patrick.net

It sounds like you've thought this out more than most people in terms of career path and affordability, which is a good thing.

With respect to the HOA/maintenance issue, it would be worth getting copies of HOA documents, budgeting, and minutes and reviewing them (or having someone review them if you aren't comfortable) to make sure the community is keeping up.

true, but at least nobody would live above us as they do now.

thanks on the advice corntrollio, i'll ask the realtor about that when i see her sunday. that makes sense.

Well, I'm no expert.

But if you can't find a rent that is cheaper than paying a mortgage, then I would go for a mortgage. You can't really lose that way.

I live in Mexico where I pay less than $300 to rent a house. A mortgage here however would generally tend to be much higher.

I know folks in the Midwest who pay about $2000 for a condo that has now lost much value. I'm betting they could net a place to rent for no more than $1000. In such a situation, I would rather rent.

ih8alameda2 says

thanks on the advice corntrollio, i’ll ask the realtor about that when i see her sunday. that makes sense.

Btw, is this a relatively new development? If so, is here any litigation going on with respect to the property? Several bubble-time developments are having defect and other lawsuits, so you may want to see what the status is.

Also, just generally, it never hurts to knock on your potential neighbors' doors and ask what they think and see if they have any concerns. For example, it may be good to ascertain the character of the board of the HOA -- whether it's a bunch of busybodies looking out for their own interests, for example, or whether it's more fair-minded. I have heard of developments where the developer abandoned them unfinished with 75% of the built units sold, turned over everything to the HOA, appointed developer-friendly people to lead the HOA, and said "see ya suckers!" Those owners potentially face massive assessments in fees.

Town Home NO!
A Home in Town maybe...

Are you ready and willing to pay upto or even more in many cases than your Taxes and Home insurance combined in a monthly separate payment to a Home Owners Association. Who on a whim of some mid day board meeting, that they could hold while you are at work, and vote on something that pits your interest against theirs. As their interest will always win, they are the Law. So if they vote to change the buildings facade, replace the security gate, and assess your share at 8 or 10 grand. And you don't have it, you're out.

But that's just one of hundreds of ways they can legally fuck you over and out of YOUR House. With a HOA you aint King of THEIR Castle.

Is a townhome another way of saying condo? If so, watch out.
The monthly fees are sometimes high, and they can never go down.
Remember you can always reverse-mortgage the place later, so you will eventually get some of your payments paid back to you, unlike rent.
You probably have time to ponder your choices. Don't let anyone rush you.

Thanks for all the feedback so far.

I am definitely not going to jump into it, but I'm definitely trying to learn more as I have heard horror stories involving HOA's.

This is not a new development, done in the 80's. It's a townhome, meaning you shares wall left and maybe right, but nobody above or below you.

A majority of the bayfarm homes actually have HOA's since there are lagoons, shared parks, etc and fewer units in the association. For some reason that seems to have less intrusive HOA's than apts/condos, at least based on my rental experience.

Know a couple of happy townhome renters on BFI. I would rent a TH there and wait to buy the SFD that you actually want. Plenty of SFD that have been made into 2-3 units in Alameda, you could step up and see if you could rent the show as LL and not get called a jerk by your renters. GL either way!

Tenouncetrout says

own Home NO!
A Home in Town maybe…

Are you ready and willing to pay upto or even more in many cases than your Taxes and Home insurance combined in a monthly separate payment to a Home Owners Association. Who on a whim of some mid day board meeting, that they could hold while you are at work, and vote on something that pits your interest against theirs. As their interest will always win, they are the Law. So if they vote to change the buildings facade, replace the security gate, and assess your share at 8 or 10 grand. And you don’t have it, you’re out.

But that’s just one of hundreds of ways they can legally fuck you over and out of YOUR House. With a HOA you aint King of THEIR Castle.

I'd have to agree with Tenouncetrout... Officially, the decision should still come down to a rent vs. buy analysis, but I've always felt that, qualitatively speaking, condos and townhouses were the worst of both worlds:(1) the leverage of owning plus (2) a variable HOA or Condo fee you have to worry about every month...not to mention the lack of control.

the only reason why we're not going to buy a townhouse is quite simple. Too many stairs. My wife has back and knee pain, can't handle all those stairs, and I never see stair climbing as fun.
If you guys don't mind climbing 5 to 8 stairs up and down, each and everyday, it will be ok choice for you.

I like townhomes. They are practical and I like the "lifestyle".

But I will always worry that my neighbor is smoking in bed, or freebasing, or making meth, or even careless like a roommate I had who draped his shirt over an incandescent bulb that he was too cheap to buy a lampshade for, then he left the room.

Good thing my other roommate noticed the whole second floor was filled with smoke as that other guy's shirt had smoldered and carpet around it smoldered too (lamp was on the floor).

It's a reason I prefer SFH with defensible space around it.

Your idea sounds decent. Known issues with BFI include:
1) Oakland Airport is right next door. Planes are loud, and sometimes flight paths change in unfavorable ways. I remember hearing that some of the condos over there have had noise issues and had to replace all of their windows with windows that can dampen the noise more effectively. I don't know whether the developer or the HOA covered that cost, or how bad the problem was.
2) The townhomes are getting a little older. A friend lives in one, and a few years ago they had a major roof assessment that felt somewhat out of the blue.

So I would check on the noise issues, and also on ongoing maintenance issues. Otherwise, the townhomes are cute, and there are nice bike paths, and it should be fun to live there.

