Married couple here, no kids, early 30s, plan to have at least one kid in a year or so (maybe one more in future).
TC: $425K/annum, good credit score (750+).
Home budget: $800-850K
We are thinking about buying a condo in MTV/Sunnyvale area or in San Mateo county (husband works in the city, wife works in the South Bay (SFH is out of the question for that budget).
Note, we plan to buy and live in the house for the next 6 years. We don't know what we would want to do or where we would want to live after 6 years.
Let's take this particular house as an example: https://www.zillow.com/homedetails/2255-Showers-Dr-APT-184-Mountain-View-CA-94040/19510850_zpid/
Assuming it goes for the listed price, Zillow's mortgage calculator shows monthly costs to be ~$4K with ~25% down (we have that handy).
It would cost almost the same to rent a 2Br1Bed apartment.
So, why not buy the house?
1. We are breaking even on rent vs monthly payments.
2. It would allow us to raise the first kid and accommodate visits of the other family members.
3. Even with 1% annual appreciate, if we sell it after 6 years, we would break even (as 5-6% seller agent's fees would need to be paid).
4. We are aware of SALT deduction cap, so we are not even factoring those calculations in.
5. While alternatively the 25% downpayment money could be parked elsewhere and a higher return could be earned (Vanguard, etc.), frankly at this stage with an incoming kid, the convenience and peace of mind that we would at worst be breaking even short and long term is worth paying 25% downpayment upfront. I think 1% annual appreciatation for the next 6 years is probably not a bad assumption to make.
Let us know if we are missing any crucial points.
Thanks, Blind community!
- Microsoft RIFrafmoreYou don’t buy a house to sell it, you buy to hold and rent to residual income as it appreciates over decades - that’s what you do if you know what you’re doing. Even if you move out of state property managers are cheap, everything is online these days.. build an empire.
- Cisco ipf$4k rent for 2Br? Where are you renting ? If in Sunnyvale or Mountain View , you can get decent 2Br for <2500 . You just need to search at right places
- Dude I bought a home in 2010 thinking the worst was over and then took 100k market correction - so I was like ohfffffuuuuuu but now 10 years later it rebounded really well and I’m over 100k over what I paid - ultimately property goes up. I’ve been renting the damn house the past 5 years at a profit too, so I know it’s daunting but if you do it smart you can’t lose w real estate.
- Qualcomm libertarinIf your total compensation is 425k, why aren't you buying a 2 million house? No homeowners fees on a house
- Netflix retired19moreI wouldn't buy that small place specially with plans to have kid. That is a 899 sq feet apt, I pay $3500 for a 1600 sq foot SFH that I have been renting for 3 years now. For $4k a month, you can rent a good SFH.
Few things to consider,
1. With downturn in sight, having that 25% in cash will provide you great investment opportunities - both in equity and real estate.
2. If you're selling during downturn, consider the cost of property being empty for 5-6 months.
3. In my own personal experience, kids love in SFH much more than in apartments/condos as they can run around in the backyard.
4. You didn't seem to include maintenance cost at all, it can run you down $500 a month easily (over 6 years of owning).
- Would you be okay with the house depreciating if the market were to take a hit? It's been going up since 2008 and only recently started to plateau, but where it goes from here is anyone's guess...
- Voya / Finance Blind867moreBesides the fact that you should buy
Your calculations are off. Your monthly mortgage payment includes principal, so calculate your equity you're paying yourself in your breakeven as well. It's actually 3 years if you have 1% growth because each payment (assuming 600k loan @ 3.75) you're getting 903/mo towards principal.
Also in your calculations verify tax (zillows calc is usually off) and maybe run a condo quote just to know a good estimate for insurance (condo is usually cheap).
If rent and mortgage are equal you're ahead because of that principal payment, and if you can one day rent out higher than your payment thats great too.
Additionally check with multiple financing companies and see if you can put down 20 and what mortgage ins looks like if you out less. For our recent purchase it was only 35/mo to put down 15 rather than 20, and that 5 will earn better at market rate.