Shall I buy a one B/B apt in Bay Area? Help needed, please.

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JY109050
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Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by JY109050 »

Hello Everyone,
I work and live in Bay now. Currently, I have about 100K in total, 50/50 in cash and stock.
The rent is crazy! 1B/1.5R for the first year is 2.7K/m. I would expect a 10% increase for 2nd year if I'm not going to move to the other one.
I'm thinking to get a 1B/1R around April or May, but some friends advised me not to since the housing price is too high.

More about myself:
1. early 30s
2. single
3. annual income about 200K
4. H-1B Visa holder

If I should not buy it, what should I do with the $50K cash I have on hand?
Thank you for your help in advance.
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CAsage
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by CAsage »

Have you priced or located any one B/B you would consider? How does the purchase, mortgage, taxes, HOA etc compare with renting?
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randomizer
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by randomizer »

I'd never buy in the Bay Area, but there are plenty of people who do.
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livesoft
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by livesoft »

Who knows? Only those folks who can predict the future can tell you if you will lose money or not. If you don't care about losing money, then by all means, go ahead and buy if you can afford the monthly payments, taxes, insurance, and upkeep.
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Lynx310650
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by Lynx310650 »

I am not sure if you have enough money. 50k in cash would be a 20% DP on a 250k home. You cannot get even a 1br condo in the Bay Area for that much. Generally it's going to be double that. Without being able to come it with at least 20% down, I'm not sure your offer will be competitive enough to win a bidding war. Supposedly a lot of these 1 br type places are going to investors paying cash with the intent of using as a rental property. At least this is according to a friend of mine who wanted to buy one of these places with a traditional mortgage, and eventually got a place for $600k by putting $300k down.

You could liquidate your stocks to make your offer more competitive, but then you completely lose liquidity, so I think this would not be advisable. At your income, you should be able to save a lot of money quickly, so I'd wait a bit until you have more saved for a DP.
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Watty
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by Watty »

Here is a good rent vs buy calculator that will help you crunch the numbers.

https://www.nytimes.com/interactive/201 ... lator.html

Don't underestimate the risk of there being an earthquake that will damage your property if you buy. When I lived in the Bay Area my best guess was that if I bought a house there it might have significant earthquake damage once in 200 years, be sure to do your own research. That does not sound too bad until you realize that if you live there 20 years there would be a 10% chance of having significant earthquake damage.

When comparing renting to owning be sure to include the cost of earthquake insurance to have a fair comparison since with a rental you can just leave if the place has bad earthquake damage.
JY109050 wrote: Sat Jan 06, 2018 4:41 pm 4. H-1B Visa holder
Even if you can get a mortgage without a lot of extra requirements or a larger down payment I would not buy property until you get a green card, there is just too much that can go wrong.

What is your credit score? If you have not been in the US for a long time then you may not have a very good credit score since the length of time that your accounts have been open is a factor in calculating your credit score. If you don't have a good credit score then it will be difficult to get good mortgage.
Thesaints
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by Thesaints »

Have you found a bnb you could buy ? What would your projected return rate after taxes be ?

Anyway, the answers are:
What to do with the 50k: keep it; it is your emergency money. If you crash your car how are you going to get to work ?
Should you buy a bnb in the Bay Area: No. H1-B visas only last up to 6 years and that is something which could change suddenly.
WanderingDoc
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by WanderingDoc »

randomizer wrote: Sat Jan 06, 2018 5:27 pm I'd never buy in the Bay Area, but there are plenty of people who do.
The Bay Area has been THE MOST PROFITABLE market for landlords, since 2000, since 2005, since 2010. Don't confuse cash flow for profit.
Profit = cash flow + capital appreciation.
One shouldn't worry about a -$300 monthly cash flow when they net $60,000 per year on their property! ;)
I'm not looking to get rich quick (stocks), I'm not looking to get rich slow (indexing), I'm looking to get rich, for sure (real estate) | Don't wait to buy real estate. Buy real estate.. and wait.
aristotelian
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by aristotelian »

If you are gainfully employed, you can afford it, and you plan to stay there for 10 years, go for it
DrGoogle2017
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by DrGoogle2017 »

I would never buy a 1br/1b condo. Too limiting. I rather rent.
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Pajamas
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by Pajamas »

JY109050 wrote: Sat Jan 06, 2018 4:41 pm If I should not buy it, what should I do with the $50K cash I have on hand?
Thank you for your help in advance.
Since you are here on an H-1B visa, it's probably not a good idea to buy an apartment. It might not even be less expensive than renting. Have you considered sharing an apartment to save money on living expenses?

Where you should put your cash depends on what you intend to use it for and when.
WanderingDoc wrote: Sat Jan 06, 2018 5:55 pm The Bay Area has been THE MOST PROFITABLE market for landlords, since 2000, since 2005, since 2010. Don't confuse cash flow for profit.
Profit = cash flow + capital appreciation.
One shouldn't worry about a -$300 monthly cash flow when they net $60,000 per year on their property! ;)
This post seems to be in the wrong thread as it is off-topic.
Thesaints wrote: Sat Jan 06, 2018 5:52 pm Have you found a bnb you could buy ? What would your projected return rate after taxes be ?
A "one B/B apt" refers to a one bedroom, one bath apartment, not a bed and breakfast. JY109050 is looking for a place to live that is less expensive than paying rent while working in the U.S. on an H-1B visa.
Last edited by Pajamas on Sat Jan 06, 2018 11:23 pm, edited 1 time in total.
TravelGeek
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by TravelGeek »

aristotelian wrote: Sat Jan 06, 2018 5:57 pm If you are gainfully employed, you can afford it, and you plan to stay there for 10 years, go for it
H1B doesn’t allow for a 10 year stay, though. OP would have to get a green card. Depending on the application criteria that takes a short or long while and is never guaranteed.

