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buying vs renting in San Francisco

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buying vs renting in San Francisco

Old 08-24-04, 05:01 PM
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buying vs renting in San Francisco

So I am back in SF, and am looking to get somewhere to live, the places I have been looking at would leave me with a mortgage of 3000-3400 +prop tax of 500/month. and then the normal other bills etc.

So the benefit of purchase is of course an increase in equity.

However I also started looking out of curiosity at what a rental for 2000-2400 would get me, and it seems like it would get me more property for my money. But no equity to build..


In that case I would probably putchase something in Ireland and rent it or, try and pay both rent and mortgage, but ireland is crazy expensive. Dublin is San Francisco expensive, and the weak dollar does not help a lot there.

If I were to purchase here in SF I'd like to get a TIC, which apparently outside california is typically used for commercial lending. And if you get one and convert it into 2 seperate condos then you can sell each condo for more money, of course with the prices of those being in the million plus range I'd be doing that with a partner which itself contains risks.

Thoughts?
Old 08-24-04, 05:34 PM
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Buy w/partner.

You can make it worth your while if you do it this way. Rent = Bad in this case.

-pedagogue
Old 08-24-04, 05:36 PM
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If you aren't looking long term (20 years), I would rent. Your first 10 years of payments would have interest higher than rent payments, so you are definately not ahead (not factoring in appreciation).

What are your long term plans?
Old 08-24-04, 05:37 PM
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He could always sit on the property and rent it out. If I remember the numbers correctly (from an earlier discussion off the board) you should be able to cover most/all of the cost...though the property tax may push it the other way. (Still building equity though)

I'm not sure how long SF will stay hot, but I think it would be a safe bet for awhile.

-pedagogue
Old 08-24-04, 05:41 PM
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the mid-long term plan is undecided which is what sucks.

I'd stay in sf long term, but the mrs. thinks she'd like to move back to ireland in 5-7 years. but a lot can change then.

and yes the property tax is the one thing that pushes me more to the rental side.
Old 08-24-04, 05:41 PM
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I'd say rent considering how inflated the real estate market is right now and the fact that the dollar is low. It's crazy how many Americans are buying houses they can't afford because the interest is low.
Old 08-24-04, 05:42 PM
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But he would have a payment of $3,000 plus tax and insurance, and be taking in $2,000 in rent. That sounds more like my stock returns than my rental returns.

Now rent may go up and the payment would remain stable (not including tax ans insurance), but I would want better number than that unless I had long term plans there.
Old 08-24-04, 05:43 PM
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Historically the SF market tends to not care about the rest of the us, as its still restricted by size, 7X7 miles. It can't expand like a Los Angeles can, so in a similar way to manhattan it will always appeal to people and always appreciate.
Old 08-24-04, 05:43 PM
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Your first 10 years of payments are mostly interest and are therefore mostly deductible. So is the property tax. Rent is not. So after-tax mortgage payments are lower than rent.

With the average rise in property values that has occurred you end up building more equity than your after-tax payments cost. I know my equity is easily rising at least 4x my pre-tax cash outlays.

So it seems to me it's up to whether or not you can use the equity/down payment you would be tying up to make more money than that.
Old 08-24-04, 05:45 PM
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I think kvrdave is confused this is a decision on whether to buy a place to live in, or rent a place to live in,.

Not buying a place for 3K and renting it out for 2K..
Old 08-24-04, 05:49 PM
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I was responding to
He could always sit on the property and rent it out. If I remember the numbers correctly (from an earlier discussion off the board) you should be able to cover most/all of the cost...though the property tax may push it the other way. (Still building equity though)

I'm not sure how long SF will stay hot, but I think it would be a safe bet for awhile.

-pedagogue
Old 08-24-04, 05:53 PM
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Originally posted by kvrdave
I was responding to
You mean people actually READ my posts?!!

-pedagogue
Old 08-24-04, 05:55 PM
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Of course that would be after the 5-7 year timeframe, but then who knows. Tough choices.

