Familiar with Bay area move...what would you do on this

[scarab007]

Situation:

Wife and I moved to Bay Area a few years ago.  We settled in South Bay (San Carlos)  and stumbled on a brand new condo complex that we got one of the last remaining units.  November will be exactly 2 years. 

Condo: $515k purchase price for 2/2.  As some will attest, real estate has seen an increase in the bay lately. My building to be exact has been exploding.  Unit next to me, same specs sold last month $780k. Unit below me, just sold yesterday $830k.  I think we made out great. 

Here is the meat of my post to think about:

Jack London Square on the East Bay side. Great location and only 12 min bart ride or by boat to downtown.  Brand new developments and getting some huge money invested right now.  We can sell out condo and move that money over to this place.  If I really went deep into money we saved (really only $150K needed more), we could probably pay cash as they are selling around $500k as well.  This would leave only HOA and Taxes of about 1k a month.

Things to consider:  Where my current work is, it would be now a 35 min drive vs. 10 min. I could possibly switch to our downtown office.  Wife would have the same drive until her contract would end in Nov.  She could also stop working and focus on her photo passion that we have been running a side business for the past 6 years. Those are really the main things, but just seeing what some would do.

I am sure there are other things I am not thinking of that people will ask.  Thanks in advance.

[Another Reader]

Yep.  Crime.  I had an employee that rented a condo there at the end of the last wave of development.  Their cars were broken into, there were problems on the elevators, it was unsafe going in and out of the garage at night.  Children had to be driven to and from private schools and had no place to play outside.  These properties are the last to go up in value, and only do so when desperate buyers are priced out of other markets.  When prices drop, these are the first to go down.  As soon as it's possible, folks sell and flee to SF, the Peninsula, or the suburbs to the east.

[scarab007]

Yes, crime is a big factor.  I know certain areas are getting cleaned up.  The heat map does show it is not as bad, say over on the main down streets in Oak.  I guess I need to drive near that area at night as well and see what is going on. 

Looking at the city data, it shows pretty good stats. 

[Another Reader]

Areas of Oakland have been "being cleaned up" since I was a kid in the 60's.  Don't believe a word of it.  Some areas are more gentrified, but the crime problem is still there.  Smart developers that understand the cyclical nature of the condo market and how buyers will rationalize buying for the convenient location and killer views when they are priced out elsewhere build and sell product at this exact point on the cyclical curve.

In your shoes, I would walk around the area and talk to the folks that live there.  Ask people where they send their kids to school and if they or their neighbors have personally experienced crime.  Ask what the parking situation is like.  Find out what percentage of the units in the buildings built in the early to mid-2000's are rented.  Drive a few blocks north towards the train yards and see what the neighborhoods look like.  Cross 880 and drive those areas as well.

If you like gritty urban areas, maybe you will like this location.  However, if you choose to buy, it's likely the investment will not perform nearly as well as your current property and there may be times you won't be able to sell at all.

[scarab007]

hahah..yes, they have been saying "it's getting cleaned up" Agree with that.  Yes, have walked some and talked, most seem to like that area.  They do caution about going south a bit.  The condo we are looking at is The Bond, brand new development and very urban.

Good thing is no kids for us, so school not an issue.  So far right at 95% owner occupied. Good stuff to think about Another Reader.

[Rebecca Stapler]

What is your goal here -- to make money on your condo and move into a transitional neighborhood to make money on the next condo? It sounds like it's a real possibility that you'll fulfill the first goal, but I don't think moving to another condo, in a transitional neighborhood, will necessarily meet your second goal. Jack London Square is a much riskier bet than San Carlos, where the schools are better so it appeals to a bigger population of buyers.

Instead, I would look for undervalued single family properties in an improving area because condos have a lot of market volatility. I'm also not a big fan of counting on my residence being an investment -- it's important to live somewhere you want to live, in cash the market doesn't pick up like you hope it will. Or, I would look into a two-family home in an improving area, so you can collect rent (which always goes up!) and have a more guaranteed source of income than relying on a big jump in the market.

