[JasonCA]

Hi Everyone,

My parents are divorced and I was living with my mother, in California, when she passed away. It was an unexpected death and so everything is going through probate since there is no will.

Because I have siblings, the house will get split three ways with my siblings. And, because it will be too difficult for all of us to live together in one house, the decision is to rent the house out so we have a positive cash flow to live somewhere else.

It's been a very painful and difficult process so far and I am trying to figure out what to do with myself? So I own 1/3 of a house and will also receive inheritance money (possibly $100,000 approximately).

I am wondering what to do with my living situation? Should I rent a place somewhere? Should I buy a condominium? Should I look into a town home? Should I try to buy a house? Since prices are low in the housing, I am considering a condominium at the moment since they are cheaper to buy. But then again, I hear it's a good time to buy a house since prices have fallen a lot. How should I look at this?

Look forward to feedback ...

Jason

[satxproperty]

I am sorry to hear about the loss of your Mother.

I really don't have any suggestions for you other than even though $100,000 sounds like a lot of money, you can quickly go through it if not careful.

BTW, being a landlord is not for everyone and can be emotionally and financially draining if you don't get good tenants.

[Dan Connolly]

There is not enough information here for someone to give you good advice. There are a lot of things that would affect your decision, your job, your age, exactly where you live and what is going on in the local market, what your goals and aspirations are, how secure is your employment in these uncertain times... and more.

I think you should try to find an ethical Realtor in your area and try to get a handle on what is going on in your market. If you are going to buy today you should be certain that you can live there for a fairly long time, in case the market spirals any further down. If a move may be in your future over the next couple of years, you need to make sure that the mortgage payment is able to be covered by rent and that you have the stomach for being a long distance landlord.

[JasonCA]

Originally Posted by Dan Connolly

There is not enough information here for someone to give you good advice. There are a lot of things that would affect your decision, your job, your age, exactly where you live and what is going on in the local market, what your goals and aspirations are, how secure is your employment in these uncertain times... and more.

I think you should try to find an ethical Realtor in your area and try to get a handle on what is going on in your market. If you are going to buy today you should be certain that you can live there for a fairly long time, in case the market spirals any further down. If a move may be in your future over the next couple of years, you need to make sure that the mortgage payment is able to be covered by rent and that you have the stomach for being a long distance landlord.

Thanks for the response! Answers provided below:

1) I am 25 years old, soon to turn 26, and live in Southern California (LA area)
2) House was about $500,000 and no mortgage. It's already paid off. Reason why we are going to rent it.
3) I am college educated, have a steady and stable job, and have a good income.
4) I believe I would receive about $500 a month for renting the house. Then, when it's a good time to sell we can sell the house.

You may be asking why I was living with my mom? Well, why get my own place if I had my own room and everything at home with my mom, had a good relationship with her, and things were just going well? I was able to keep more money, which I saved, and now am in a good position to do something with it. On top of that, I will be receiving inheritance money from her (which is painful for me as I have been going through a lot in turns of emotions ...etc).

I wouldn't say I 'need' a house. But, I hear it's a good time to buy. Being that I haven't lived on my own (except for college for a few years) I am not sure about what roads to go down:
1) Pay rent at an apartment? What are the pro's and con's?
2) Buy a condominium? What are the pro's and con's?
3) Look into a townhouse?
4) Buy a house, pay mortgage on it, and when things get better I can then sell the house.

The goal is to use my money wisely and not blow it; hence my questions. I am not rushing into anything either. Right now I am just seeking a perspective on how to approach things in my situation?

Jason

[coastal]

Much of your decision depends on what type of lifestyle you are interested in living. Do you plan on staying in the area for another 5 - 10 years?

I like houses, but with a house you will have a yard to take care of and if maintenance issues arise you will have to take care of them yourself. If a roof needs repairing or an air conditioner quits working you could be looking at some rather large bills. If you rent you don't have to worry about these things.

If you can afford it and plan on staying in the area my personal choice would be a house but if you don't need much room and don't like to maintain the property a condo or townhouse may be something you are interested in.

Renting may be the best option if you do not plan on staying in the area for at least a few years.

[Cleo]

Sorry about your loss. As for current situation, I agree with Coastal - if you plan on staying for a few years then go for buying a condo/townhouse since there is not much maintenance and fairly easy (generally) to rent out in the future if you plan on keeping it and moving somewhere bigger or somewhere else. If your rent will cost nearly the same as a mortgage and you find a place you like and can be happy in then definitly go for it whether it is a single family or condo. Do find a local realtor though to discuss it with.

[Dan Connolly]

I still think that you should talk to a local expert before you decide whether to invest in a condo townhome or house. In some areas condos are a good investment, and in others they aren't. From what you have said I think a home purchase could make a lot of sense but as to what kind of house...that is a local question.

In my opinion the maintenance issues in a house vs a condo shouldn't be a major factor, the potential investment value should be the prime consideration. Condo associations have fees to pay for the maintenance, if you spend the same money in a single family home and pay someone else to take care of the issues, is there really that much hassle? If the potential long term return is much higher on a house, I wouldn't worry about the management of the maintenance.

Remember the association only takes care of the exterior, there is ongoing maintenance on the interior of a condo. Plus there are other factors to consider with a condo or townhome. How well is the association managing their money? How much is in the reserves? What assessments are planned. When was the roof last replaced? Parking lots and pools repaired?

What is the percentage of owners to renters? Does the association control that ratio? If the ratio passes 20-25% renters, then new buyers cannot get normal fannie mae, FHA (20%) or freddie mac (25%) loans, and the units become much harder to sell. What happens to the transferred sellers who can't sell or rent their units when the association doesn't allow more than 20-25% rentals? Does the association grant hardship rights to rent and thus make any unit sold difficult to finance, or does the owner have to let the unit foreclose? How many foreclosed units are in the complex now?...and so on.... Get a local ethical agent to help!

[NY RE Broker]

Much of the advice is the same here and for a good reason, its good advice, but let me add; Talk to a Financial Planner, Accountant and Attorney. Even if there is a small fee to discuss this matter with them, it will be money well spent.

I am surprised that on a $500k house, you can only expect $1,500 per month income. Also, you should never use 100% of the rental income as your income. You all should put away 20% to cover unexpected repairs, capital improvements and general maintenance. You should never let a rental get run down. Constantly keep improving it to keep it at the top of the market. It will also keep good tenants in there because they know you care about the house.

Its a great time to buy, but not for everyone. House or Condo, its a personal choice, but given your age, I'd have to scare you with all the work required in a home. You're young and will probable want vacation time, weekend traveling, toys, etc. A house does not allow for that. If you do buy, look for a 2-3 bedroom, even if its a condo because they are easier to sell or rent.

Remember, there is no reason to sell a house just to buy another. Not if you can rent them out. Even today, housing is and will appreciate over any 10 year period. People who buy now will realize even more gain than people who bought just two years ago.

Good Luck and keep us posted. Oh, and don't forget...you can always hire a Property Management company to manage the rentals, especially if you are dealing with siblings.

[Ryocheck]

Sorry about your loss.

I would think now is a decent time to buy. I am not sure of the market in California but believe you could find a good deal on a bank owned property.

Renting out the existing home would probably be best as well till the market rebounds a bit.

[StepsMLS.com]

Maybe you could try and buy the house from your siblings? Then you could rent out the remaining bedrooms to cover the mortage you owe to them. This way once the house increases in value you will get all of the equity instead of 1/3rd.