Even the thought of spending 2000-2500 for rent is a bit nuts, but hey.. You get what you pay for and you get to live in one of the best cities in the world, imho of course.
Old 08-24-04, 06:03 PM
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Wait a sec - your wife may want to move back to Ireland in a few years? Then are you still going to go through the process of becoming a citizen? Or can you maintain dual-citizenship?
Old 08-24-04, 06:07 PM
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you can maintain dual citizenship
Old 08-24-04, 06:09 PM
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Dont forget earthquake insurance. it aint cheap.
Old 08-24-04, 06:13 PM
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You can't really get earthquake insurance, the best you can hope for is to buy on bedrock.


i.e. not in the marina which is all built on the landfill from the 1906 quake.
Old 08-24-04, 06:14 PM
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Originally posted by BadlyDrawnBoy
you can maintain dual citizenship
Okay, I thought that was still possible, but I wasn't certain.

I want to move to Ireland, possibly County Kerry along the Dingle Peninsula.
Old 08-24-04, 06:16 PM
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I have earthquake insurance. Don't they sell it in the City?

Doesn't make sense not to have it.
Old 08-24-04, 06:19 PM
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Isn't it a must? It's like having mine-subsidence insurance in this area.
Old 08-24-04, 06:21 PM
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You can also look at an interest only mortgage so the payments you will make will be fully deductible and you would still get the upside equity potential. You will not be building equity if you make the minimum payment. On the apartment I just closed on I have a LIBOR floating mortgage where I pay a spread over LIBOR. That spread is 1.625% and 1 month LIBOR is currently at 1.6%. It is an interest only mortgage for the first 10 years which doesn't matter to me becasue I would have sold it already. My mortgage is $500k and interest payments are roughly $1,333 a month and even if LIBOR rose to 4.4% (not likely in my opinion considering I will be at the place 3 to 5 years tops) my interest payment would be $2,500. Maintenance (maintenance and taxes) for the coop is $1,100 and is 50% deductible. My payments will range from $2,433/month to $3,600/month but tax-affected my payment would be $1,679/month to $2,380/month. Consider I was paying $2,745/month for a 1BR it is a no brainer to buy the 2BR.
Old 08-24-04, 06:25 PM
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Originally posted by neiname
You can also look at an interest only mortgage so the payments you will make will be fully deductible and you would still get the upside equity potential. You will not be building equity if you make the minimum payment. On the apartment I just closed on I have a LIBOR floating mortgage where I pay a spread over LIBOR. That spread is 1.625% and 1 month LIBOR is currently at 1.6%. It is an interest only mortgage for the first 10 years which doesn't matter to me becasue I would have sold it already. My mortgage is $500k and interest payments are roughly $1,333 a month and even if LIBOR rose to 4.4% (not likely in my opinion considering I will be at the place 3 to 5 years tops) my interest payment would be $2,500. Maintenance (maintenance and taxes) for the coop is $1,100 and is 50% deductible. My payments will range from $2,433/month to $3,600/month but tax-affected my payment would be $1,679/month to $2,380/month. Consider I was paying $2,745/month for a 1BR it is a no brainer to buy the 2BR.
Not a bad way to go in markets like yours and SF. LIBOR is probably the only index I would consider in an ARM. (Maybe COFI)
Old 08-24-04, 06:33 PM
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Anyone else absolutely flabbergasted at the #'s BDB is throwing out there for rent/buying??? I thought my cost of living was high...
Old 08-24-04, 06:41 PM
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I just put in my numbers into a "mortgage calculator" for a 30 year fixed mortgage at today's rate of 6.37% and I would have to pay $4,268/month compared to $2,433/month that I'm currently paying. I would be building equity with the 30 year fixed but not in the first 10 years. It really matters with the type of mortgage you go for.
Old 08-24-04, 07:02 PM
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Originally posted by B.A.
Isn't it a must? It's like having mine-subsidence insurance in this area.
Nope not at all. It is prohibitively expensive...

Unless you were grandfathered in...

our last building had it for 200 dollars per year, but again it was on alamo square. Which is bedrock.

I have heard its about 6-700/month which is crazy

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