Investment advice

May 21 24 Comments

Hi Blind

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.

Thanks!

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TOP 24 Comments
  • OneTrust / Consultant
    ejensi

    OneTrust Consultant

    PRE
    Caradigm
    ejensimore
    How did u accumulate ur money?
    May 21 1
    • OP
      Frugal life, sp500 returns over the past few years, a little bit of bitcoin, not having a mortgage to pay at the end of the month and not having to spend crazy money on kids.
      May 21
  • New / Eng
    Amazon B.O

    New Eng

    PRE
    Amazon, Zillow Group
    Amazon B.Omore
    What's your TC? How did you manage to save 1.5M?
    May 21 2
    • OP
      Replied above. Tc around 450k
      May 21
    • Would you like to share your TC progress over your career?
      May 21
  • Oracle CAFFEINE!
    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
    May 21 3
    • OP
      Well basically in the Bay Area no rent vs buy calculator would ever favor buy... it’s purely an appreciation play. And yet people made millions in equity.
      May 21
    • Oracle CAFFEINE!
      Then look for one that lets you set your real estate appreciation beliefs
      May 21
    • Qualtrics ❄️IsComing
      Appreciation 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
      May 21
  • Yahoo Crdp53
    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?
    May 21 2
    • OP
      I’ll stay in the bay until I get retirement money, which for me is something along the line of 4M in today’s dollars. Then I’ll get out.

      Go figure how long it’ll take, it will heavily depends on market returns and job market...
      May 21
    • Yahoo Crdp53
      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 well
      May 22
  • Facebook public2
    Buy a larger property (free leverage) and rent out extra rooms to lower your monthly cost.
    May 21 0
  • New / Eng
    Amazon B.O

    New Eng

    PRE
    Amazon, Zillow Group
    Amazon B.Omore
    Are you a manager? TC 450k
    May 21 5
    • OP
      No. IC. E5 engineer. Standard comp for an E5 who’s been a few years in the same place so was able to get refreshers and such. Fresh Facebook E5 offers are at around 400k not counting for stock growth.
      May 21
    • New / Eng
      Amazon B.O

      New Eng

      PRE
      Amazon, Zillow Group
      Amazon B.Omore
      So sorry to sound like someone who doesn't know the norms but what does "refresher" mean in this context?
      May 21
    • OP
      New RSUs that you get every year in addition to your original grant as part of your perf review, so they sum up to your original grant. 450k is how much base + RSUs I roughly vest every year.
      May 21
    • New / Eng
      Amazon B.O

      New Eng

      PRE
      Amazon, Zillow Group
      Amazon B.Omore
      Wow that totally makes sense. Thanks alot for explaining.

      Also Wondering if it's possible to ask for significant more salary every year also or that's not typically possible?
      May 21
    • OP
      Typically salary is hard to negotiate and it’s hard for an engineer to pass ~260k, equity is where you have more freedom.
      May 21
  • This comment was deleted by original commenter.

    • OP
      Not at all. Perhaps I should have used the term “long term relationship”. I apologize if that sounded offensive. I love her very much and we’ve been together for a few years now.
      May 21
  • New / Eng h7j8
    Don't buy property in the bay. If tech crashes it's going to absolutely destroy the housing market there. Invest in something uncorrelated to the tech industry.
    May 22 0
  • LinkedIn small gov
    Buy for the leverage and for the primary residence interest tax deduction. Appreciation will be awesome but isn't guaranteed.
    May 21 0
  • Google bo o
    buy some Bitcoin.
    May 21 1
    • OP
      I still have some, about 3% of my portfolio. I’m not buying more, I got a little bit lucky in 2017 and that’s enough for me.
      May 21

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