Purchasing Options

Hi Everyone! I’m trying to figure out what my options are so any help would be greatly appreciated!

Our family is looking to move to the west coast in the next few years. I’ll need to stay at my current job for the next 4 to 5 years. What I would like to do is:

  1. Go ahead and purchase a home where I would like to move

  2. Rent it out for the next few years until it is time to move (use rent money to pay mortgage while also putting 4-5k on top a month).

  3. Sell current home when it’s time to move and put that cash on the mortgage.

Here is the current situation:

  1. Current home is paid for (valued around $300k)

  2. No other debt (family take home pay around 8k a month)

  3. Minimal cash on hand (around 50k)

  4. Where we would like to move is pretty expensive (New house would be between 750k and 1m)

Based on that, is there a way I can go ahead and purchase this home and start renting it out? Could I use my current home as collateral for the new mortgage? It is possible we are eligible for a low down payment loan but I’m pretty sure those only apply to primary homes. I would assume the bank would consider this new home to be an investment property.

It is unclear how Bay Area market will be reacting to the current situation created by COVID-19 and its economic ramifications. The prices may move in either direction. Up or Down. We will see how prices do this summer. If you are buying home with small down-payment in proper bay area. (within 10 miles of water - bay or ocean ), you will end up with negative cash flow and you will be paying mortgage from your pocket. Now what should you do in this situation? If you are not coming to bay area in next 4-5 years, just hold off purchase till you come here and have lived for about an year. Rent a place and live for about an year so that you become familiar with places, shopping centers, cultural centers, employment centers, and traffic patterns in the Bay Area.

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$50k isn’t nearly enough money for even a $750k rental property. You will need four times that for a $30% down payment required for investment property. Figure out out a good investment vehicle and wait till you sell your primary home. $750k won’t get you much except in the exburbs in the East Bay.

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