I am 32yo, live in the Bay and am a happy renter, I rent an apartment close to work spending $3000/mo (probably going up this year). I don’t have a family, I just have a long term girlfriend and probably am not going to have kids, not interested.
My net worth is 1.5M, all invested in Vanguard index funds (mostly VTI and VXUS and a small percentage of muni bonds so I have some dry powder to rebalance in if there’s a crash). I reinvest in the market all that’s left from my paycheck, so about 150-200k a year after tax.
I’m wondering if I should cash out some of my investments (~200-400k) and use it as a down payment buy a small property in the Bay Area, to diversify? I don’t need a house, but I like the fact that with a relatively small down payment I gain leverage by controlling a much larger asset that might appreciate with borrowed money.
What do you think?
Also, please don’t suggest buying a rental out of state etc. it’s not for me, I don’t want to deal with property managers or manage it myself. Maybe later in life once I quit the rat race.
- Use a rent or buy calculator, tons of them online. Look for one that lets you set non-housing asset return rate so you can eyeball effect of recession based on your beliefs
- Qualtrics ❄️IsComingAppreciation play is like options trading. Say you bought a house with 20% down, and then price went up by 30% over next three years, you basically gained 100% returns on your investment besides selling related cost and additional cost over rent. If the other way happens you are now underwater; loosing 100%.
Saying that, the amount of asset you have you can think of buying a house for diversification. Negative side of considering house as an asset is it’s least liquid of all kinds of asset
- How long are you planning to be in the Bay Area? Is you goal to retire early or continue to climb the latter and accumulate?
- I think how long you are willing to be in the area should drive the decision. There are transaction costs involved with buying and selling that don’t make them great in the short term — assuming a more mild rate of appreciation in the bay going forward. Property taxes under the new trump regime are a big negative as wellMay 22 0
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