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Mid 20s single male, 300k TC, ~1.1m NW (250k retirement accounts, 800k tech stocks/ETFs, 70k cash, 20k crypto). I don't mind continuing to rent because I like the low overhead and I'm making decent gains on investments. But it would be nice to have a permanent place, and to grab property in an attractive location before it's all gone/priced out. Ideally I'd be living in the house with friends as roommates/tenants. Job is fully remote so I can move anywhere in the US, but targeting Seattle or Austin. Are these still good locations to buy right now? Feels bad not having bought a year or two ago. I don't foresee prices falling though. Does $1m sound reasonable? That would mean I'd have to sell about $130k of stock to pay for the down payment, which feels bad (paying taxes). How do people normally liquidate for a down payment?
Seattle less income taxes to pay for.
Not true; Seattle has all sorts of payroll taxes charged to employee in place of income tax. Texas doesn't have anything extra than the fed deductions.
Texas has really high property taxes
Buy where you want to live?? Home ownership only is smart in a market where the price goes up by >12%/year, otherwise you'll make more money in other ways. Renting doesn't allow you to really invest in where you live, have a sense of community greater than your lease, stability for your children, etc. These things are actually worth a lot of money, and you should try living where you'd like to be.
Appreciation or not, it's always sensible to diversify. Stocks can vaporize, real estate doesn't.
Most people are highly leveraged in housing, especially in the first few years. So a 3% gain on a 20% down payment gets you almost 15% return!
Housing is nuts right now everywhere. Buy where you want to live for 5+ years or just rent
Wait for prices to reduce, you are still young. Enjoy the freedom of renting and being able to move with no attachments.
Will prices ever reduce though?
Exactly. Look at a historic graph of housing prices in high demand areas. Even in 2009, bay area prices just held still for 3 years and that was literally a recession brought about by a real estate bubble.
How did you accumulate so much NW in your mid 20s? I assume you only worked 3-4 years?
Close to 5 YoE, mostly luck and living frugally. Company stock grew 5x and I didn't sell. Also hopped for TC increase.
Oh, company stock growing 5x def explains it lmao
$1M NW with 5 yoe! You can buy a $3M property in another 5 years!!
If you want a decent house in Bay Area or Seattle now a days, you need 3M.
@MSFT Are you talking about Seattle proper? Certain east side and north side suburbs within 30-45 min commute are under 1 million for 4 bd 3 ba houses. Defs doable if one manages their expectations. Obviously if you want a Magnolia/Ballard house with a water view then you’re paying 2mil+
To avoid paying taxes you could get a margin loan to fund the down payment. (Borrow against your stocks). Then pay back the loan from your W2.
👌
How much is the interest rate for margin loan? Is it lower than home mortgage interest rate?
Get a 10% down jumbo loan: Quicken/UWM. And get a margin loan against your stock for the rest. Then you don’t have to sell any stock.
Why a 10% jumbo vs going the normal route of a 20% conforming loan?
In the current rate environment, it is cheap to take on higher leverage and invest the rest. As long as you can qualify and afford the payment.
Keep renting a luxury apartment or rent a good house till at least housing stabilizes.
Till inflation eats money
I would say keep renting until demand for real estate comes down as it is at an all time high. In terms of down payment, if you are comfortable with it you could take out margin from your tech stocks. This way you don’t pay capital gains, get to keep your stocks, and get a low interest on margin while at the same time increasing your net worth with the home purchase. If not, you could use this time to accumulate your stocks (sell when you get them so you don’t have cap gains) and store as cash in a money market. When you have enough for a down payment the housing market might be lower allowing you to buy at bargain prices. Truth is no one knows what will happen in markers. So make a decision that aligns with your values. If you’re ready to buy then don’t listen to me, just sell your stocks, buy your home and be happy.
Interesting, didn't realize I could use margin like that. Waiting for more stock sounds safer though.
Timing the market is always good advice 😅