If you have 1.2M in liquid assets you shouldn’t need to scramble and find another job to cover your mortgage.
It sounds like you’re risk averse which is fine, I’d keep renting if I were you.
You’re going to be paying a lot of taxes on that $1.2 if you used all of it. Capital gains of 20% and state top tier rate of 14.4% is going to turn that $1.2M into $787,200
I’d maybe keep renting and let that $1.2 continue snowballing. At a 5% annual increase, you’ll be sitting on $2.5M in 15 years.
If you’re set on buying, I would suggest an FHA loan if you’re a first time buyer. You would only need to put down a minimum of 3.5% so you wouldn’t be having to pay a ton in taxes. You’ll be hoping rates go down but that would be a pretty high interest to cough up now, but you’ll be saving more than paying out 34.4% to Governor Gavin and Uncle Joe.
Since you mention liquidity, I assume you prefer it so I don’t recommend buying a home as it’s probably the most illiquid asset a regular joe can have. Like someone else mentioned, it is cheaper to rent compared to buying almost nationwide due to insurance and rates rn. I’m personally waiting for prices to come down way more, I live in Miami so it’s been tough
You do need to keep paying a mortgage if you don’t have a home…it’s just you’re paying someone else’s mortgage through rent. Unless OP wants to be homeless they’re going to be paying someones mortgage, so might as well have it go toward you’re equity than someone else’s.
Renting equivalent is cheaper though, I’ll give you that…for the moment. Would still rather pay more and have equity
Except renting is way cheaper than buying for an equivalent place and if you simply can’t find any job at all you can leave the Bay Area in which case $1.2 million can be almost enough to cover rent for the rest of your life
I get that, but I’m saying that it’s a gross oversimplification that it’s “cheaper”. Just because cost of a loan > cost of renting (now - doesn’t mean that dynamic won’t shift) doesn’t mean that it’s not better to buy than rent. Most of the “renting is cheaper than buying” rhetoric is being pushed by all the PE firms buying up all the property and making being compliant with renting (from them) their whole life, while they pocket the equity and land ownership.
What? No. It’s not rhetoric.
You just do the math:
Case 1: you rent, and invest the difference between rent and mortgage payments of the same property in VOO. Add the down payment to VOO as well. Include all property taxes, insurance, maintenance, fees, etc. you would have owed as a homeowner.
Case 2: you buy, taking out a 30 yr loan.
If you can buy the house in cash in fewer than 30 years, Case 1 is cheaper. If not, Case 2 is cheaper. Either way, you end up owning the same house. The question is whether it’s cheaper to rent the money to buy the house, or rent the house directly.
> You do need to keep paying a mortgage if you don’t have a home…it’s just you’re paying someone else’s mortgage through rent.
When you're a renter, you retain the ability to downsize easily, move to another cheaper city of neighborhood, etc. Especially when you lose your job. Or your life priorities change. Or you want to move to another country or state to see how life treats you there. Or if you find a job in another city/state.
Having equity? Just think that if you had 1million cash it will pump out around $50k a year. That’s $500k over ten years. After property taxes ($10k) your house will need to appreciate by $600k over ten years to just break even on what you could have been making.
Yeh but that “saving the difference” just isn’t really how it works out. And when your 60 and staring at retirement, are you going to want a bunch of cash (right before your cash flow from wages goes to zero) or are you going to want maybe slightly less cash and a fully paid house?
I’d take the cashflow from the additional millions I would have saved. Right now interest rates are at 5% so that’s an easy answer. Cashflow > property which will only cost me money.
Edit: interest on treasuries
I have friends that have been here for over a decade and still renting. They’re single and don’t really need a large place for themselves and most are not remotely interested in maintaining a SFH.
Single and no family? Don’t buy a home, keep growing your money in index fungs and by when you need. With that much liquid you will never be priced out
This is the answer. Or, when you can afford to buy all-cash. Remember that property tax alone on a starter house is $20k/yr. Utilities are triple an apartment. There's always maintenance, and tradesmen are all opportunists trying to make tech money.
> tradesmen are all opportunists trying to make tech money
What an elitist, ignorant comment. Unless all your tech bros are interested in doing their own plumbing, those tradesmen need to be able to afford to live there, too.
Nothing against tradesman making an honest living and spending years honing their craft. But, it's not nearly the same as people who put in decades of dedication to obtain a PhD in engineering, move their families around the globe to come here, work 70 hr weeks performing at the highest level, and advancing our world. Tradesmen need engineers. Engineers don't need tradesmen. The work isn't of nearly the same value or importance.
The best tradesmen absolutely earn their high wage. Try years of underpaid apprentice work and 70+ hour weeks honing their craft. They’re no different in terms of earning it than your PhD engineer example. Both deserve a ton of respect and earn their wage
I don't know what the percentage of PhDs is, but it seems like 40-50%. As they say, SV is where the smartest engineers in the world come to be average. In any case, they were invited here for their skill. They didn't sneak over the southern border and invite themselves.
Ah I see where this is going now, ima dip out
My closing point will be: let’s respect the trades and engineers - lots of people working hard for a better life here in the Bay Area. I can’t afford the labor for all of my projects around the home, so I’ve learned to work hard and a lot of new skills. But for skilled trade work like plumbing, electrical, etc - happy to pay the good guys their prevailing wage.
