Local experts are predicting little or no growth for several years, To recover to the peak price most optimistic economists are hoping to arrive surpass that point after year 2020s.
This is nothing new. In the 70s one lives in a house for 5 years and make $1-$2K 1970 dollars. In the early 1980s people pay interest rate as high as 20% and survived.
I am also in the process of buying a house for ~800K, but in my case, I will have plenty of money to live well.
Why buy a house if you're not gonna have money to live well, have fun, enjoy life? Seems to me that you are overextending yourself.
I'd recommend you downsize a bit. Otherwise, I see nothing but trouble in case you lose your job or encounter any other unforeseen expense.
I like to have 50K in my checking/savings (or any other highly liquid) account just in case.
Congrats on your investment. Sounds like you've done a little homework in determining a good location for your investment. And yes, school districts are an important part of owning rental property amongst other things such as freeway/interstate access, access to grocery stores/major services, low crime rate, etc.
From a monetary standpoint, here's a formula I've used to determine whether its worth my time or not.
annual net operating income (NOI)/ down payment = percentage return
I know, what is â€œannual net operating incomeâ€? This is basically, income minus expenses or in other words, cash flow. Letâ€™s look at an example to see how it all breaks down.
Subject home: $160,000
Required down payment: $40,000
Amount Financed: $120,000
Property tax: 83
Add this all up (1550 - 690 -83 -52) and you have a monthly NOI of $725 or annual NOI of $8,700. Getting back to our formula (NOI / down payment), it would look like this:
$8,700 NOI / $40,000 DP = 21.75% return
Not too bad. I usually try to shoot for 15% or greater. Can you make this in the stock market or anywhere else? Hence, my passion for real estate investing!! Got further interest? Give me a shout.
John Mondello, Realtor
â€œI find the house, you make it home.â€
I agree with Maria, don't buy a home just for profit you just can not predict what the market will do in 5 years, purchase a home that will not financially strap you, you do NOT want to be a slave to your home.
If this home is what you REALLY want , you might want to try a different loan like an FHA with 10% down or explore other options.
Just don't buy anything that is going to put you under to much stress.
Feel free to contact me with any questions.