Buying a Single Family Home

Workday realizm
Sep 21, 2018 34 Comments

Hey all looking for advice as I’m trying to purchase a 4b 2b house in the Pleasanton/dublin/San Ramon bay area.

My wife and I wanted to upgrade from our 2b 2b condo. The loan amount for it would be 670k (rest is downpayment which is over 20%). Monthly payment would come out to 4300 with property tax et all.

We currently own our condo and have ~300k in equity in it as it’s valued at ~650k. Many many people have told me not to sell our condo and just rent it out. I have tenants that would rent it from us for +$150 Cash flow / month (mortgage, hoa, prop tax, insurance). Wondering if I can afford to buy AND keep it:

I make 130k base salary a year.
+ About 80k in RSUs (that vest) a year
(So this last year for example my w-2 has 210k despite the 130k salary)

180k cash in the bank
200k in vested stock to sell
More stock that is yet-unvested
I have a 401k but don’t want to state amount as I really don’t want to ever withdraw from it until I’m 59.

My wife will actually be in school for the next year so her part time salary will be enough to cover her daily necessities (food, gas etc) when she finished school she will be expecting to make ~80k a year to help with anything.

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TOP 34 Comments
  • Samsung usr777
    property market is too hot now in my opinion you should sell and go on rent and buy the house in another 3-4 years with a steep discount...
    Sep 21, 2018 2
    • Apple / Other MEiD84
      I know a lot of people that did that 2yrs ago and are crying right now
      Sep 21, 2018
    • Samsung usr777
      It's a waiting game ...
      Sep 21, 2018
  • Glu Mobile PQSK63
    Did you factor in you have to pay tax on your rental income? Or that when you sell the rental, you have to pay tax on all gains since it's not your primary residence? I would take the gain tax free, then buy another primary resident. Save the cash when market corrects and buy 2 apt for rental income.
    Sep 21, 2018 4
    • Workday realizm
      OP
      I believe if I sell it in a year it would still be tax free because it’s the rule of 2 of 5. You have to have lived in it as your primary residence for 2 of the past 5 years prior to selling it. So I would have another 3 years to sell it tax free.
      Sep 21, 2018
    • Oath / Mgmt Atinlay
      Don’t quote me but I think that isn’t true of rental properties. You can’t have it both ways.
      Sep 21, 2018
    • Nvidia Curr->next
      OP you still have to pay tax on the rental income on your condo. You can’t write it off. Did u consider this when calculating the 150$ profit?
      Sep 21, 2018
    • Workday realizm
      OP
      The rental income to be taxed would be ~850 a month (150 profit plus principal). If I claim depreciation (which I believe you have to anyway) then 0% of that income gets taxed. Of course it would then get added as part of my income when I sold the property in the form of depreciation recapture.

      What I was talking about above was simply capital gains tax at the point of selling the property, and yes I double checked if you qualify for the 2 out of 5 rule without moving back into the property, you can still take the 250k / 500k exemption on property sale, even if you rented it for the last 3 years. (But this exemption doesn’t count toward depreciation recapture)
      Sep 21, 2018
  • Facebook public
    Never sell real estate but also never buy a condo, I'm so conflcited!
    Sep 21, 2018 0
  • Microsoft / Eng
    anaya👏🏾

    Microsoft Eng

    BIO
    CTO of ECorp
    anaya👏🏾more
    Bro you poor
    Sep 21, 2018 1
    • Microsoft / Eng
      anaya👏🏾

      Microsoft Eng

      BIO
      CTO of ECorp
      anaya👏🏾more
      Don't spend so much on mortgage
      Sep 21, 2018
  • Pure Storage orangIsh
    Buy SFH and keep the condo for 6 months. Should not be difficult to rent it out. May be sell it after 6 months (if you need money) when people are looking for houses before school starts.
    Sep 21, 2018 0
  • Nvidia Curr->next
    Just checking ... will you get a loan for 670k with your current expenses? Even if you get it will be on a much higher interest since you already have a loan
    Sep 21, 2018 3
    • Workday realizm
      OP
      Yes the loan will be with my current expenses, I actually already have my loan locked in at 4.25 30 year fixed via my bank though for the 670.
      Sep 21, 2018
    • Oath / Mgmt Atinlay
      If you already have your loan locked in, it sounds like you have already made up your mind. Why even ask here?