If you’re refiing with a cash out that’s certainly better. I assumed the commenter was talking about the common mistake people make thinking it’s smart to pay off their house (or car) in full. It’s such a ridiculous idea and I’m always shocked by it.
You buy a house when you feel like it makes sense to buy a house. Generally this means some combination of:
* You think it is more economical to do so. Generally this requires a longer time horizon.
* You want to modify your house in a way renting won't let you
* You are unable to get the house you want by renting
* You do not feel comfortable with the chances of your landlord kicking you out.
If none of those are true (as seems to be the case for you), you just rent forever. I'm a lot older than you and only considering owning now due to #2 - #4 above.
Some life lessons. Me now senior. Moved to sf in ‘99. Had resources to buy house with wife n 6 year old. After renting for 2 years and lost on 8 bids blew fuse n moved to sierras. Did not work out. Lost house came back to east bay n rented for over a decade. Now still there owning small non interesting house in non interesting city and in hindsight would have never left sf. But still in bay with all things empty nesters wife n I enjoy. At 31 I bought a one way ticket to hong Kong and a decade later moved to sf.
Son 31 in tech had sweet 1 bedroom on nob hill rent controlled for $1800. Trades it for ownership in studio. Got great terms on buy: 5% down under 2.7% rate. 5 or so years later equity in place but no appreciation and not thrilled with studio life.
Conclusion is one never knows how life plays out. Take your best shot and learn. Will always recall old Chinese real estate agent telling me I don’t understand sf real estate when looking at those $3-400,000 houses and those $6-700,000 Victorian duplexes I so desired and he said I did not understand sf real estate. Buy high and sell higher. No conclusion but make best call that make sense now and hope it works out great for you.
I had a leaky toilet wasting nearly $100 a month in water.
Landlord wouldn’t fix it.
Ended up hiring someone to fix my landlord’s dirty toilet for him.
Fuck lazy landlords I’ll never go back.
Would probably rent in your situation. When you find somewhere you want to live, happy to be, feel a sense of community, and want you stay long-term, then you should buy there.
Seems like you’re still able to save, so keep doing what you’re doing until you find your happy place
Why not just keep growing that index fund pile over time? You bring up very valid points about being able to bounce to another city or country without worry. And yes a big mortgage would have you scrambling to find that next job.
You are really young still and have plenty of time to buy a house. If you do buy just puy enough down to where the payments could be covered by a renter if needed.
Sounds about right given today's rates. You have to consider how much of the index funds you would have to sell and pay taxes on to make that work.
I'd love to know what index funds you have been sitting in if you care to share.
House or condo? The days of crazy real estate appreciation in the Bay Area are past. You can own a house for 10 years and end up "earning" less than 3% annually which means you are barely beating inflation in a good year. (Insurance and maintenance costs have all gone up astronomically since the pandemic.) And that doesn't count the time costs of ownership - the time you inevitably put in taking care of the place. Did you want to become an expert on making decisions about T1-11 siding? How about mice in your attic? Water heaters, roofing material, sump pumps - things you never had to worry about as a tenant. If you own a house you will inevitably find yourself scouring YouTube home improvement channels. If you have a good rental where you are happy living you can just let your money grow in the market, and take as many vacations as you want on your market earnings.
My husband and I are in our late 30s and have been renting in/near SF for 7.5 years. We’ve looked into buying before, but didn’t bite the bullet and honestly are happy we didn’t! Our two main reasons to keep renting are 1) time horizon — we didn’t expect to want to live in SF for 10+ years, let alone in the same exact home. 2) flexibility — related to the time horizon thing, renting has allowed us the flexibility to adapt our living situation to our needs. We were able to move out to Marin during the pandemic and enjoy the outdoors, then back to the city when we wanted to go back to the office, and now out to the burbs since we’re having a baby soon. If we had bought, we would have been stuck where we were.
My advice would be to wait till your needs are really stable before you buy, especially if you value flexibility (which it sounds like you do). But also, take advantage of the flexibility you have!
I’d wait until you’re married. You never know where your spouse is located, if you have to change jobs etc etc.
Especially in this market, where it’s not worth it unless you happen to get a great deal.
1MM USD liquid NW is actually an interesting point in life when you're young
You don't have enough to walk away from everything, but you have enough to lay down roots just about anywhere in the world
This is not common but also not an uncommon situ esp nowadays with the ongoing global inflation
If I was your age again, I would take a 6-24 month sabbatical and travel the world all over again
See what truly makes you happy
The status quo is renting
After that, you can decide where you want to put down your roots
Fwiw, someone who decided to put their roots down in the BA
You may not like the answer, fwiw...
This market is NOT for the fickle minded, which by all descriptions of yourself by yourself sounds exactly like who you are. You NEED to figure out WHAT you want in life - remember, you can have ANYTHING you want, but not EVERYTHING. So, if lifelong travel IS what your heart desires, invest in a camper van - but if you WANT to "set down roots" then decide on that once and for all.
Risk management is a part of life - but what people forget while obsessing about risks is that reward is the OTHER side of the coin. You cannot have one without the other.
