Assets and household income to justify buying a 2 million dollars property
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.
Seems reasonable to me. 1.5 mil mortgage. Everything else stays the same. People do this... roll into bigger houses
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.
No cap gain if you roll over. The 400k can be kept in bonds for interest rate arb
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 βkeep upβ with idiots...
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.
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.
Don't forget to account for property taxes
Last I checked thereβs no capital gain on upgrading your house. Itβs 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.
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.
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
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.
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.
All these dumb people who donβt understand the Bay Area. $2M == no empty space, prob no air conditioning. π
That is a power couple
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.
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.
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.
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.
Edited with number of kids.thanks for the response.