      If you do it, you’ll will have very debt-to-income ratio and you haven’t even told us about everything else like other expenses credit cards, car payments, utilities, tuition, etc. You also need home owners insurance for both properties. I think you will be cash strapped if your tenant bails on you. Each time something unexpected happens you will be dipping into savings.
      Sep 21, 2018
    • Workday realizm
      OP
      Fair enough, I have no other debt (no credit card debt or car payments), no student debt, and I have probably what would be typical utility bill amounts. Insurance on the condo is included in the +150 cash flow on renting it.

      I still ask here because it’s always good to do a thorough analysis of major decisions before actually going through with them, always helpful to bounce ideas off others.

      My plan is to buy, and rent out the condo, and revisit selling it next summer, if either I need money, or the whole thing is too much to deal with.
      Sep 21, 2018
  • Apple / Other MEiD84
    If you can, I would rent ur current property and buy another, it can be a good long term investment
    Sep 21, 2018 3
    • Workday realizm
      OP
      That’s definitely the plan, but do you think I can afford it with my numbers?
      Sep 21, 2018
    • LinkedIn hdvkuscbkg
      Take into consideration what happens if you have a vacancy.

      The fact you need to ask this question tells me you shouldn’t do it.
      Sep 21, 2018
    • Apple / Other MEiD84
      No Pains No Gains, think long term, squeeze ur spend for a year and see if u can manage
      Sep 22, 2018
  • New .Peace.
    Don't buy now as the market is due for correction
    Sep 21, 2018 3
    • Cisco testID
      Is there a correlation with stocks during a real estate correction?
      Sep 21, 2018
    • Workday realizm
      OP
      Id like to know this too as all this money in stock has just as much of a chance at depreciating as the housing market over the next 3 years.
      Sep 21, 2018
    • New .Peace.
      Stocks will get hit along with real estate.
      Still not clear whether stocks or Restate will start the down turn first. My take is stocks will as soon as stock buy back ceases.
      Sep 21, 2018
  • Capital One / Eng
    Bum Cheese

    Capital One Eng

    BIO
    death by onions and peppers
    Bum Cheesemore
    Agree with the others. $150/month cash flow positive coupled with slower appreciation and probably faster depreciation of a condo makes it seem not worth it when compared to having the money available, especially if your THC (hah!) is going to be ~$300k.
    Sep 21, 2018 0
  • Uber vor
    It's not worth it to keep a condo, as it appreciates much slower than a sfh and will also be hit the hardest in the downturn. Also, in Bay Area it's not cost effective to rent. So, I would suggest that you sell your condo.
    Sep 21, 2018 1
    • Pinterest expin
      I think OP should do the math and see how much his condo can rent for.
      Sep 21, 2018
  • LinkedIn hdvkuscbkg
    Where is your condo that it’s worth so little? No offense, he since around MV, SNV, SC it’s so expensive
    Sep 21, 2018 1
    • Workday realizm
      OP
      East bay, same area
      Sep 21, 2018
  • Amazon
    SWGMA

    Amazon

    PRE
    Microsoft
    SWGMAmore
    One need to be under 43% of liabilities to get a loan. I doubt your loan even be approved. Have you checked with lender?
    Sep 22, 2018 0
  • Amazon HBkS82
    Don't forget property tax in your calculation
    Sep 21, 2018 0
  • Google / Design ruminate
    I’m in a similar situation. I’m planning to rent out my 2bd condo with positive cash flow and buy a home that’s similarly priced to yours.
    Sep 21, 2018 0
  • Workday realizm
    OP
    Ah guess I should mention after the downpayment I would be left with ~30k in bank, ~80k In vested stock (401k untouched)
    Sep 21, 2018 0
  • Microsoft rdi
    Open redfin.com, choose a home, tour it, buy it. What's else?
    Sep 21, 2018 0