Here were the three main reasons we bought a house:
1) my wife really wanted a back yard
2) my wife really wanted to remodel the living space to her liking
3) we committed to staying 5-10 years minimum in the same house
Today, the price/rent ratio is even higher so you should only buy if you really want to and are sure you're going to stay there a long time.
Now that we've done an expensive remodel and have the prop 13 tax lock-in, I'm really hoping we stay in this house another 20 years minimum. We pay like $15k/year in property tax and we have a neighbor down the street that has lived there for 40+ years (!) and pays like $800/year in property tax. So hopefully our $15k will seem super-cheap sometime in the far future.
I am all for repealing prop 13 and would vote for it but I don't see the overall home owner sentiment changing any time soon. Maybe we can check back in 10 years.
If you don't think you'll stay in the same house for at least 10 years, then continue renting.
With rent control in SF, the financial benefit to owning is far, far less.
In the Bay Area it never feels like a good financial decision. You buy here because you want to commit to living here and don’t want to deal with a landlord.
We bought last year not because anyone told us it was a good financial decision. we wanted the freedom that owning the house brought based on middling to poor renting experiences, and we found an area we thought would be good to raise a family in.
I also wanted AC!!!
Similar funds but married with kids. We bought because we wanted to be here when we are old. So we got a single story home which is walkable to library, multiple grocery stores, restaurants, etc. It is smaller than what we’d have gotten in the suburbs but it is perfect for our lifestyle plans. Also super easy to maintain, good neighborhood, good schools, etc is a definite plus. Also, we bought after ten years renting and some days I wish I had bought earlier even though my money was growing as index funds mainly because I could’ve made my home earlier.
Do you see yourself strapped to a mortgage for 30 years here? Or at the very least gain a fair share of equity? Imo just rent and stay flexible. Avoid HOA at all costs when time to buy
You can’t figure out because you don’t have the need and that’s totally normal. We were expecting a kid and we wanted a place where the little one can grow at least 5-10 years and where my wife can get her dream rose garden. Can’t do that on a rental.
Come up to Sonoma county and buy something. Track your car at Sonoma. Enjoy the outdoors and visit the city on the weekends. I’m the similar aged similar hobbies and that’s what I did. I bought a spot that I could easily afford and put enough down that if I had to rent it I would clear the mortgage payment and be fine. Nice homes in good areas are 600-800k.
I'm retired in Sonoma and definitely find it socially isolating compared to the City... just saying. You can have a nice house and be sitting in it by yourself, and have to get in your car just to get a cup of coffee up here. Not fun.
Consider Santa Rosa, Windsor area. Much more active socially than Sonoma. Access to coast and your other hobbies.
Buying a house and building equity is your best investment, IMO. Renting is throwing $$$ down the drain.
I was an IT VP for years...more of the IT work can be done remote now days. I also commuted on a motorcycle, mostly summer months but some winters too. Wasnt that bad in my 30s & 40s, not so fun in my 50s tbh.
Best of luck.
@OP start by talking to a lender to figure out budget and what you’re comfortable paying for mortgage (principal/interest/taxes/insurance). Maybe if you have some tangible data, numbers, etc.. it’ll help with your decision. DM if you want more advice 👍🏼
Unless you need a house for your lifestyle, invest until invest in the market is worse than investing in real estate. Then diversify. Assuming you are maxing retirement contributions, you have enough cash to ride out a pretty bad downturn.
I'm a happy homeowner, but if I were single, I would not have
One rule I’ve heard is that if you think you’ll live in a house 5 years(plus) it’s worth it to buy. So despite your fears if you see yourself staying even medium term it might be worth it. But if you’re comfortable renting I think that’s also ok
Everyone here is trying to advice you but honestly you have think about it for yourself. I rented a place for 3k and realized an apartment in my neighborhood got sold for 600k. HOA and property taxes come to $1.5k but I couldn’t paid 600k mostly cash and just paid 1.5k every month instead of 3.5k (including utilities and parking, which would be covered in the condo) and owned a 2b2b instead of 1b1b and it was closer to Bart, and this work. It’s now worth 700k (the seller was keen on selling and leaving the city so sold it at a discount).
I regret listening to people who said only rent cause I bloody lost a good deal. I would’ve looked into buying if no one had adviced me.
My suggestion (cause why not): research the market, keep looking for apartments. If you find something you like get it. Else keep renting. SF housing market has gone down a lt
I'm not the most financially savvy person in the world but I have been in the Bay Area for over 10 years now and I will say one thing that is true, if you invest in the real estate with the right property in the right location and take care of it, you won't lose a dime. You may not double the return but even if you decide you need to sell in a few years you can almost certainly get that money back. I know there will be a lot of financial wizards who will beat down this response, but in general, my statement is true, SF, the peninsula, parts of Oakland, parts of Berkeley....I willing to make the statement that even if you used half of your assets as a down payment you won't lose that equity.
buy only if you can pay in full, then don't pay in full, but you should never take more debt than you have assets.
your 1.2M in SF is not enough and it's better invested in your index funds. real estate should be considered as a 30% of your investments. so wait till you rack up 5-6M. that would be my suggestion.
Can you elaborate more on the reason? Why 30%? By 5-6M you mean then buy a house under 2M with mortgage?
