Real Estate: California/Which Should I Buy
My wife and I will be relocating to the Inland Empire area of California in the next few months. We have found two new construction projects that we really like. One is a 2 bedroom, 2 bath town home with attached garage in an established, desirable area of Temecula. The other is in a new area of Lake Elsinore I would describe as more of a city in transition. The home is a 4 bedroom, 2.5 bath single family home in a brand new master planned community and the amenities in this community are first rate.
My question is: which is the best option to buy now in anticipation of turning this property into a rental in about 5-7 years? There is a chance we might keep the home to start a family in, but as of now, we see this as becoming an investment property in the next 5-7 years. Which would you choose? The town home in the better location or a larger single family home in a nice new area, albeit less desirable on paper? The prices of the homes are similar.
Your feedback is greatly appreciated. Thank you.
This is such a great question. You are very smart to be thinking about the present and future value. I would love to be able to provide you the very best answer but to do that I would have to work in that area. I do know a little bit about the area (I use to work medical sales for Abbott) and your summary is spot on.
In general, we want to believe LAND ownership is the real value in U.S.A. and therefore a single family home on a lot has more value. But if that home is in a less desirable area (socio-economic, jobs, views, ease of commute, weather, crime, etc), then a condo, townhome, or even a mobile home may have a better value.
Based on your basic 5-7 year plan, the townhome may provide more flexibility for rental (less maintenance etc.). Be careful to read HOA docs and make sure you know the rental policy. Also, the general health of the HOA (delinquency, vacancy, owner/tenant ratio, reserves) will be key to comparing value.
Those are very general comments and I would suggest talking with agents specializing in each area to see what their take is on the market growth, stability and over all value for the two subdivisions. It is more difficult with new construction to find exact comps but it will be smart to look at other new construction to see how quickly they sold out and how the value has changed in the last two years.
I would be interested to see what you find out from the rest of your research and what you decide.