“I am 34….” Option C – Partner Up (Part 3)
So, the solution would appear to be to just get hitched. Then, the nagging question is, “What if I never get married?” While it is almost a given for just about every relative, I do not see it that way. I do not plan on marrying someone just so that I can afford to live in the Bay Area. (You can throw in your favorite “life is too short” proverb here.)
In that potential scenario, I would need to bite the bullet and team-up with a total stranger (and assume the risks as one reader mentioned). And I can picture a scenario where I have a different roommate every so many years as their life stage changes! You didn’t really expect him/her to be single for life, did you? But, things may not really be as bad as that sounded.
There is something called TIC (Tenants-in-Common) apartment. It is basically several people getting together to buy an apartment. But, in my case, I am not doing this for investment purposes. I am doing this so that I can have my own apartment unit. Generally, the other people would have the exact same motivation.
If all of the units are owner-occupied, the apartment units could eventually be converted to condo units. (Every city has its own requirements.) From an investment standpoint, this would be a good thing. A condo unit has a higher resale value. It is easier to sell (vs. selling the entire apartment complex). There is less risk as you basically own just your condo unit (vs. a share of the entire apartment complex). That would help alleviate the risk that the other person moving out.
Sure this option is not 100% foolproof. But, this option has been used by many people in the past and will be used by many more in the future.
So, it is looking more like Option C – Partner Up (whether through marriage or otherwise) is the best way to be able to afford to continue to live in the Bay Area.
Over the weekend, I attended my cousin’s wedding. It was nice. It was nothing overly extravagant. I was told that the bride and groom saved wherever they could. But, it was a very joyous day. I got the chance to see relatives that I haven’t ... Read
As I have written in part 1, a modest income homebuyer can get into a very expensive home by teaming-up with someone. This is certainly nothing new. But, it is certainly being used a lot more often these days, particularly, in places like the Bay ... Read
The number of first-time homebuyers who can afford to purchase a median-priced (about $660,000) home in the Bay Area has steadily declined for years. The percentage is now in the teens. Given the high cost of a median-priced home, most first-time homebuyers are forced to ... Read
This is exactly what I did. Had a roomate before getting married. We are good friends (no longer living here, as I got married). I asked for a rent lower than what he could get in the area, and I provided a housing that was better than what he could get in the area. It worked perfectly. When I consider the interest and property tax deduction, and the principal ammount, I was living in a property that was paying a third of what would have costed to rent.
If you take into account the capital appreciation of the property, I felt like I was being paid to live there.
Why do you feel the need to buy? Why not rent?
From what I've read, the real estate market in the bay area is a bubble waiting to burst. Whether or not that's true, the evidence is strong in similar overvalued markets around the country that rent is not keeping up with valuations. If the average apartment/condo in the bay area is 660k it would have to rent at $6600/month MINIMUM to be a decent investment (standard rule 1-1.5% of value). If rents are significantly less than that, it's pretty likely you're in a market that's due for a correction. If you can find a rental unit for much less than that calculation you eliminate the current high risk of a devaluation of your property.
Finding a roommate is fine, but I would strongly urge you to reconsider investing in real estate in the bay area at this time unless you can meet the time honored criteria of being able to make a 20% down payment and have payments that don't exceed 25-30% of your gross income.
If you can't meet those requirements, you can't afford to buy, particularly in a market that has greater downside than upside risk.