Anything requiring HOA in a less-than-stellar neighborhood has a big downside risk - more and more owners are skipping HOA fees. I learnt about this from a friend who serves as a chairperson of his HOA. He lives in SF, a decent but not top-notch area, and due to the economic strife lots of people are facing, he's seeing more and more owners of the same development missing their HOA payment, and they are busy filing for liens on these properties left and right. The bottom line is, because so many are skipping payments, there is not enough money for the upkeep, and when the rest of the owners feel like they are left carrying the burden and not seeing the result (e.g. common lawn getting ignored, project work getting delayed), they start to go on HOA fee strike as well. Not a pretty picture.

That's why I would really steer away from HOA type of property in a so-so area.

Thanks for the thoughts.

Is there a big difference between hoa's that only cover community maintenance versus ones that cover exterior maintenance?

Other than the obvious price and having to pay for your neighbors roof, are there additional downsides? I would imagine most of the pains of an hoa are there regardless of how much it actually covers?

For the most part most areas of bay farm are really nice and mostly desireable. Safe, decent schools, close proximity, etc so I imagine we're going to be okay, and unfortunately all the homes in the newer parts of the island have hoa's, whether sfh or th's. Having grown up in a th, I actually prefer sharing a wall as opposed to looking out a window and seeing the neighbors house less than 5 ft from you.

I have some friends who live on BFI. Most of those town homes were built in the late 70's and 80's. The one they have is pretty nice with a tiny courtyard and a 2 car garage. Sort of funky area a bit removed from Alameda proper. Its true that you can actually see the airport from there but the planes never seemed to be that big of a deal.

As far as HOA fees go, well my Brother's GF owns a town home in the East Bay. She bought it a long time ago for around 90k. Her HOA fees as of now are $450. Seems like a lot to me. On top of the fees there are all kinds of ridiculous rules. The HOA thing is the main reason I would never buy a town home: You're still basically paying rent and the rent will always be due and likely go up over time.

I am familiar with Alameda and I have seen some houses in the $400-$450k range. That said these tend to be small houses that some 90 year old woman lived in for 60 years and never made any upgrades. In other words a true "starter" home. So for a bit more money a SFH can be had but it will probably need work.

If the development is over 20 years old, you need to dig a deeper on the sinking fund they set aside for future renovation to see if it is adequately funded. I have heard of cases that owners are slapped with $10K+ for major repair because they didn't collect enough in the past. My friend's complex is about 15-20 years old and since it is by the sea, there is quite a bit or erosion, so they need to repair and repaint, and in the bubble years, the HOA overcommitted to nice landscaping which is now biting them in the ass.

So I guess you will just need to find out
1) if most owners are paying their HOA dues
2) if there are major upgrade/repair projects in the near future

ih8alameda says

1) settling…what we really want is a detached home with a yard. We can’t afford it, given the way the market has been, don’t know if we ever will, ESP just on one persons income.

You CAN afford it, if you leave the overpriced area you're living in.

StoutFiles says

You CAN afford it, if you leave the overpriced area you’re living in.

Absolutely, and if I didn't need to retake my professional license and start my career over from scratch, I would in a heartbeat! Working one full 6 figure job just to live in an avg home is insane.

John Bailo says

find a nice small city in an interior state

It's interesting how one typo can change the whole meaning of a sentence.
I think he meant to type "f", not "t".

..."find a nice small city in an inFerior state"

.

LL's are A holes around there simply because most are house rich and cash poor. rents maybe help them break even at best.

you also might be a nightmare tenant, we want grass in the Back yard, fix this, fix that, the toilet is too high, the ceiling is too low? we pay too much. bla bla that's why they are A holes IMO

Rent for life in Alameda. I don't expect much to change there anytime soon. owners are sucking air so hard there now.

I hear West Oaklands looking great for buying. I think it's the next area to gentrify in next 20-30 years. first bart stop to the City. location location location.

Professor Baron has a good chapter in his book about this topic of HOA assoication governed properties. Look very very carefully before you leap.

http://www.professorbaron.com/

I almost had a very bad time with a townhome. I almost bought a 1 of 12 townhouse/condo. The development was underinsured for replacement cost in case of an event. I read the condo docs from the 80's and they said if you didn't pay a special assessment within 30 days they were going to charge you 10 percent interest. I am sure this sounded reasonable when they wrote those documents in the 80's.

I declined to buy because the complex was underinsured. That means if your neighbor burns his house down and doesn't have enough money to rebuild, they will charge you to rebuild your neighbor's house.

Be very aware that many times the developers do control the HOA. They also sometimes have sweet deals where the HOA pays them rent on the "amenities" and they sometimes don't own the pool and other amenities, they simply are renting them from the developer who can increase the rent when the lease is renewed.

Dr. Baron's book is very eye-opening. I was scared of HOA and condo assn's before but this book has some crazy scenarios.

My thoughts would be:

Flexibility - If you might need to leave the area for any reason, there are costs to buying that are non-issues for renting.

Total cost- have you looked at insurance, maintenance, etc when calculating cost. If you left off HOA, I wonder if all calculations are complete. Take a look at Patrick's calculator.

Depreciating asset - prices are falling. I suspect you are going to loose some portion of the money you put into a down payment. It sounds like you ultimately want a SFH. How big of a blow will l loosing your nest egg in a falling market be to your longer term goal. Also, figure in closing costs when you think about the total cost of going from the TH to the SFH down the road.

Good luck!

My thoughts would be:

Flexibility - If you might need to leave the area for any reason, there are costs to buying that are non-issues for renting.

Total cost- have you looked at insurance, maintenance, etc when calculating cost. If you left off HOA, I wonder if all calculations are complete. Take a look at Patrick's calculator.

Depreciating asset - prices are falling. I suspect you are going to lose some portion of the money you put into a down payment. It sounds like you ultimately want a SFH. How big of a blow will l loosing your nest egg in a falling market be to your longer term goal. Also, figure in closing costs when you think about the total cost of going from the TH to the SFH down the road.

Good luck!