You're asking such a question in a fairly bias forum. Invariably, we're all going to encourage you to go toward owning real estate. That point aside, it's all really relative. AND, it's all about diversification. Not putting your eggs in one basket is key to a successful earnings future. In this market, particularly given how low interest rates are, there is no better time than now to get into the housing market. I think owning a balanced portfolio of liquid assets (i.e. stocks and bonds), and also buying a property in a well-located neighborhood is clutch. The power in real estate comes from the ability to leverage, which is how / why people are able to make so much money (if done properly and hedged correctly).
Dino Zuzic, MBA / TRI Coldwell Banker San Francisco
I hear that in San Francisco the price are climbing up a lot - and you could potentially
flip a condo for a large profit. A thought...
Overall, it is best to start from investing into investment real estate first - to create passive income.
It does not have to be where you live, it could be in another state, with the help of people who work/live there (property management).
The goal is to create passive income and re-invest it into paying off mortgages on your investment
properties, increasing the passive income flow further.
When you are financially free - you can buy yourself a "reward" - principal residence.
Hope this helps,
Beachfront Realty, Inc.
But San Francisco (like NYC) can be one of those few cities where it can make more sense to rent because the house prices are so high in San Francisco. Whereas inland cities like Sacramento it is a no brainer to buy vs. rent.
tend to rise higher. Then comes 2008, and the it can't ever go down crowd got a lesson in Econ 100. If you're looking for a primary SFH, it's a question of your
needs, your wants, and you ability to afford them. Any profit you may make is secondary.
If you are looking for income property, the key word is income, and the only
guarantee is work unless you have so much money you don't mind paying others to manage for you.
Stocks offer you much more liquidity, and potential for higher income from dividends, appreciation or both, but the cost is risk. If you're a pack animal who
waits to see what the crowd does, then you buy high, not knowing that the smart
money just sold their shares to you on the way out. Is Apple a good deal at $700/sh? It is if it doubles again, but many of us can't afford that risk. Other stocks selling for $1.00 could be a bargain, but many may be a step away from
bankruptcy. The short answer is always education, not just taking advise from other people who have a vested interest is selling you one thing or another.
It will depend on what is right for you.
Many people see real estate as an investment vehicle. They start with buying their first home, then investment property, and so on.
It could be an opportunity to invest in yourself. (Instead of investing in your landlord)
I totally agree with Dino. You do need a balanced portfolio. However, it is important that you build equity and if you live in San Francisco, the time to buy is now. Interest rates are very low and prices are starting to move upward...... People pay a premium to live here thus real estate is always a wise investment in the long run.
I am a advocate of home ownership as still the best investment despite the bubble. Hence, you know exactly where my statement is leading you.
What I can tell you is that if you do not yet own a home, owning the home you live in is always wise. first move. Compared with renting, you will get tax breaks on owning plus have greater control over your living environment. And the Bay Area is such a desirable place to live - I would recommend buying a first place to live in.
After that, I sincerely recommend consulting with a licensed financial planner who will help you develop a diversified and smart investment portfolio.
Best of luck. I think it's great that you are starting out so young!
So real estate is not only a better investment it porvides a place to live, shelter from the storm and a place to have freinds over.
For one thing, I make too much money to live in a rental. Whether it's a good investment or not, I want to own my own home, and not be at the mercy of a landlord and neighboring tenants (if I choose apartment life).
But from a financial point of view, you don't INVEST money in the stock market, you SPECULATE that other people's actions will make the value of the stock go up. This is a critical point. You can invest money in a friend's business, but when you buy stock, you're not putting money into the company, you're (usually) buying from the inventory of the brokerage or another stock holder. Buying 100 shares of Amazon doesn't make the company more solvent, it doesn't give them more capital to work with.
You can speculate on real estate values, or you can invest in rental property and run it like a business.
Trying to make a hybrid decision - I'm buying my own home because it's a good investment - is a compromise. Better then to rent and invest separately. But life is short, and there's only so much sacrifice one should do for one's retirement - if all you do is live for your bank account, then is life really worth living?
I, personally, would consider not buying properties cash- but taking advantage of the low rates and leveraging other people's money (extending the money you do have by putting 25% down and financing the rest). This in theory gives you 4 times the purchase power, assuming your DTI ratios are in check (positive cash flowing on your properties).
Sure, there is the argument that you will have these debts/payments for 30 years, but look at it this way: you buy a property for $160,000 cash, which gives you $1600/month rents, at 90% occupancy= 10.8% gross ROI. After expenses, say you knock 3% off= 7.8% ROI. The same property financed, 25% down would have a mortgage payment of roughly $600 at 4% interest= gross 27% ROI, knock of 3% and you got 24% ROI.
And at that point we're not even including appreciation- at the historical average rate of 6% you're looking at an appreciation of $195,000 after 10 years.
If you are just looking to buy and owner occupy, well then that will only give you 6% returns for appreciation and home owner tax deductions (and as Jim said, you get to live in it!)
But...That's just my opinion. If you have any other questions please feel free to contact me. Good luck!
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