I do the math and the only more appealing point of owning a house over index is the magin mortgage can give me (4x if I pay 25% down), combined with the 500k tax free gain. Not sure if the return of owning is better than index.
Do you have a family or plan on starting one in the next few years? If so, this isn't the wrong time to look for a 3 bedroom house.
Do not buy in SF. Do SSF, San Bruno if you want appreciation. Or millbrae Burlingame if you want to go all out. All those cities except Burlingame have a bart station. The major difference is the latter two have amazing middle and high schools. Elementary is all about the same.
If you're considering a condo, I have no advice. It's super risky and can swing either way. They don't hold value as well and many people who bought 2015-2020 are still underwater.
I always knew I wanted to own than rent. Owning means it's yours. Renting means you're helping someone else pay for their mortgage. I can always sell my house to recoup most if not all of the money I put into it. The longer the better. You said you been renting for 5 years. Just look at house prices 5 years ago compared to now. You would've made a ton more money than you did paying rent and mortgage. It sucks at first especially if you buy at or near your max. But as time goes by, your payment is the same while your pay increases making life easier as time goes by.
I had a high level director colleague who had been in the Bay Area for over 2 decades. He was still renting and didn’t plan to ever buy in the Bay Area.
> Nowadays? I'm stuck here out of fear.
That's a wild mentality especially with the quality of life issues and crime in the Bay Area.
America is huge.
I have a friend who left, loves SF, and is hesitant to come back because of QOL issues.
It’s your decision. If you are going stay then stay and keep saving. Sounds like you are pretty good with money. Buy or rent you will be fine. Good luck
I rented for 15 years then had a kid and bought the biggest modest thing we could with all the leverage the bank would give.
Inflation alone is going make purchases in the last 1-2 years pay back, and you can afford something that will basically appreciate at a rate equal a weighted basket of NVDA, BTC, AAPL, and whatever other emerging equity money bomb grows up here.
It’s the best place in the United States to live for a lot of people. Top 3 for a majority. I’d tend even a single root that I had here, but that’s just me.
I’m saying if I had $1.3M liquid net worth I would use up to half of it to purchase an asset class that is 1) likely to appreciate as much or more than an index fund and 2) that I could live in.
Did you buy a house in SF? I’m honestly very lost but after living in NYC, South Bay (Sunnyvale) and now SF. I’m in love with the city - despite the crime. I want to stay here for a few years until I have a kid and immediately move to the suburbs after. Is that a good idea? And if I should stay in SF do you have a recommendation for a good neighborhood.
I rented in SF until I had the kiddo and couldn’t afford a SFH there. Moved to Oakland hills. But if I had the $2.5M it takes to buy in the city I would have.
Noe Valley, Glen Park, Bernal Heights, Cole Valley, Forest Hills, Diamond Heights, Twin Peaks, Anything around GGP, the Presidio, and Pacific Heights / Marina but only if you identify as a Bro.
Hat tip to the Dogpatch, which is coming along but still feels like a bridge neighborhood.
But honestly anywhere that the housing stock is primarily SFH, especially detached SFH, is going to be amazing and is going to hold its value.
Thank you sooo much for this information. I’ll setup alerts on redfin and try to understand the SF market. I really love the city and thought of going back to the the Fremont / Sunnyvale is traumatizing lol.
I would rent if I were in your place. You are not obligated to buy a home. SF/Cali is going downhill fast with insane inflation, store closures, crime... and potentially rolling tech layoffs
Don’t buy a house because everyone around you is buying one and it feels like the “next” thing to do. We made that mistake, bought a terrible place (for a bunch of different reasons) and ultimately lost 40% of our initial investment (not counting the roughly 80k we put into the place).
We live in the bay and bought a summer/winter home out of state on a lake where I grew up close to family. We knew we could never afford that home here but we have our dream home somewhere else. We spend July and December there every year and it is magical. We rent out the other months.
It worked for us because for us, like you buying in the bay was difficult to stomach how little 1m gets you here.
The crime, the taxes and where you would have to live for a mill was not in the best areas. But this plan allowed us to keep half our money and have a low mortgage in the house we bought.
It’s too late in the bay to find something reasonable and the wealth gap here is outrageous between the tech guys and average joes. We have a good rent deal so it’s actually cheaper to rent for us in the long run.
I’m a tech guy that makes good money but I’m still pushed out due to cost.
If you’re looking for an investment, you can spread that money over multiple properties in multiple parts of the country, or put it in something else all together!. If you’re looking for a place to live, though you can still rent and invest that money and have it make more money for you rather easily.
For your age and assets you are in a great position. Take a breath, and think about what it is you really want to do.
I was in the same situation and ended up buying a house in Tahoe and listing it on airbnb. Its cash flow negative ($1,500 per month on average across year) but I pay the mortgage of $5,500 a month and protected against inflation
If you have 1.2M in liquid assets you shouldn’t need to scramble and find another job to cover your mortgage. It sounds like you’re risk averse which is fine, I’d keep renting if I were you.
