Assets and household income to justify buying a 2 million dollars property

Uber Househunt
Sep 30, 2017 95 Comments

Please don't post links to mortgage affordability calculators. I just want to know how others in market are justifying their decision at this price point when half of our income is paid in stocks, some of which is paper money if you work at a unicorn. Would be great if people who already bought a 2 mil property or are in process of buying one can post what was their net asset (better if you can give the brake down in cash, stocks, house equity, 401k) and total house hold compensation in base and stock at the time of buying. Not a contest, I just can't wrap my head around 10k in mortgage and property taxes.

My situation:
Age: early 30s for both me and my wife and both are IC , 2 kids.
Cash :430k
Stock( not counting capital gain tax): 700k
401ks: 340k
Home equity (not counting selling costs and tax on capital gains just zestimate - mortgage ): 500k

House hold income per year: 350k cash, 70k paper money from uber, 100k real rsus from spouse.

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TOP 95 Comments
  • Microsoft hrtN12
    Trying to have a micro mansion to show off to friend's is a life of being house poor. Pay you house of at 30 and be free the rest of your life. When the kids leave in 12 years you will want to down size. Cost a lot to air condition empty space.
    Sep 30, 2017 8
    • Microsoft yMcg47
      Suppose housing market doubles in 12 years. With the mansion, they will cash out 4 mil vs 2 mil in their current place. It can make sense depending on risk and where you think real estate is headed.
      Sep 30, 2017
    • Google tentenths
      All these dumb people who don’t understand the Bay Area. $2M == no empty space, prob no air conditioning. 😂
      Sep 30, 2017
    • Uber NgyW37
      Agree with the above. 2M in Silicon Valley in a nice neighborhood gets you a nice house MAYBE 2500+ Sq ft and a nice little yard. Not really a micro mansion. If you want move in ready with space for four in a nice neighborhood you're probably looking 1.5-2. Who knows what will happen with the market but we live in a condenced tech area that seems to just see the big cos w massively deep pockets continue to buy up real estate and grow.
      Sep 30, 2017
    • Google tentenths
      I don't worry about it too much. Renting is not cheap, and have to look very far away to buy cheap (and it's still more than a mil).
      Sep 30, 2017
    • Splunk
      anon654321

      Splunk

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      Marketo
      anon654321more
      Oct 1, 2017
    • Amazon / Eng
      mUqi08

      Amazon Eng

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      mUqi08more
      Haha, micro mansion. You get a typical house with good school district, that's all for 2M here.
      Oct 1, 2017
    • Uber Househunt
      OP
      I wanted to post the question in bay are topic but blind doesn't allow more than one topic. I can understand why outsiders can't wrap their head around real estate market here. FWIW, I just want a normal 4 bed 3 bath , 2200 square feet home with a backyard in an average school district. The catch is I also don't want either of us to commute > 2 hour everyday. The Bay Area reality is 2 million for such criteria and I have come to accept it.
      Oct 4, 2017
    • Amazon / Eng
      mUqi08

      Amazon Eng

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      Amazon
      mUqi08more
      If you only care for avg school there are homes in milpitas for 1.1M. shitty school maybe 600k in hayward
      Oct 4, 2017
  • Amazon / Eng avra
    That is a power couple
    Sep 30, 2017 17
    • Microsoft yMcg47
      Yea. But you can find lots of women in hr and marketing
      Oct 1, 2017
    • Google / Eng rabidero
      But then they won't be pulling in anywhere close to me. I want our household income to be $5-600k, not $350k + change.
      Oct 1, 2017
    • Microsoft yMcg47
      Well a typical engineer with your background makes about 400k. If you wife makes the same, you can retire in 5 years of saving. Too easy. No struggle. No fun.