[scarab007]

The goal I am looking at is to have no mortgage on the place. If this place were to go up, then it would be a bonus.  The wife and I do like condo living and prefer it to single family.  Were not really house people.  Not counting on the residence for investment, but having a free and clear home will allow for even more money each month to be put away to investments. 

We do like the area and as Another posted, need to walk around more and meet more people.  Drive around at night and see what is hanging around the street. 

The two family is an idea, but we are pretty simple in our housing needs and just sold two properties in another area. Not really a fan of renters and all that goes into that business.  I assume you're familiar with the bay area?  The issue is improving areas are just as bad on the south bay and east bay side.  Redwood city near me is the same and real crazy at night. 

[Rebecca Stapler]

If you're not looking at your next place as a short term investment, and this price would allow you to own it free and clear, then go for it. It doesn't appeal to me, because of the longer commute, the transitional neighborhood, and the lack of quality public schools to entire future buyers, but we are different people -- I would live on Mt. Tam in Mill Valley if I had my druthers!

[Dicey]

I suggest you house-swap or even just rent something short term whilst staying put. Spend some time driving around, or better still walking. Go to the grocery stores, the post office, library, DMV, parks, etc. Keep your eyes wide open. Pay attention to what the schools look like. You can find some beautiful houses and good restaurants in some nice neighborhoods, but to move to Oakland without considering your family's safety and the security of your property is risky.

I live in the East Bay and before I retired, I was a sales rep and my territory included Oakland, so I got to know it up close and personal. I had two accounts where I had to call first so someone could unlock the door to let me in. Others had fully gated parking lots where again, I had to call ahead to be admitted. To clarify, these accounts are retail operations, open to the public. BTW -I covered from Eureka to Monterey, including San Carlos. No other area had the security I encountered in Oakland. Also, everyone I encountered in all my Oakland accounts was highly security conscious, all the time. San Carlos is not the same in that respect.

Please don't flame me - I'm not dissing Oakland per se, I'm answering the question of San Carlos vs. Oakland. Sure, crime can happen anywhere, but I'll take the streets of SC over Oakland. And that's without considering the 10 minutes vs. 35, which is a total deal breaker, IMHO.

I am actually more concerned with your all-cash option. It's simply too risky. What if you hate it and can't get your hard-earned money out? A mortgage can be a powerful tool for wealth-building, which is a little-explored or appreciated concept on many financial blogs. I suggest you find a copy of "Ordinary People, Extraordinary Wealth" by Ric Edelman. It's probably available at your library. Just read the first chapter. It could rock your financial world. It changed mine and now I'm retired early. Not extremely early, but still early. If I'd read that book sooner, it could have been earlier still.

[scarab007]

Nice! Thanks for the comments Diane.  I like the idea of renting for a few months to explore. We could even live with my brother for a few months who lives in San Leandro area.  Yes, SC is pretty dang safe in terms of area.  Few times I have walked the dog at midnight and was perfectly safe with no care in the world.  Maybe some Oakland love will get my Marine instincts back up :)

We could just knuckle down and have our current place paid off quickly as well.  I just love that open, gritty, urban type condo, but it is no good to us if I have to battle a war zone!  Good points.

I will check out the book you recommend.   

[Another Reader]

You should also consider the selling expenses for your current place.  With commission and closing costs, selling expenses could easily reach $60,000.

In your shoes, I'm knuckling down and paying off the mortgage if that's what will make my goal possible.

[DoubleDown]

I agree, every payment you make on your current place is building equity in what sounds like a better investment overall, with better potential for greater gains, that happens to be more convenient and safer as well. I realize the allure of being mortgage free, but honestly if you have a good mortgage rate (say anywhere near 5% or below), I'd keep the current place and enjoy the faster growing equity. One day perhaps you'll entertain the idea of moving out of the Bay Area entirely, and could very conceivably be cashing out on a home that's worth 1 - $1.5 million in the not-too-distant future. That kind of money would go a long way in a place where great homes in a nice city cost, say, $200k. Then being mortgage-free will be a snap, and the idea of paying $1000/month in property taxes and condo fees will make you laugh!