My Secret Notebook

May 18, 2021

3 min read

Why I am investing in a single-family home during the pandemic (Orange County, Southern California)

Every time I’m about to buy a home, I get hyper-analytical and read up on markets etc. And that’s exactly what I’ve been doing for the past month as I struggle to assure myself that I should stay in escrow.

This is the least sure I’ve been on an upcoming home purchase because of how unprecedented everything is. And last time, I missed a huge stock rally (albeit I gained a lot from appreciation).

But I’m here to share my conclusions on the market and my upcoming purchase.

Here is why I’m going to remove contingencies and proceed with buying a home in Orange County:

  1. The pre-maintenance cash flow is about the same as my Stanton property, percentage wise. That makes it just as good as an investment I already have. However, I would maintaining more contracts, which is worse.
  2. I believe there is high rental demand in Anaheim. I believe I will be able to fill vacancies, especially since supply is constrained (because of forbearance and pandemic). I will have leverage to charge more.
  3. The stock market is volatile, especially with the recent inflation scare. Home prices rise with inflation and are shielded from it’s effects. There is rotation away from tech stocks, and May to October is perceived as low growth times (sell in May and go away).
  4. Housing prices may drop in 12–18 months after foreclosures flow in from forbearance. I might be positioned to get another primary home loan and perhaps I will have enough for a down payment in 1.5–2 years.
  5. I don’t think my hobby-business ventures are that stable or time-consuming, especially because nothing has taken off yet. Better to diversify my time and put some effort into my investments via real estate.
  6. Interest rates are low. Can they really get any lower? And it may only go up if inflation continues to dominate and spook.

What I’m worried about:

  1. A significant price drop is possible. But I think it’s unlikely.
  2. Low appreciation in the area due to substandard schooling and not many amenities-ish.
  3. Missing out on a better cashflow opportunity by buying during low supply
  4. Stock bounce-back. I lost $7–9K in stock value from the inflation spook. It is a bad time to sell, but I had to sell off this morning in preparation for my purchase. This is not ideal and it hurts.
  5. Extra work in maintaining a SFH (especially exterior)
  6. Extra work in multiple rental agreements.
  7. Taking away time from travel and projects. Like I said, my projects aren’t super time consuming yet, and I just procrastinate anyway. There are travel restrictions anyway, so maybe it’s a good time to set up rental agreements.

Overall, it’s a very difficult decision to make. There are reasons for both sides.

But I lean going through with the purchase because I’m bullish on real estate. Supply is relatively fixed in OC, especially for SFH (recent projects seem more like condos as you can only build up in a more cost-effective way).

I will feel even more FOMO if I don’t buy now, especially since this is one of a few properties that I felt would make sense financially, is relatively well-maintained, and had a market inefficiency with poor photos/misrepresented listing.

But the anticipated burden of landlording has taken me to this preliminary conclusion: This is the last property I’m buying until I decide to move-out and live with a partner and have kid(s). I don’t want to buy more rental properties.