      Marketing makes comparable. Maybe not 400, but 200 should be easy. So 600 total is not bad.
      Oct 1, 2017
    • Google / Eng rabidero
      Fair point, but even across the company (and SV/industry in general) the gender ratio is skewed enough that women have a much easier time. I don't think there's really much hope for below average men, and I'm way below average in everything except paycheck.
      Oct 1, 2017
    • Microsoft yMcg47
      Aha. You guys should thank me. I brought a gf with me when i moved to sv. We broke up but she's still in the area
      Oct 1, 2017
    • Google / Eng rabidero
      Nice, thanks for helping to balance the trade deficit with your import.
      Oct 1, 2017
    • Spotify BOnI02
      I'm an engineering woman and almost always date engineers
      Oct 3, 2017
    • Google / Eng rabidero
      Even if every single engineering woman dates engineers, that'll leave lots of single men.
      Oct 3, 2017
    • Microsoft yMcg47
      Yea, 75% of men. Those dudes can go after marketing women. Brin did, so it's not unusual
      Oct 3, 2017
    • Uber pitt
      OP is a lucky guy with a lucky problem!
      Oct 8, 2017
  • Facebook public
    Bought a house once around that price. Rented out 3 bedrooms. Paid around 4k a month to cover the balance. Moved a few years later and house now bays me 2.5k a month. You take home 21k cash after tax a month. 10k a month is easy.
    Sep 30, 2017 13
    • Facebook public
      A 2m is a little house haha. You tear down with fire damage sold for 1.4m so guess it's possible but I aim for easily renovated properties.
      Sep 30, 2017
    • Microsoft yMcg47
      I can't imagine spending 10k a month on housing. Rent would be about 2k for a single dude
      Sep 30, 2017
    • Facebook public
      Maybe in seattle lol. 3k might get you a studio if you've got the hookup.
      Sep 30, 2017
    • Microsoft yMcg47
      Naw you can get a good 1br in mv for 2-2.5k
      Sep 30, 2017
    • Facebook public
      Mv 😂
      Oct 1, 2017
    • Microsoft yMcg47
      Must be something i missed. Is mv funny? Do people not live there anymore?
      Oct 1, 2017
    • Facebook public
      People do I'm sure, but not by choice.
      Oct 1, 2017
    • Microsoft yMcg47
      I like mv. Can do with fewer googlers but otherwise fine for me
      Oct 1, 2017
    • Facebook public
      Oh sorry, glad you like it. Didn't mean to put it down in a serious way.
      Oct 1, 2017
    • Uber Househunt
      OP
      Thanks for your response. When you have a family renting out part of home is not an option. Or I personally don't like that option. You are right about being able to afford 10 k with current salary but lot of it is in stock which is variable. I just feel I won't be able to sleep with 10k mortgage hanging over my head.
      Oct 4, 2017
  • Salesforce Ridnenh
    With your situation, I cant see a justification. Most banks will want your payment to be less than 40% of your monthly income. If you rolled your 500k home equity into new house, you are still talking ~9k a month payment, which would be more than 40% (after tax and bs). So you would have to put up a chunk of your cash and you know have made a huge bet on this one property. Stick with your current place and keeping stacking cash. Dont try and ‘keep up’ with idiots...
    Sep 30, 2017 2
    • Netflix vbgu14
      The banks look for total debt to income ratio and want it under 43% and they look at your pre tax income. In his situation their monthly income is ~ 30k. Assuming no other debt 10k payment would still put them in 33% ratio and that is very healthy as far as banks are concerned.being young is a plus too.

      I still wouldn't recommend it. Assuming this is CA, you will end up with about 19k cash each month assuming a 35% total effective tax rate. There is very little savings that you will be left with if you pay 10k for mortgage. Just stay put.
      Sep 30, 2017
    • Microsoft yMcg47
      I think it can be a good idea depending on your bet on real estate. If you think it will keep going up, this is like doubling down. If it goes up as expected, then you will end up with more.

      The prob is if it makes a correction. You will have lost a bunch of time.
      Sep 30, 2017
  • Oracle / Product
    TKSHUDGO

    Oracle Product

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    IBM
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    Lead, follow or get out of my way.
    TKSHUDGOmore
    Don't forget to account for property taxes
    Sep 30, 2017 2
    • Uber Househunt
      OP
      Property tax is accounted for , that is why 10k per month for 2 million property assuming 20% down.
      Oct 4, 2017
    • Oracle / Product
      TKSHUDGO

      Oracle Product

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      IBM
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      Lead, follow or get out of my way.
      TKSHUDGOmore
      Math seems right. Sounds crazy to spend so much on taxes doesn't it?
      Oct 5, 2017
  • Intuit kzinti
    Last I checked there’s no capital gain on upgrading your house. It’s called a 1031 exchange.