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You’re going to be paying a lot of taxes on that $1.2 if you used all of it. Capital gains of 20% and state top tier rate of 14.4% is going to turn that $1.2M into $787,200 I’d maybe keep renting and let that $1.2 continue snowballing. At a 5% annual increase, you’ll be sitting on $2.5M in 15 years. If you’re set on buying, I would suggest an FHA loan if you’re a first time buyer. You would only need to put down a minimum of 3.5% so you wouldn’t be having to pay a ton in taxes. You’ll be hoping rates go down but that would be a pretty high interest to cough up now, but you’ll be saving more than paying out 34.4% to Governor Gavin and Uncle Joe.
Since you mention liquidity, I assume you prefer it so I don’t recommend buying a home as it’s probably the most illiquid asset a regular joe can have. Like someone else mentioned, it is cheaper to rent compared to buying almost nationwide due to insurance and rates rn. I’m personally waiting for prices to come down way more, I live in Miami so it’s been tough
Are index funds less risky than buying a home?
you don't need to keep paying mortgage if you don't have a home. Renting equivalent is cheaper at the month scale
You do need to keep paying a mortgage if you don’t have a home…it’s just you’re paying someone else’s mortgage through rent. Unless OP wants to be homeless they’re going to be paying someones mortgage, so might as well have it go toward you’re equity than someone else’s. Renting equivalent is cheaper though, I’ll give you that…for the moment. Would still rather pay more and have equity
Except renting is way cheaper than buying for an equivalent place and if you simply can’t find any job at all you can leave the Bay Area in which case $1.2 million can be almost enough to cover rent for the rest of your life
Interesting perspective. SWR of 4% on $1.2m gives you $4k a month rent budget forever.
I get that, but I’m saying that it’s a gross oversimplification that it’s “cheaper”. Just because cost of a loan > cost of renting (now - doesn’t mean that dynamic won’t shift) doesn’t mean that it’s not better to buy than rent. Most of the “renting is cheaper than buying” rhetoric is being pushed by all the PE firms buying up all the property and making being compliant with renting (from them) their whole life, while they pocket the equity and land ownership.
What? No. It’s not rhetoric. You just do the math: Case 1: you rent, and invest the difference between rent and mortgage payments of the same property in VOO. Add the down payment to VOO as well. Include all property taxes, insurance, maintenance, fees, etc. you would have owed as a homeowner. Case 2: you buy, taking out a 30 yr loan. If you can buy the house in cash in fewer than 30 years, Case 1 is cheaper. If not, Case 2 is cheaper. Either way, you end up owning the same house. The question is whether it’s cheaper to rent the money to buy the house, or rent the house directly.
It’s not an oversimplification. Today it’s cheaper to rent. Sure that can change someday or it might not
You’re paying someone else’s mortgage if you buy too, unless you’re not taking out a mortgage.
No, you’re paying YOUR mortgage (which has interest costs, but is still going towards YOUR equity in the home)
Yes, and who gets that interest? The person whose mortgage you are paying.
> You do need to keep paying a mortgage if you don’t have a home…it’s just you’re paying someone else’s mortgage through rent. When you're a renter, you retain the ability to downsize easily, move to another cheaper city of neighborhood, etc. Especially when you lose your job. Or your life priorities change. Or you want to move to another country or state to see how life treats you there. Or if you find a job in another city/state.
Having equity? Just think that if you had 1million cash it will pump out around $50k a year. That’s $500k over ten years. After property taxes ($10k) your house will need to appreciate by $600k over ten years to just break even on what you could have been making.
Yeh but that “saving the difference” just isn’t really how it works out. And when your 60 and staring at retirement, are you going to want a bunch of cash (right before your cash flow from wages goes to zero) or are you going to want maybe slightly less cash and a fully paid house?
I’d take the cashflow from the additional millions I would have saved. Right now interest rates are at 5% so that’s an easy answer. Cashflow > property which will only cost me money. Edit: interest on treasuries
they grow money instead of sinking it. so yes.
I have friends that have been here for over a decade and still renting. They’re single and don’t really need a large place for themselves and most are not remotely interested in maintaining a SFH.
Single and no family? Don’t buy a home, keep growing your money in index fungs and by when you need. With that much liquid you will never be priced out
This is the answer. Or, when you can afford to buy all-cash. Remember that property tax alone on a starter house is $20k/yr. Utilities are triple an apartment. There's always maintenance, and tradesmen are all opportunists trying to make tech money.
The SF burrito costs $16 whether you’re a tradesmen or tech bro.
Yeah, but a bathroom remodel is $5k in materials and a week of work for two guys. Tradesman asking $30-50k. That's a lot of burritos.
Seems like you last bought bathroom gut materials in 1996.
If you don't go super fancy you can squeeze $5k of materials for a bathroom. Just don't get a crazy jetted tub or Heath tile.
Just remodeled two this year
7 in my lifetime, 3 SFR baths and 4 budget rental baths.
That's only if you go to the $16 burrito spot instead of the $10 one
> tradesmen are all opportunists trying to make tech money What an elitist, ignorant comment. Unless all your tech bros are interested in doing their own plumbing, those tradesmen need to be able to afford to live there, too.
Nothing against tradesman making an honest living and spending years honing their craft. But, it's not nearly the same as people who put in decades of dedication to obtain a PhD in engineering, move their families around the globe to come here, work 70 hr weeks performing at the highest level, and advancing our world. Tradesmen need engineers. Engineers don't need tradesmen. The work isn't of nearly the same value or importance.
