Buying a House in the Bay
With savings and selling off some of my stocks I will have a downpayment for a million dollar home in about a month. We’d like to stay here long term, but we’re also playing around with the idea of getting a place in a cheaper market, rent it out, pay it off in 5-8 years, and potentially move there down the road. Buying a house in the Bay seems out of whack these days, but short term I could see it go even a little higher after all the IPOs. That said I have a feeling it will drop significantly if a recession were to hit, and I like the idea of sitting on cash if that were to happen. I know that there are other ways to invest that outperforms real estate. It’s not just an investment as we’d love to stay for the long haul. And I see it as a way to not pay market rate rent when we retire. What would you do? TC: 430k
The right thing to do is to not put all your cash on a house. This way you can still sit on cash (albeit less of it) if housing prices drop, vice versa. Use something like 30 or 40 % maybe.
Would not put all our cash in the house. Will have a years worth of mortgage payments on a rain day account.
Ever horrible recessions - like 08 don't even dent housing prices in the bay. From 08 to 10, prices just grew more slowly, they didn't really drop
East bay is getting real soft; especially the less desirable areas like union city, Castro valley. You could low ball areas like that for fixer uppers.
I’m guessing you are not open to renting out the spare bedrooms. My TC is low, but I managed to save enough for a downpayment, and make the majority of the monthly payment through rental income. With your TC, you could do this in a nicer neighbourhood. TC: 155k, total mortgage cost $5k/month, rental income $3500/month
We are. Have a family member possibly moving here next year that would potentially move in with us and chip in. If not, I’m for sure open to renting it out too.
You could potentially look for houses that have a detached in-law suite. You’d be able to get $2k/month easy for something like that, maybe more depending on the area.
Unless there’s several more million dollars in reserve, you’re taking a big risk by buying a house that costs that much and then living in it. Since you can’t just sell it easily, once you’re living there, you’re parking a large percentage of net worth in an inaccessible place
Spend a lower % of your net worth on a house you live in if possible