coffeeshop, Home Buyer in San Mateo County, CA

Should I pay all cash for a SF home?

Asked by coffeeshop, San Mateo County, CA Tue May 29, 2012

I am a first time buyer, have been wondering about a few things and
would really appreciate your feedback on this matter.

My parents have generously gifted me with a sum of money to buy a
house for me and my wife and future family. The sum is enough to buy
a property in SF all cash. We are looking at single family homes in the
$1M range.

But I am not sure if as an investment it's a good idea to pay for it all
cash, if I can afford to, or if it's smarter to invest part of that sum and
take a loan. With my credit I can take a loan at around 4.1% interest.

I should mention that we are not permanently attached to San Francisco
and could move in a few years, when we would either have to rent out
or sell the property to buy at a new location.

I really appreciate your feedback!


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shiu227, Home Buyer, Hayward, CA
Mon Sep 30, 2013
l would not buy in SF because of the sewage gas coming out of the ground into the homes.
This is a problem for me. I guess most people don't have any issue with that since they
are not as sensitive in their nose as I. I would rent, use the money to buy apartments
in some other cheaper city to collect rent as income.

Home prices are also way to expensive now. There are no more bargains left. If you bought one
today, you might be losing money later on when the the housing bubble in China bursts wide open.
Chinese investors must sell their holdings in the USA so they will depress prices again. Also, US national debt is way too much so government will continue to raise taxes for the middle class again and again.
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gabrielle b…, Agent, San Francisco, CA
Thu May 31, 2012
Yours are great parents to have!

The answer to your question depends on several factors and on information that you have not yet supplied. Money is cheap at the moment, of course. Buying a home for you and your family and owning an investment property are generally two separate items that require separate analyses.

Feel free to call me 415-200-7202.
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Oggi Kashi, Agent, San Francisco, CA
Wed May 30, 2012
That's really generous of your patents. If you would like peace of mind, pay all cash and live in the property free and clear.

If you would like to take full advantage of the current lending environment and future inflation, you might want to purchase with the largest loan balance that you are comfortable with using a 30-year fixed rate loan. Then invest the rest of your cash elsewhere or in other real estate opportunities.

Best of luck,

Oggi Kashi - 415.690.3792 direct
Broker Associate, Paragon Real Estate Group CA DRE 01844627
All data from sources deemed reliable but subject to errors and omissions, and not warranted.
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Vicky Chrisn…, Agent, Purcellvile, VA
Tue May 29, 2012
Wow. My mom and dad are not so nice! Ha! That is quite a gift. Honestly, money is so very cheap right now.... it's hard to pass up the opportunity to get an incredible loan. On the other hand, what are going to do with the money if you don't put it in real estate? The bank isn't going to pay you much interest... and stock markets might steal the money from you. It's time for a financial advisor, and an accountant... don't look for that kind of highly personalized advise from a real estate page. I think the answer varies depending on lots of other financial type information (tax rate, other investments, retirement fund situation, etc.).

Either way, best of luck to you... I sure wish I had your problem.
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coffeeshop, Home Buyer, San Mateo County, CA
Tue May 29, 2012
Thanks for all the answers. Here is more background..our household income is around $230k. But with a baby on the way, and recession the way it is, it's possible that at some point we might live of a single income only (half of that).

I am currently engaged with a very experienced real state agent. Should I expect him to also help me figure out my investment options? I am thinking of finding a independent financial advisor to help me.

0 votes
Agreed. My guess is there's no way they don't recommend some diversity. I'd suggest you make sure you've done your homework with your agent as well. I have concerns about why your question hasn't been answered adequately already.
Flag Tue May 29, 2012
As I previously commented, you should get a financial adviser to help you. That's a specialty and a responsibility best left to the specialist. A realtor cannot and should not guide you along those lines....not our area of expertise.
Good luck!
Flag Tue May 29, 2012
Without question, go and seek out the professional opinion of a financial adviser. They is no substitute for sound advice from a person or persons who are seasoned in these matters.
Flag Tue May 29, 2012
Matt Ciganek, Agent, San Francisco, CA
Tue May 29, 2012
Snowbrasil-Excellent problem to have! Good luck with your decision. I'm happy to help and add my opinion if you'd like. Keep in mind it'a a busy, upwardly moving real estate market here in the City. Make sure you don't pay too much or you'll have less chance at retaining your investment or even earning money! It's not easy, but there is value out there. Check my website or give me a call at 415-240-9901 to help find the right property once you've made a decision.

Thanks-Matt Ciganek
Barbagelata Real Estate
DRE 1871937
0 votes
Pacita Dimac…, Agent, Oakland, CA
Tue May 29, 2012
If you haven't consulted with a financial planner, perhaps you should.

With this much money, wouldn't you want to diversify and not put all your eggs in one basket

Can you qualify for a small loan?

With your income, can you use some deductions that the interest on the mortgage can give you

Since you said you're not permanently attached to SF, then consider that the general thought is to stay put for at least 5 years to recoup your expenses when buying real estate. sure are you that we won't encounter another down turn in the economy? I know of some folks who paid $750K for a waterfront condo in Oakland at the height of the market. When they had to move they found themselves stuck when the prices dipped to less than half. Had they taken a mortgage they may have qualified for a short sale due to the relocation hardship.
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David Tapper, Agent, Burlingame, CA
Tue May 29, 2012
Good question Snowbrasil. It's usually best to use other peoples money ( the banks ) especially since the cost of money is so cheap.

But, since the market is so hot, I think you would come from a position of strength negotiating a cash offer instead of getting a loan.

Once you own the home, then you can do a refinance later. Talk with a professional banker/ mortgage broker to see if you would qualify and what the rate would be to do it that way.

You can also talk to your Realtor to see how they may be able to negotiate an offer like it's cash and still get you a loan.

If you need a referral to a good mortgage banker, feel free to ask.

Good luck!

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Gabriel Rojas, Agent, San Francisco, CA
Tue May 29, 2012

A great question with some great answers for you to start with.

I've been fortunate enough to work on behalf of some all cash buyers recently and have had great success with it. Casting all other investment opportunities aside, all cash purchases right now seem to put buyers in a very strong position. With fewer contingencies to delay the purchase, many sellers are hoping for this type of opportunity.

Whatever you decide, I wish you and your wife the very best!

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Vi Pavlicevi…, Agent, San Francisco, CA
Tue May 29, 2012

Thank you for your question. Interest rates are at an all time low, so it would be a good option to consider financing your home. It's a good time to invest in Real Estate, so why lock up your money on one home? Also, the rental market in SF is extremely strong, so it's another thing to consider when you're deciding between renting out your property or selling it.

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Steve Gallag…, Agent, San Francisco, CA
Tue May 29, 2012
The answer to this depends on other factors. The money you borrow to purchase a home is some of the cheapest funds you can borrow and the interest you do pay can be completey deductable. The question that I would ask is if you have the income from which to deduct the interest payments. Also, if you invested the funds elsewhere, what interest rate could you acheive?
I would be happy to elaborate on this if you want to contact me directly,
Steve Gallagher
Coldwell Banker
ca dre# 01193002
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Matthew Goul…, Agent, San Francisco, CA
Tue May 29, 2012
Hi Snowbrasil,

A enticing question for a Realtor, an all cash buyer for $1M.

My answer is simple, without all your information, needs and possible plans it is really hard to advise you on the investment side. I would suggest calling me to sit down and review your options to see if making a purchase here makes sense seeing as you may move in the near future.

Good luck, I am sure you will see many answers to this Q.

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