To buy or not to buy, what''s the best option?

[MustangGal]

So, in the vein of other housing threads, DH and I have been exploring options in this down market. We live in AZ, and will probably be here at least another 5 years. We have a nice home in a nice neighborhood, but could use a little more yard space for all of DH''s toys, maybe an extra room for guests/future baby #2, and we''re also tempted by the low home prices. We''re about 10k upside down on our current home, so not bad considering, and the mortgage is just about equal to what we could probably rent it out for. The options we''ve been considering are:

1) Buy a larger/better home. We''re already aproved for 175k, which would equal payments similar to those of the current mortgage. This can actually get you a pretty decent house in our area right now. If we did this, we would have 2 mortgages arount $1200 per month.

2) Buy a similar home with just a bigger lot/better layout. For this option we''d spend bout 125K-150K, and have smaller mortgage payments just incase house #1 doesn''t rent as high as we hoped, and to have more spending money (babies are expensive!).

3) Stay in the current home, but buy a rental house. We have figured out how we could re-arrange DH''s toys to fit better once we sell the project car in a few months, and would finish up a few home projects to make us a little more comfortable here.

4) Do nothing, wait until our current home value goes above our mortgage amount and possinbly sell and buy up later.

We''ve been looking for 2 months now, put offers on 2 houses (didn''t go through), but still haven''t found quite what we''d want in a new home. The longer I look, the more I''ve gotten worried about being able to rent our current home and what happens if we get bad renters.

From what we''ve seen the housing market is really picking up here. Both homes we offered on sold within a week of being listed, and for higher than the list price. So we''re a little concerned that we missed the window, or that it might even slump again.

I keep going through the decisions, and just can''t figure out what to do. I''m normally a decisive person, so this is driving me nuts! So, please give me an outside perspective on the options. Thanks!

 

[charbie]

we''ve sort of been in the same pickle.

my suggestion would be to pick up another home if you can afford it and rent out one of them. many members of my family have done this over the years, and it always has been successful for them. pick your applicants carefully, and be active landlords. you can even do a "rent to buy" this market and once the market picks up (like its going to and has been) then you''ll be able to sell that house for a nice chunk of change in a few years with the right renter. advertise to a younger population (universities, that kind of area) and you''ll be doing yourself a favor actually.

just my words of advices

 

[D&T]

Our mortgage buddy in AZ has predicted that its still going to be another year before anything really picks or just stay stagnant for a while (he''s been right on a couple of other occasion with the real estate market). Our Financial broker for our company is also conservative and says that we still got a ways to recover from the economy. Have you looked into what the rental market is? think about really how much will you be able to rent it out for, if you rent at a loss? and if you can''t find a renter, how long can you carry that mortgage for? Are you ok with being a landlord? If your renters trash your place, can you handle all the fix ups and repairs?

If you are indecisive about it, usually just my own personal feelings it isn''t right.

 

[MustangGal]

My grandparents and parents both own seveal rental properties (although my parents never get rent from my brother), and have been happy and successful doing so. DH''s family all own 1 home, his parents have been in theirs 30 years now! So, much different home ownership models. DH really likes the idea of an investment property, either our current home or a second home. While I also do, what seems to be stopping me is the risk of loosing money. We are comfortable now, and do have plenty saved up incase we''d have to cover 2 mortgages for a while. My grandsparents also have plenty, so if it really came down to it and we were getting in trouble, I know they could help bail us out without having to resort to bankruptcy/forclosure.

I checked rentals in my zip code, and this seems to be a pretty much owner occupied area, so there aren''t too many rentals out there. The ones I did find listed were for $1100-$1300 for comparable properties. I know of 4 rental homes in my neighborhood, and they all seem to be continually occupied, so I hope this won''t be an issue. If we purchased a rental, we would probably get something in our area to better keep track of the renters.

DH and I are pretty handy, and FIL can do just about anything home-improvement wise, so fixing up a trashed rental could all be done by us.

D&T, good to hear things may stay like this a little longer, it might give us some more time then. I guess the perfect property for DH and I just hasn''t come up yet.

 

[D&T]

sounds like this is something right up your alley then and you seem comfortable and understand from having family involved in real estate investments. My FIL has an apartment complex and he is so not cut out to be owner/landlord of it, its ashamed that it needs to be kept up and he doesn''t have the drive to maintain and have terrible renters. Don''t worry I bet the perfect property will come up soon for you, and when it does I''d say #1 (if you are still comfortable with the financial implications)

 

[MustangGal]

Thanks D&T! For buying a new home for us, being limited to the area we are is making it a little bit tougher. I keep seeing amazing prices on other sides of town (Buckeye, Surprise, Chandler, Mesa, etc). I love the area we''re in (N. Phoenix), but it does tend to be higher priced. At least it''s not as bad as Scottsdale I guess.