i have some money saved up and I was wondering if it was better to save an additional 4-5 years to buy a $1.5M house with cash in the Bay area or finance it now withh a 30 year mortgage at 3.5%? Dave Ramsey recommends buying with cash versus Warren Buffett who says getting a 30 year mortgage is a good idea.
Choose your down payment so that you have a good amount of emergency cash left over, but try to aim for a shorter term loan.
You can't have it both ways in bay area
With that kind of cash, you have to account for rates, but also should consider market. If market looks high, just wait it out. If you can find a sweet spot of a low rate plus buying in a housing dip that would be best
What rate do you recommend locking in at? And how long?
https://youtu.be/BJ3xhjqk52A If you will pay 500k down payment and invest remaining 1m with ~5% year gain for 30 years, your 1m will become ~4.5m at the end of the day. It’s equal to ~3x of paid interest.
Talk to a financial advisor, you don’t seem to know how to invest/deal with money
Have you really read Ramsey? (Or his great podcasts?) he talks of paying cash for things to stay out of debt. Housing is good debt. And he is certainly not talking about $1M+ housing. Hes talking about snowball type debt like financing cars and boats and other crap that should be bought with cash. You dont want all your eggs (net worth) in one illiquid asset. Paying cash for 1.5m makes sense if you have 5m in the bank. If 1.5m is most of your worth, terrible idea. most everything you own is then tied up in an asset that can take months to liquidate and costs money to sell and maintain. I would put down 500k or whatever amount gets you to an easy monthly mortgage cost, and dump the rest into VTSAX and watch it multiply over the years. Source: own a lot of RE, even more VTSAX.
Thanks for the advice!
You should be stupid to buy with cash. Invest the same amount in 10 more houses in a good cap rate real estate area and finance all of them. You can get a cap rate of 8% easily and pay your mortgage with that
Low rates = take the mortgage. Your money can earn more elsewhere.
The loan cost $1M albeit over 30 years. You also can’t quantify the less stress and no burden of a monthly mortgage of $7K.