    I would rent instead of buy and currently do so with one toddler and stay at home wife. $2525 for a two bedroom 20 minute walk from the beach in SoCal, been here only since Feb 2017.

    I budget for white glove full service moving costs annually, but hope to stay put for 2-3 years at a time.

    Little more than half the cash income but same equity.
    Sep 30, 2017 4
    • Intuit kzinti
      I reread your post, misread the home equity part. You should track your home equity in your primary residence at zero. You can cash out refinance if shit hits the fan or HELOC, but that gets much more difficult in a bad economy. Pulling the ripcord and moving to the midwest if things get bad is the only real viable downsizing plan IMO.

      If I absolutely had to buy, I would want two years of my current burn rate in cash. Easy to stretch it to 3-5 if you only lose one income.
      Sep 30, 2017
    • Databricks / Eng
      datadicks

      Databricks Eng

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      I suck
      datadicksmore
      Um no. 1031 exchange is for investment properties only. If its your own house you just get a 500k exemption for the gains if you are a married couple. So funny tax software person doesnt know about taxes
      Sep 30, 2017
    • Google tentenths
      Yeah you just have to rent it out for 1–2 years first. So simple. DERRRRP. As someone else said $500k gain is not taxed so why is this relevant
      Sep 30, 2017
  • Gen!x / Eng
    XPbr65

    Gen!x Eng

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    Bank of America Merrill Lynch, HPE, Northrop Grumman
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    mehy
    XPbr65more
    I can’t comment well on this as I can’t relate. At all.

    I live in the Midwest. 3500sf Queen Anne on a half acre lot (actually .45). Adding 1500sf for a badass woodworking shop + man (bat?) cave.

    House cost 150k. Extension costing another 75k.

    Like I said, can’t relate.
    Sep 30, 2017 0
  • Uber GMie27
    700k + 430k = 1.13m So why not?
    Sep 30, 2017 0
  • Salesforce UncleBenny
    Home ownership is a joke/trap.
    Sep 30, 2017 7
    • Microsoft hrtN12
      Not if you buy somthing you pay off in 10years or less.
      Sep 30, 2017
    • Salesforce UncleBenny
      You don't magically have to stop taking care of a house once you pay it off...
      Sep 30, 2017
    • Salesforce UncleBenny
      But also think of the more worthwhile things you could buy with $2 mil... So many mcdoubles....
      Sep 30, 2017
    • Microsoft hrtN12
      Been in mine 20 years and done zero updates and i could sell it for double. Its outdated but people want to make thier own design choices not live with mine.
      Sep 30, 2017
    • Salesforce UncleBenny
      Amazing you don't have to pay property taxes
      Sep 30, 2017
    • Microsoft hrtN12
      I do they are not that high.
      Sep 30, 2017
    • Uber pitt
      Every house I've bought have appreciated so much I could just let them sit empty and still make money
      Oct 8, 2017
  • Netflix / Eng ricewater
    Interest rate is low. Interest for first 1M is tax deductible. And you get 5 times leverage. My 2m house is up 10% over the last year. 400k gets 200k return in a year. Tax free. Best low risk investment you can get. Not to mention better school, better commute, better neighborhood.
    Sep 30, 2017 2
    • Google theverge
      How is it low risk? You just don't see the risk..
      Oct 1, 2017
    • Google keyboards
      Isn't it 400K + may be 50K?
      Oct 1, 2017
  • Microsoft hecuba
    Op, please share what you decide to do. I know two friends in roughly the same financial boat as you (a few years older though) who have been looking at buying a $1.8M house in Seattle and just can't figure out what kind of people actually live in these things and whether they are overshooting their budget.
    Sep 30, 2017 2
    • Uber Househunt
      OP
      I seriously have no clue. I guess I will just bite the bullet and dive head first.
      Oct 4, 2017
    • Uber Casper4
      Also curious OP. I'm in very similar boat. Please continue to share your experience
      Oct 15, 2017
  • New
    fktrump