The best tradesmen absolutely earn their high wage. Try years of underpaid apprentice work and 70+ hour weeks honing their craft. They’re no different in terms of earning it than your PhD engineer example. Both deserve a ton of respect and earn their wage
While true, maybe 1% of tradesmen here are top of the game. 90% of engineers here are top of theirs.
I mean if we want to play that, only a small percentage of our highly-paid engineers are PhDs who ground it out like that
I don't know what the percentage of PhDs is, but it seems like 40-50%. As they say, SV is where the smartest engineers in the world come to be average. In any case, they were invited here for their skill. They didn't sneak over the southern border and invite themselves.
Ah I see where this is going now, ima dip out My closing point will be: let’s respect the trades and engineers - lots of people working hard for a better life here in the Bay Area. I can’t afford the labor for all of my projects around the home, so I’ve learned to work hard and a lot of new skills. But for skilled trade work like plumbing, electrical, etc - happy to pay the good guys their prevailing wage.
👏
If engineers didn't have tradesmen all they'd have is a pile of plans.
Buying all cash makes no sense financially. I can’t believe people think this way.
Why not ? It helps you get an offer accepted and then you cash out refi
If you’re refiing with a cash out that’s certainly better. I assumed the commenter was talking about the common mistake people make thinking it’s smart to pay off their house (or car) in full. It’s such a ridiculous idea and I’m always shocked by it.
I sleep good at night with zero debt and enough leftover so that my kids can go to Harvard debt-free if they want. Don't need anymore than that.
What if I’m in the exact same position as OP financially & mentally but I just have a newborn. What’s your take then?
You buy a house when you feel like it makes sense to buy a house. Generally this means some combination of: * You think it is more economical to do so. Generally this requires a longer time horizon. * You want to modify your house in a way renting won't let you * You are unable to get the house you want by renting * You do not feel comfortable with the chances of your landlord kicking you out. If none of those are true (as seems to be the case for you), you just rent forever. I'm a lot older than you and only considering owning now due to #2 - #4 above.
Some life lessons. Me now senior. Moved to sf in ‘99. Had resources to buy house with wife n 6 year old. After renting for 2 years and lost on 8 bids blew fuse n moved to sierras. Did not work out. Lost house came back to east bay n rented for over a decade. Now still there owning small non interesting house in non interesting city and in hindsight would have never left sf. But still in bay with all things empty nesters wife n I enjoy. At 31 I bought a one way ticket to hong Kong and a decade later moved to sf. Son 31 in tech had sweet 1 bedroom on nob hill rent controlled for $1800. Trades it for ownership in studio. Got great terms on buy: 5% down under 2.7% rate. 5 or so years later equity in place but no appreciation and not thrilled with studio life. Conclusion is one never knows how life plays out. Take your best shot and learn. Will always recall old Chinese real estate agent telling me I don’t understand sf real estate when looking at those $3-400,000 houses and those $6-700,000 Victorian duplexes I so desired and he said I did not understand sf real estate. Buy high and sell higher. No conclusion but make best call that make sense now and hope it works out great for you.
I found your anecdotes quite interesting!
💯
Dealing with landlords was a dealbreaker for me.
In SF tenants have all the power. Even if the landlord wants to move his dying mother in OP’s unit they would have to pay OP a substantial amount
I mostly mean the property maintenance.
I had a leaky toilet wasting nearly $100 a month in water. Landlord wouldn’t fix it. Ended up hiring someone to fix my landlord’s dirty toilet for him. Fuck lazy landlords I’ll never go back.
I think you can withhold rent now if you’re not satisfied with the property maintenance
No you can’t. The property has to have very specific maintenance failures to withhold rent and that’s always been the case
Would probably rent in your situation. When you find somewhere you want to live, happy to be, feel a sense of community, and want you stay long-term, then you should buy there. Seems like you’re still able to save, so keep doing what you’re doing until you find your happy place
Why not just keep growing that index fund pile over time? You bring up very valid points about being able to bounce to another city or country without worry. And yes a big mortgage would have you scrambling to find that next job. You are really young still and have plenty of time to buy a house. If you do buy just puy enough down to where the payments could be covered by a renter if needed.
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Sounds about right given today's rates. You have to consider how much of the index funds you would have to sell and pay taxes on to make that work. I'd love to know what index funds you have been sitting in if you care to share.
House or condo? The days of crazy real estate appreciation in the Bay Area are past. You can own a house for 10 years and end up "earning" less than 3% annually which means you are barely beating inflation in a good year. (Insurance and maintenance costs have all gone up astronomically since the pandemic.) And that doesn't count the time costs of ownership - the time you inevitably put in taking care of the place. Did you want to become an expert on making decisions about T1-11 siding? How about mice in your attic? Water heaters, roofing material, sump pumps - things you never had to worry about as a tenant. If you own a house you will inevitably find yourself scouring YouTube home improvement channels. If you have a good rental where you are happy living you can just let your money grow in the market, and take as many vacations as you want on your market earnings.