Given the data in the OP, I would not buy. I don’t even know if it would actually be possible given current prices.

Sharing a larger rental with friends/coworkers is likely what I would pursue to reduce cost.
Engineer250
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by Engineer250 »

Watty wrote: Sat Jan 06, 2018 5:49 pm Don't underestimate the risk of there being an earthquake that will damage your property if you buy. When I lived in the Bay Area my best guess was that if I bought a house there it might have significant earthquake damage once in 200 years, be sure to do your own research. That does not sound too bad until you realize that if you live there 20 years there would be a 10% chance of having significant earthquake damage.

When comparing renting to owning be sure to include the cost of earthquake insurance to have a fair comparison since with a rental you can just leave if the place has bad earthquake damage.
I live in SoCal and have earthquake insurance. It's a special type set up through the state. Meaning, I pay for it through my home owner's insurance but it goes through a statewide pool. It's less than half of what my homeowner's insurance is (which is pretty affordable, in my opinion). I agree with you and recommend anyone in any state should consider extra insurance for their local risks (as unfortunately a lot of people in Texas for instance recently learned).
TravelGeek wrote: Sat Jan 06, 2018 6:48 pm H1B doesn’t allow for a 10 year stay, though. OP would have to get a green card. Depending on the application criteria that takes a short or long while and is never guaranteed.
I think the current administration is changing how they handle H1Bs as well. I know they are looking into changing a lot of the rules (that they believe they can do without changing the law, it's how the administration is handling visa requests). So if I were an H1B visa holder I would take that into consideration as a possible risk.

OP - without knowing a lot more about your financial situation and the prices of properties I don't think anyone can give you a concrete answer on the financial aspects.
Where the tides of fortune take us, no man can know.
harrychan
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by harrychan »

Times are different. I would not purchase a property while on h-1b. There are just too many unknowns.
This is not legal or certified financial advice but you know that already.
katnok
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by katnok »

harrychan wrote: Sat Jan 06, 2018 9:11 pm Times are different. I would not purchase a property while on h-1b. There are just too many unknowns.
+1 Completely agree.

Right now, those who are on H1b have no idea what their future holds as there is speculation that there will not be visa extensions beyond 6 years (even if you are in line for your green card). If you are from India (which I guess you are), then just forget about buying a house.

At least wait until there is certainty with regards to H1b/GC.
WanderingDoc
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by WanderingDoc »

Pajamas wrote: Sat Jan 06, 2018 6:24 pm
JY109050 wrote: Sat Jan 06, 2018 4:41 pm If I should not buy it, what should I do with the $50K cash I have on hand?
Thank you for your help in advance.
Since you are here on an H-1B visa, it's probably not a good idea to buy an apartment. It might not even be less expensive than renting. Have you considered sharing an apartment to save money on living expenses?

Where you should put your cash depends on what you intend to use it for and when.
WanderingDoc wrote: Sat Jan 06, 2018 5:55 pm The Bay Area has been THE MOST PROFITABLE market for landlords, since 2000, since 2005, since 2010. Don't confuse cash flow for profit.
Profit = cash flow + capital appreciation.
One shouldn't worry about a -$300 monthly cash flow when they net $60,000 per year on their property! ;)
This post seems to be in the wrong thread as it is off-topic.
Thesaints wrote: Sat Jan 06, 2018 5:52 pm Have you found a bnb you could buy ? What would your projected return rate after taxes be ?
A "one B/B apt" refers to a one bedroom, one bath apartment, not a bed and breakfast. JY109050 is looking for a place to live that is less expensive than paying rent while working in the U.S. on an H-1B visa.
Perhaps you were reading the wrong thread. A post about buying a property in the Bay Area, in response to a post about real estate in the Bay Area, in a thread titled "Should I buy in the Bay Area"? is about as on topic as it gets. :sharebeer
I'm not looking to get rich quick (stocks), I'm not looking to get rich slow (indexing), I'm looking to get rich, for sure (real estate) | Don't wait to buy real estate. Buy real estate.. and wait.
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Pajamas
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by Pajamas »

WanderingDoc wrote: Sun Jan 07, 2018 3:22 am
Perhaps you were reading the wrong thread. A post about buying a property in the Bay Area, in response to a post about real estate in the Bay Area, in a thread titled "Should I buy in the Bay Area"? is about as on topic as it gets. :sharebeer
Um, no. :confused

Past returns on Bay Area housing from a landlord's viewpoint are irrelevant to this poster's question.
UrbanMillennial
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by UrbanMillennial »

Are you living in an urban, desirable area of SF? If so I’d say that rent is excellent, even with a 10% increase. And if your income is 200k, a 10% increase puts your rent at less than 20% of your gross - more than affordable. Living in SF has great personal and professional opportunities - I’d look at your rent through that lens.

You must be living in new construction to be expecting such a significant rent increase. Have you heard about rent control here? Rent is never raised higher than inflation in buildings built before the 70s (the vast majority of buildings/apartments in sf outside of SOMA). I might consider moving to an older building after next year so you don’t have to worry about price jumps in the future. Make sure to ask the realtor about it before you sign a lease.

As for buying, I don’t think it makes sense for you to buy for many reasons as other people have already mentioned. 100k is not enough for a down payment here - you need at least double that. And, you’re better off investing that rather than tieing up all of your money in real estate.
Topic Author
JY109050
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Re: Shall I buy a one B/B apt in Bay Area? Help needed, please.

Post by JY109050 »

Thank you all for your input very much.
H-1B/GC change is my biggest concern as well. There are too many unknowns on-going at this point.
I want to be on the safe side.
Appreciated!
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