    New

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    GoDaddy
    fktrumpmore
    I don't understand why someone would dump all this money into a single house and not have rental properties?!? Someone elaborate
    Oct 1, 2017 1
    • Netflix / Eng ricewater
      2M house is only decent in Bay Area, far from luxury.
      Oct 1, 2017
  • Microsoft Macarena
    I woukd think of having multiple properties. 1 mil primary home and two additional as investments 500k each. Buy and hold long term
    Sep 30, 2017 1
    • Uber Casper4
      How in the world can OP get a house for 1 mil without a soul crushing commute?
      Oct 15, 2017
  • Google tentenths
    Did you take into account the mortgage deduction (up to 1.1M?). Adjust your federal and state withholding exemptions to 6, 8, whatever to figure out better take home income. $450k incl RSU seems like it should be enough. If your spouse is at a good co maybe they'll be doubling or tripling that RSU/yr soon... Not that you should count that now but might make you feel better later
    Sep 30, 2017 0
  • Gen!x / Eng
    XPbr65

    Gen!x Eng

    PRE
    Bank of America Merrill Lynch, HPE, Northrop Grumman
    BIO
    mehy
    XPbr65more
    It appears OP currently owns his house.

    What’s the primary driver to move to a bigger house?

    I don’t see that articulated anywhere. If it’s for intangibles like signaling or even things like better school district those are value judgements that Blind can’t (reliably) help you with.
    Oct 2, 2017 4
    • Google böringcö
      Question is not about the why, simply about how. Here’s a typical scenario: 3br townhouse in mediocre to ok school district could have appreciated 900k to 1.4M. Pretty reasonable to want to move to a single family home in better district, and 2M is entry level there. Not bigger.
      Oct 2, 2017
    • Gen!x / Eng
      XPbr65

      Gen!x Eng

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      Bank of America Merrill Lynch, HPE, Northrop Grumman
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      mehy
      XPbr65more
      This introduces facts not in evidence.

      And if you’re moving for school district, why do you care what Blind users think. Isn’t that a decision for your kids?

      I suspect this is more of a case of lifestyle creep. But similarly that introduces facts not in evidence.
      Oct 2, 2017
    • Google böringcö
      Just go back and read the OP's actual question. Wants to know how people make it work, how much in assets they held at the time of purchase to feel comfortable, whether they have two large incomes, and so on. Never said anything about the reason for moving. It is reasonable/typical to want to do so.
      Oct 3, 2017
    • Uber Househunt
      OP
      We don't own a home in same state. We just moved here and love everything about the Bay Area. My wife still wants to keep the other home so we are not planning to sell it. Boringco is right. I just want to know how others made it work and what was their financial situation when they did it. I don't feel comfortable committing to 10k/month payments for next 30 years. What if One of looses the job? What if age discrimination causes our pay to decrease at later stage of our career? Lot of pay is in stock and I am counting on it to pay for mortgage but what if stock market nose dives? What if mortgages rate goes up causing housing prices to stagnant or worst fall down? Too many variables and still lot of smart people are buying these properties. So either i am not seeing what they are or I am just thinking too much.
      Oct 4, 2017
  • Credit Karma gftb45
    I don't understand $2M. You don't mention kids, so I assume there is a range of lovely homes to be had at a far , far lower price point, even in the Bay Area. Just a thought exercise? Anyhoo, I would assume anyone in a $2M property in 30s either put a full mill down (w/ help from some source, like rich parents) or simply loves living on the edge for status. Either way, not my scene at all.
    Sep 30, 2017 1
    • Uber Househunt
      OP
      Edited with number of kids.thanks for the response.
      Sep 30, 2017
  • Facebook / Eng johno
    Your rsus are insanely low. Consider applying elsewhere after you buy the house, unless you really believe those are awesome sauce lottery tickets you've got.
    Oct 7, 2017 0
  • Amazon / Eng
    mUqi08

    Amazon Eng

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    Amazon
    mUqi08more
    First of all people usually don't lose jobs for long here. That's the main benefit of living here instead of Midwest for example.

    Those who make it work usually use ARM loans and start with less than desirable area. Most of my friends can't afford Cupertino or Saratoga, unless both make super high income and very senior.

    Most single earner lives in townhouse if purchase or rent if they want good district. Or they put up with long commute and live far. A lot of desirable area townhouse I see are with south Asian single earner family, and garage to bedroom conversion.

    Some would try to cramp a family of 4 in a two or three bedroom condo in good school districts.

    Some just give up and send kids to private school for 20 to 30k a year, and live in an expensive slum.

