Redmond/Sammamish is super hot, homes are selling at 15-20% above listing price. Buying home would need 20% down, appraisal gap and additional money in closing. At 1.6m, it will cost be 400-500k cash. I am wondering if I should continue renting for 3.5k for another year and invest cash in market for 10-20% return. Housing may stabilise after an year, once people return to office. Thoughts? TC: 320k Networth: 1.7m Age: 44 Two kids are in highschool, need money to fund their College education.
No, way smarter to bet your whole life saving on a single property bought at top of market cycle
I also worry peaked housing market. But will this ever settle here in Redmond/sammamish?
100% I’m convinced. People panic bought homes in the last months which resulted in stupid price increases. The huge inflation that buyers were expecting isn’t there. And will not be there. Prices will correct
Tough situation… paying someone else’s mortgage at $42k per year kinda stinks. IMO you need to think about the long game and need to stay in the house for 8-10 years to get a return on your investment.
Let’s be clear here. Buying a home relying only on asset appreciation to make any money is 100% speculation. A house to live in is not an investment. You might get lucky and it appreciates but it’s not a given. So in 8-10 years maybe it’s worth the same. And you paid interest insurance and property tax. That’s negative return. It’s full speculation. If you want a home to live you buy one. But don’t think about it as an investment
So you recommend paying someone’s mortgage? What if you purchase a place, live in it for 10 years and then rent it for 10-20? Trying to understand if your opinion is to continue renting forever or wait and hope the market goes down?
I would choose to rent. There’s this 3-1-1 rule where 5% of property value goes towards usual annual expenses (loan interest, maintenance, property tax, HOA, etc.). That’s 80k for a year in the ballpark for $1.6M Your rent is 42k a year. If you’re strictly looking for growth, you can invest the extra money into a variety of stocks or other investments that helps you diversify instead of fixing on one single property. I would only look at buying a property if I want to keep my investment safe against the inflation, not for hoping a higher return when I sell it.
In addition to financial factors, consider the fact that both your kids will be out of your house in a 2-4 years and your requirements related to property size and location may change.
Btw, can you downsize since your kids are almost in college? Townhome??
But they will come back for summers. Downsize once they have job and settled
3 bedroom townhome? College students hang out with their friends in the summer :). Anyways why did you wait so long to buy something?
Question makes no sense, either you are ready to buy a house or not - means you have cash for downpayment, afford higher mortgage than rent and additional maintenance that comes with owning a house. If not just rent. The part that truly confuses me with the question is the implicit assumption that you are buying house at peak, well stock market is at all time high so good luck timing these to perfection.
I am not able to understand first part of your comment. By peak I mean the peak for next 5-7 years
Question is fine, it simply asks whether op should rent vs own a house. You can afford a house and still choose to rent instead. You can’t really compare peak of housing market and peak of stock market. You can dollar average stock market even at the peak. I have never heard of dollar averaging housing market. Hence, there will be hesitation of committing a large amount.
If this is your 15 year gone , get it. But plan if you are really going to work atleast next 10 years
If I were in your shoes I would buy something cheaper, maybe in a different locations.
Since your kids are so close to college - it’s better to rent a nice stable home for the next couple of years and once they are out get a 3 bd townhome or condo somewhere. They will visit you only on holidays - there is no need to maintain a huge house for that. At 44 - you don’t have a big time horizon for retirement so you should optimize for savings and a paid off home.
This is classical American thinking which no longer holds true. Plenty of young college grads stay at home to save $$$$$$ for that down payment. Another new trend is even kids have their own houses near by,they will still be dropping in casually with grandkids. This is especially true for immigrant families where the grandparents enjoy watching grandkids. Do not waste another quarter million renting, buy a nice spacious house, ~1.2M in kenmore/ Bothell.
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You’re missing some details. You don’t mention whether you have the cash for a down payment or not. How much is in stock? Is it long term capital gains or not?
I have 350k in cash