Frugal in SoCal?? yeah FN right

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Frugal in SoCal?? yeah FN right

Question: Ok.. got approved for a home loan!! I am pretty stoked about that since a year and half ago, I could barley rent and place cause my credit was so shitty. Thanks to some frugal living this is all possible. Anyway, so I am approved for a loan amount of 285k and plan to use 15-20k down. Naturally I want to buy a house w/o HOA fees. SO I drive around in neighborhoods that are commutable to my place of employment in the price range I can afford. Selling price to 315k. These neighborhoods are filled with migrant farm workers, gang-bangers, filthy streets, trash everywhere, broken cars and appliances parked on the dead lawns. The FN neighborhoods I can afford to live in are the neighborhoods I avoid driving through. I now realize I cannot buy a house in a decent area in San Diego County for under 315k. Now I’m looking at stinking condos in OK areas! LOL..California is too FN expensive.

This question is going to be a tough one… Does anyone have any ideas on ways to find a decent home in a decent neighborhood for below market value? and have you used this to purchase a home?

Please don’t laugh cause I know your gut reaction is this: “If I knew the answer to that question, I’d be a millionaire”.

Any tips are appreciated!

Answer: Hey, I feel your pain. I live in Northern California, in the Bay Area. It is also a damn expensive place to live. I thought about leaving–until I sat down and did the math and realized that I was making about 175% of what I was making back East for the same job. Over time, I have had the opportuniy to advance, which is occuring much more rapidly here than it ever would have in any of my former positions before I moved here. So it has advantages and disadvantages.

I also am working on a similar plan. I had an enourmous amount of school loans, and some personal debts that came with me when I moved here. So I took that extra income and doubled payments and plowed it down substantially. I just hit a great milestone where I just paid off a series of loans just this month–yahoo! All of these were necessary to get me through school at the time, but I can’t wait until they’re all gone, like you’ve done. Successive approximation; I’m getting there.

I also have similar dreams, to buy my own property and home. However, particularly in the areas we live in, we should tread with some caution. I have read from Consumer Reports to the Wall Street Journal (Or was it the NY Times???) that wrote about areas where housing prices are “dangerously” overvalued. I believe they defined that as 20% over the rate sustainable for a given area, based on average income, and a bunch of other data I won’t try to replicate here. But my tip #1, be careful, as the market may level off, and may slightly decline in our overvalued markets. Some will nay-say this, but they haven’t done their homework.

But I’ve been keeping an eye on the market for a few years in my area now. I also have looked at low income areas. Some are areas, as you described, that I would not want to live in. But there are some family areas nearby, outside of city-type problems, which I would buy in a new york minute–if I could find one for sale at a reasonable price–and despite the city name. Say “Oakland” up here, for example, and some people think of the murder rate. True enough, but there are lots of neighborhoods within that city–some I’d live in, some I wouldn’t. So, my tip #2, get to know the neighborhoods. Sometimes there are diamonds in the rough. I knew some folks that bought into a nieghborhood in Richmond, CA, that also had a bad rep, but was “up and coming,” and it did come up. They sold for over half a mil–more than twice what they paid just three or four years prior–and moved back to NY and bought a property–for CASH–they plan to run a B&B on. Not bad, for a pair of restaurant WAITERS!!!

Tip #3, if you can’t find that palace by the sea you’ve been looking for, and you have a set budget taht can’t go up, your only choice is to lower your expectations. It’s a starter home, right? An investment, not necessarily where you will live for the next 30 years. So you could go condo. Not me, though, I have had bad condo experiences. I’d love to find a fixer-upper in a better neighborhood and put in the elbow grease myself.

Tip #4 be resourceful. Sounds easy, huh? But one thing I’ve learned is that the vast majority of advertised homes, with pictures, in full color booklets–are crappy deals. And if they AREN’T crappy deals, then they’ll be GONE well before you get there. But there are other things you can do. Get on e-mail lists that allow local people selling their homes to advertise at low cost or no cost. Look for individuals selling their homes. BOTTOM LINE: you learned to LIVE frugally, SHOP frugally, etc., etc., so now learn to HOUSE HUNT frugally. Find the bargain. They’re out there. Someone nabbed one near me. In a neighborhood of homes where I rent, they are selling for $300k-475k. Yet someone nabbed one for like $175K just recently. WTF!?!?! I went by and checked it out–yep, a real fixer upper, but I would have done it. In an area where you don’t have to worry much about rain or worry about any snow whatsoever, many problems can be repaired by the do-it-yourselfer. I used to think these bargains were once a decade, but keeping my eye on active house sale lists in the paper and elsewhere, you can see that they go for cheap every now and again. I’d just love it if there was someplace that I could go to that specialized in cheap, fixer-upper properties. But there isn’t, because realtors don’t want to service the low-end crowd, after all they get their cut from the total price, right?

Good luck (wish me luck, too!),

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Frugal in SoCal?? yeah FN right

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