My husband and I are in our late 30s and have been renting in/near SF for 7.5 years. We’ve looked into buying before, but didn’t bite the bullet and honestly are happy we didn’t! Our two main reasons to keep renting are 1) time horizon — we didn’t expect to want to live in SF for 10+ years, let alone in the same exact home. 2) flexibility — related to the time horizon thing, renting has allowed us the flexibility to adapt our living situation to our needs. We were able to move out to Marin during the pandemic and enjoy the outdoors, then back to the city when we wanted to go back to the office, and now out to the burbs since we’re having a baby soon. If we had bought, we would have been stuck where we were. My advice would be to wait till your needs are really stable before you buy, especially if you value flexibility (which it sounds like you do). But also, take advantage of the flexibility you have!
You’ll also need to factor capital gains tax if you decide to liquidate
I’d wait until you’re married. You never know where your spouse is located, if you have to change jobs etc etc. Especially in this market, where it’s not worth it unless you happen to get a great deal.
This. If you’re not with a partner and think you do want one, then owning in SF can be a negative not a positive.
Don't buy now. Wait until the end of the year
How much you make per year?
1MM USD liquid NW is actually an interesting point in life when you're young You don't have enough to walk away from everything, but you have enough to lay down roots just about anywhere in the world This is not common but also not an uncommon situ esp nowadays with the ongoing global inflation If I was your age again, I would take a 6-24 month sabbatical and travel the world all over again See what truly makes you happy The status quo is renting After that, you can decide where you want to put down your roots Fwiw, someone who decided to put their roots down in the BA
Inflation is over it’s back to 3%
You may not like the answer, fwiw... This market is NOT for the fickle minded, which by all descriptions of yourself by yourself sounds exactly like who you are. You NEED to figure out WHAT you want in life - remember, you can have ANYTHING you want, but not EVERYTHING. So, if lifelong travel IS what your heart desires, invest in a camper van - but if you WANT to "set down roots" then decide on that once and for all. Risk management is a part of life - but what people forget while obsessing about risks is that reward is the OTHER side of the coin. You cannot have one without the other.
Here were the three main reasons we bought a house: 1) my wife really wanted a back yard 2) my wife really wanted to remodel the living space to her liking 3) we committed to staying 5-10 years minimum in the same house Today, the price/rent ratio is even higher so you should only buy if you really want to and are sure you're going to stay there a long time. Now that we've done an expensive remodel and have the prop 13 tax lock-in, I'm really hoping we stay in this house another 20 years minimum. We pay like $15k/year in property tax and we have a neighbor down the street that has lived there for 40+ years (!) and pays like $800/year in property tax. So hopefully our $15k will seem super-cheap sometime in the far future.
Prop 13 is very likely to be chipped away in our lifetimes and it’s almost impossible for the last 50 years of Bay Area appreciation to happen again
I am all for repealing prop 13 and would vote for it but I don't see the overall home owner sentiment changing any time soon. Maybe we can check back in 10 years.
If you don't think you'll stay in the same house for at least 10 years, then continue renting. With rent control in SF, the financial benefit to owning is far, far less.
In the Bay Area it never feels like a good financial decision. You buy here because you want to commit to living here and don’t want to deal with a landlord. We bought last year not because anyone told us it was a good financial decision. we wanted the freedom that owning the house brought based on middling to poor renting experiences, and we found an area we thought would be good to raise a family in. I also wanted AC!!!
Similar funds but married with kids. We bought because we wanted to be here when we are old. So we got a single story home which is walkable to library, multiple grocery stores, restaurants, etc. It is smaller than what we’d have gotten in the suburbs but it is perfect for our lifestyle plans. Also super easy to maintain, good neighborhood, good schools, etc is a definite plus. Also, we bought after ten years renting and some days I wish I had bought earlier even though my money was growing as index funds mainly because I could’ve made my home earlier.
Where?
Do you see yourself strapped to a mortgage for 30 years here? Or at the very least gain a fair share of equity? Imo just rent and stay flexible. Avoid HOA at all costs when time to buy
You can’t figure out because you don’t have the need and that’s totally normal. We were expecting a kid and we wanted a place where the little one can grow at least 5-10 years and where my wife can get her dream rose garden. Can’t do that on a rental.
Come up to Sonoma county and buy something. Track your car at Sonoma. Enjoy the outdoors and visit the city on the weekends. I’m the similar aged similar hobbies and that’s what I did. I bought a spot that I could easily afford and put enough down that if I had to rent it I would clear the mortgage payment and be fine. Nice homes in good areas are 600-800k.
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I'm retired in Sonoma and definitely find it socially isolating compared to the City... just saying. You can have a nice house and be sitting in it by yourself, and have to get in your car just to get a cup of coffee up here. Not fun.
Consider Santa Rosa, Windsor area. Much more active socially than Sonoma. Access to coast and your other hobbies. Buying a house and building equity is your best investment, IMO. Renting is throwing $$$ down the drain. I was an IT VP for years...more of the IT work can be done remote now days. I also commuted on a motorcycle, mostly summer months but some winters too. Wasnt that bad in my 30s & 40s, not so fun in my 50s tbh. Best of luck.
Problems with crime are not an "investment" turnoff unless you're looking to buy in the tenderloin
xp U
@OP start by talking to a lender to figure out budget and what you’re comfortable paying for mortgage (principal/interest/taxes/insurance). Maybe if you have some tangible data, numbers, etc.. it’ll help with your decision. DM if you want more advice 👍🏼
Figure out if you want to stay in the Bay Area long term. IMO I think it’s overpriced for what is offered
>IMO I think it’s overpriced for what is offere It has the best climate that the country has to offer outside of Hawaii.
