Real estate to total net worth ratio?

Dec 4, 2019 18 Comments

I’ve been squirreling away cash for the past few years, trying to simultaneously prepare for retirement and maybe buy a house one day. The general breakdown of my assets:

200K in my 401(k)
165K in an aggressive Wealthfront portfolio
310K in cash or low risk investments

I feel silly holding so much back in low risk accounts, but I’m also terrified to dump 200K+ into a down payment for a 1M+ home in the Bay Area.

I guess I just want to poll the crowd — if you were in my financial position, would you feel comfortable taking 30% of your net worth and putting it in Bay Area real estate? Or should I invest that money elsewhere? Another real estate market? The stock market?

I feel like I’ve put my life on hold the past couple years through indecision. It’s time to make a move, just not sure what the move is.

400K TC, 10 YoE

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TOP 18 Comments
  • New / Eng
    lfVl67

    New Eng

    lfVl67
    Most people buying their first home have almost nothing leftover. Having hundreds of thousands after is not remotely financially irresponsible. So you CAN afford it.

    On whether its the ideal investment or not, nobody can say for sure. I would start with The NY Times calculator on rent vs buy projections. Typically, it will always make sense to buy if you’re holding a long enough period. I have a lot more faith in top RE markets than I do equity markets - particularly if Trump loses.
    Dec 4, 2019 2
    • CrunchTime! / R&D
      watabotism

      Go to company page CrunchTime! R&D

      PRE
      Harvard Business Publishing
      watabotism
      I don’t really get your last point, yes equity markets are at high / near record levels but they do tend to do that from time to time.

      More importantly: how in Trump getting re-elected good for those markets? I feel like Wall Street seems to think he’s the best thing for them since sliced bread - but the amount of volatility he’s injected over the past 1-1.5 years is absolutely insane.
      Dec 4, 2019
    • Intel
      zgklodg

      Go to company page Intel

      zgklodg
      I presume he’s assuming TCJA gets reversed and the deduction cap gets lifted. Of course, that probably won’t compensate for the trillions in additional taxes Bernie and Warren are calling for.
      Dec 4, 2019
  • Qualcomm
    libertarin

    Go to company page Qualcomm

    libertarin
    I'm more of afraid of the stock market and of the real estate market. Real estate been pretty slow and sure upward. Stock market is that's a big big crashes.
    Dec 4, 2019 0
  • Salesforce / Eng
    Full-Send

    Go to company page Salesforce Eng

    Full-Send
    Hey OP, current monthly expenses?
    Dec 4, 2019 5
  • Intel / Other
    seabay

    Go to company page Intel Other

    seabay
    For a 1M you only get a townhome in the bay area. Would recommend invest that money in an index fund. You would want to eventually get a bigger place. So you have to evaluate how long you will plan to start on that house.
    Dec 4, 2019 1
    • I agree, ideally I’d spend closer to 1.5-2M to get something more reasonably sized. But then I think about that mortgage and feel like I’d need a much higher base salary to justify it. How do other people do it? I wouldn’t feel comfortable with that mortgage making any less than 300K base.

      Anyway, that’s a hypothetical. I’d want 1M in the bank before throwing down on a house even close to that expensive.
      Dec 4, 2019