own advertising/marketing company, but that cannot be considered since it is not a definite thing. I currently have no monthly bills since I live with the parents and bought my car in cash. I also have about ,000 saved.
The prices in Sacramento are so low right now, that I really think it is a great time for the first time home buyer to get a house. So here is my question:
I need advice on whether to buy a house or not.
So here is some more info: In four-five years I will graduate with an MBA, and according to the regional average, I will be making between ,000-,000 a year starting off.
Option #1 for me: I buy a house now that I would plan on moving into as soon as I graduate and get a full time job. A built in 2004 foreclosure house I wouldn’t mind living in would cost me about 0,000 right now. Since it is a foreclosure, say the actual market value is 280,000 So after buying it, I would then rent it out for the next four years. I would have my parents cosign(they have perfect credit) on my loan so I could get a low rate, say 6.25% (CA avg. 6.0% right now). After tax and insurance is added, I estimate my monthly total payments would be around 50. I could rent it out easily for 00 a month. So I would then lose 0 a month. Now I know that sounds stupid, but here is how I see it: Over a 4 year period I would lose ,200+ 8,000 for repairs. ,200 total. Now say the housing market goes up over the next 4 years and the house value goes up to 0,000. (It was higher than that in 2005). I then have over 0,000 in equity, and I only lost 15,000.
Option #2: I can buy a foreclosure house that I wouldn’t move into in four years. (it would be strictly investment). They go as low as 5,000 right now for ones not needing fixing. So say I get one for 0,000 to be safe. I can then rent that out and create a positive cash flow of about 0-300 a month after expected repairs and vacancy rate. The plan would be to then sell it when the market goes back up. Does that sound like a good investment to anyone? Keep in mind, I would have the extra work of managing the property and then I would also need to buy a second house for myself in four years.
Sorry for such a long drawn out post, but thank you to anyone who read through it. I could really use some advice on this. I aspire to be very successful and wealthy in life, and I think that starting off in real estate early will help me do that.
Thank You,
Matt
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