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
    • Atlassian uQoy85
      OP
      This article is depressing.
      Dec 4, 2019
    • Zendesk gk6Dhj5s
      I struggle to see how lower supply + higher demand = falling prices 🤔

      Also worth noting that people on Blind have been predicting the collapse of real estate prices in the bay area for at least a year, meanwhile it's increased 1.5%.
      Dec 4, 2019
    • Lyft / Eng 1👌1
      1.5% is a small increase compared to last 10 years. Though i agree the article saying that there will be a shortage and yet prices will drop is some galaxy brain shit.
      Dec 4, 2019
    • Microsoft sammam
      This is the new journalism..
      Dec 5, 2019
  • 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

      CrunchTime! R&D

      PRE
      Harvard Business Publishing
      watabotismmore
      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
      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
    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
    Hey OP, current monthly expenses?
    Dec 4, 2019 5
    • Atlassian uQoy85
      OP
      $4600 in rent plus parking, split 60/40 with my partner. Everything else is variable and depends on the month.

      I’m saving ~20% of my salary to my 401(k) with after-tax contributions, and maxing out my Roth IRA. These are non-negotiable. Most stock vests go to savings or investments. Same with annual bonus.

      My lifestyle has definitely seen inflation over the years, but I try to balance that with putting away a steady amount of money each pay period, regardless of whatever else might happen.
      Dec 4, 2019
    • Audible / Eng Jdjel
      Why would you put after tax in 401k instead of some taxable investment account? Are there any other advantages?
      Dec 4, 2019
    • Atlassian uQoy85
      OP
      I have an automatic conversion for after-tax contributions to a Roth 401(k) through my employer’s plan, so it grows tax-free.
      Dec 4, 2019
    • Audible / Eng Jdjel
      Help me understand this op. You say you save ~20% for 401k and the limit is 19.5k, won't the 20% be greater than the limit?
      Dec 4, 2019
    • Atlassian uQoy85
      OP
      ~10% takes me to the $19K limit for direct contributions. The 10% after-tax contributions that are then converted to Roth 401(k) are a backdoor. https://www.nerdwallet.com/blog/investing/mega-backdoor-roths-work/
      Dec 4, 2019
  • 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
    • Atlassian uQoy85
      OP
      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
  • Sunrun bmsr17
    Use the 165k in WF and 150k cash for downpayment. Keep the remaining in cash/low risk for rainy day or investment when market crashes
    Dec 4, 2019 0

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