My current TC is ~$180k in Seattle. I want to make an offer on a house at ~850k, with 20% down. I will have ~50k left in reserve after the purchase, and the plan is to rent out 3 rooms at ~700/month each, plus part of my room to current long term girlfriend. I plan to stay in the house for at least 5-6 years. It looks like after a lot of forced saving (401k, stock plan, etc.), depending on purchase price, I'll have between $1500 and 2500 month to play with after housing costs based on my salary (Assumes no one is renting at the time). If you include car tax and grocery I'm probably left with $1k-2k a month of spending / checking account savings. Is this too much house? On the one hand, with all of the rentals it's really affordable, and I really dont want to get priced out of Seattle, where I see myself very long term. On the other hand, maybe it's too much risk. I won't die without rentals but I won't be saving much cash outside of 401k and stock purchase plan.
Did you factor in other upcoming one time costs like marriage ? International vacation? Or whatever else you like to spend on ( gifts for family, gadgets, car, travel) if it’s espp or RSU, you can still encash it in case you need more liquidity, Would you rather not invest it in equity for higher returns? Are you saving on taxes due to this mortgage? What is the rent to price ratio ( to consider when you are buying to rent a property) You probably have sufficient reserve and not have to worry about unexpected events
IMO I’d have to know what your monthly debt is and the total debt to income ratio. Other things to consider are local and state laws that are in favor of the renter, risk, cost for evictions, insurance, umbrella policy, taxes on the rental income, vacancy rate etc. don’t forget that now you’re managing the property unless you hire a company.
Don’t forget closing costs either. Those can run up to tens of thousands. Not sure if that’s factored in here.
You must rent because closing cost on a $850k home should be no more than $12k-$15k max (considering all the credits you get back from lender)
I just bought a house and closing costs were $60k, purchased for 1.1, so a little more than 850k. That included things like transfer taxes, attorney fees, appraisal fees, mansion tax.
Thre actual risk you're taking is the uncertainty of real estate market. If the market tanks as in late 2000's, your rental income might change as well as you might not be able to move out in 5-6 years. Everything else looks normal for the first time buyer.
If you can put 20% down, then have some set aside for costs for furniture and new house stuff (trust me - you will buy house stuff!) AND still have 8 months’ worth of emergency fund ($50k in that sense is too low), then you can afford it. Doesn’t look like you have the 8-month requirement (in case you lose your job)
8 months? Even the most conservative financial planners suggest 6.