    People with 2.4M homes bought their first one decades ago and upgrade over time, and many bough their first condo for 600k or house at 800k, decade ago.
    Oct 5, 2017 0
  • Lyft exHr77
    Roughly same situation and bought in the same range. Plan to stay 5+ years and expect it to appreciate. Most annoying thing is that only interest on $1m is deductible since we’re married. (Would be 2 otherwise)
    Oct 1, 2017 0
  • Amazon / Eng
    mUqi08

    Amazon Eng

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    Amazon
    mUqi08more
    Most people with those 1M+ house are not first time buyer, they bought a long time ago and they roll their appreciation into a better house. Their total debt since the beginning may be only 800k or so.

    Rent for these 2M neighborhood are usually 5k a month or even more, if the owner didn't bought a long time ago his cost would likely be 8k after property tax and mortgage. That's why it is very hard to rent a home in these neighborhood.

    As soon as you start having lots of apartments, the school goes downhill. So many wanting those school are forced to bid up.
    Oct 1, 2017 0
  • Bank of The West / Eng Idjejjej93
    Debt (mortgages) are cheap historically speaking. The interest rates may increase as growth in gdp(3%+) continues. One thought is to lock it in. Maybe fade the trump rally(sell options and rsus) and buy single family home to redistribute investments. CA has been returning 5%+ per year over the last 4 years. So down payments ( in the $2m example) 400k down, has been increasing 100k per year.
    Sep 30, 2017 0
  • New / Mktg
    PVPk22

    New Mktg

    PRE
    AKQA
    BIO
    I've worked in advertising for the last 16 years on global brands and digital campaigns. Now I run a small digital production team.
    PVPk22more
    I personally don't like the idea however perhaps your income is more stable. I'm currently looking at franchises / other businesses to expand revenue streams. Current family revenue is over 500k but it is highly variable.

    We own one property, no kids, but no interest in taking on more risk and more debt just to track inflation. The 500k equity is already going to appreciate what is the value in taking on so much more risk?

    How do you retire if you just keep rolling into later properties?

    You're early 30's what happens if you upgrade and your 350k income gets knocked down to 150k? I'm no tax expert but my gut says this is all risk with no reward. Currently you have a fantastic safety net with many opportunities you severely limit your options by making this decision. What happens if market nose dives? Your job? Spouses? You can change locations and be fine currently.
    Oct 2, 2017 2
    • LinkedIn $$$$$$$$$
      Roll it into a paid off property?
      Oct 2, 2017
    • New / Mktg
      PVPk22

      New Mktg

      PRE
      AKQA
      BIO
      I've worked in advertising for the last 16 years on global brands and digital campaigns. Now I run a small digital production team.
      PVPk22more
      Oh I misunderstood if OP is saying that he wants to roll assets into a paid off property.
      Oct 2, 2017
  • Microsoft yMcg47
    Seems reasonable to me. 1.5 mil mortgage. Everything else stays the same. People do this... roll into bigger houses
    Sep 30, 2017 2
    • Google tentenths
      OP easily has 900k even after sellers fees and cap gains on stocks. Would be a good idea for beefing up the offer too. So 1.1M seems much better and is all deductible.
      Sep 30, 2017
    • Microsoft yMcg47
      No cap gain if you roll over. The 400k can be kept in bonds for interest rate arb
      Sep 30, 2017
  • What is your take home pay on the current salaries (not counting RSUs or stock investment). This will give us some perspective
    Oct 22, 2017 0
  • New OXmv74
    I would buy in your position. We are early 40's. Almost the same assets but more home equity and less cash/stock. Single income 300k. If we had another 150k that would comfortably fund a 2mm property and then some.
    Sep 30, 2017 0
  • Pandora dipthong
    You can absolutely do this. Your combined disposable income can pay for a >$1.2 - $1.5M mortgage easily and banks will have no problem giving you a loan with your accumulated assets. Buy now. Maybe a small risk that the market dips in the future but that $2M home you’re eyeing will easily increase in value over a few years. You will regret not buying now.
    Sep 30, 2017 0
  • Amazon ktaa05
    No 10k mortgage. If you’ve wonder several houses and have built up equity...and you just want a bigger house...large cash down payment/reinvestment of capital gains
    Sep 30, 2017 0

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