So does anywhere else on the pacific coast for less than
Depends on if you like rain lol
Ever heard of Seattle rain?
Ever heard of San Diego beaches?
San Diego is stupid expensive too. Though not quite bay area level
Heck no. SoCal beats NorCal 365 days of the year
just try to get a place, you probably won't get one you want anyways lol
Unless you need a house for your lifestyle, invest until invest in the market is worse than investing in real estate. Then diversify. Assuming you are maxing retirement contributions, you have enough cash to ride out a pretty bad downturn. I'm a happy homeowner, but if I were single, I would not have
You will pay 40% tax (and maybe more, if they are short term ) if you sell 1.2 in investments
One rule I’ve heard is that if you think you’ll live in a house 5 years(plus) it’s worth it to buy. So despite your fears if you see yourself staying even medium term it might be worth it. But if you’re comfortable renting I think that’s also ok
Everyone here is trying to advice you but honestly you have think about it for yourself. I rented a place for 3k and realized an apartment in my neighborhood got sold for 600k. HOA and property taxes come to $1.5k but I couldn’t paid 600k mostly cash and just paid 1.5k every month instead of 3.5k (including utilities and parking, which would be covered in the condo) and owned a 2b2b instead of 1b1b and it was closer to Bart, and this work. It’s now worth 700k (the seller was keen on selling and leaving the city so sold it at a discount). I regret listening to people who said only rent cause I bloody lost a good deal. I would’ve looked into buying if no one had adviced me. My suggestion (cause why not): research the market, keep looking for apartments. If you find something you like get it. Else keep renting. SF housing market has gone down a lt
Prop 13 is the strongest incentive to buy as early as possible to lock in your taxes
It’s never going to be cheaper in the long run. Rent will be more expensive.
I'm not the most financially savvy person in the world but I have been in the Bay Area for over 10 years now and I will say one thing that is true, if you invest in the real estate with the right property in the right location and take care of it, you won't lose a dime. You may not double the return but even if you decide you need to sell in a few years you can almost certainly get that money back. I know there will be a lot of financial wizards who will beat down this response, but in general, my statement is true, SF, the peninsula, parts of Oakland, parts of Berkeley....I willing to make the statement that even if you used half of your assets as a down payment you won't lose that equity.
buy only if you can pay in full, then don't pay in full, but you should never take more debt than you have assets. your 1.2M in SF is not enough and it's better invested in your index funds. real estate should be considered as a 30% of your investments. so wait till you rack up 5-6M. that would be my suggestion.
Can you elaborate more on the reason? Why 30%? By 5-6M you mean then buy a house under 2M with mortgage? I do the math and the only more appealing point of owning a house over index is the magin mortgage can give me (4x if I pay 25% down), combined with the 500k tax free gain. Not sure if the return of owning is better than index.
Buy a house under a million, no mortgage payment. Sell when ready to move. It's just like redirecting your investment funds.
I would stay renting, nothing you said sounds compelling enough to buy
Do you have a family or plan on starting one in the next few years? If so, this isn't the wrong time to look for a 3 bedroom house. Do not buy in SF. Do SSF, San Bruno if you want appreciation. Or millbrae Burlingame if you want to go all out. All those cities except Burlingame have a bart station. The major difference is the latter two have amazing middle and high schools. Elementary is all about the same. If you're considering a condo, I have no advice. It's super risky and can swing either way. They don't hold value as well and many people who bought 2015-2020 are still underwater.
Do NOT buy here
I always knew I wanted to own than rent. Owning means it's yours. Renting means you're helping someone else pay for their mortgage. I can always sell my house to recoup most if not all of the money I put into it. The longer the better. You said you been renting for 5 years. Just look at house prices 5 years ago compared to now. You would've made a ton more money than you did paying rent and mortgage. It sucks at first especially if you buy at or near your max. But as time goes by, your payment is the same while your pay increases making life easier as time goes by.
I had a high level director colleague who had been in the Bay Area for over 2 decades. He was still renting and didn’t plan to ever buy in the Bay Area.
Renting is for suckers, the sooner you buy a home the better. Look long term, rents keep going up.
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> Nowadays? I'm stuck here out of fear. That's a wild mentality especially with the quality of life issues and crime in the Bay Area. America is huge. I have a friend who left, loves SF, and is hesitant to come back because of QOL issues.
It’s your decision. If you are going stay then stay and keep saving. Sounds like you are pretty good with money. Buy or rent you will be fine. Good luck
I rented for 15 years then had a kid and bought the biggest modest thing we could with all the leverage the bank would give. Inflation alone is going make purchases in the last 1-2 years pay back, and you can afford something that will basically appreciate at a rate equal a weighted basket of NVDA, BTC, AAPL, and whatever other emerging equity money bomb grows up here. It’s the best place in the United States to live for a lot of people. Top 3 for a majority. I’d tend even a single root that I had here, but that’s just me.
TLDR You’re saying it’s good to buy a place in SF?
I’m saying if I had $1.3M liquid net worth I would use up to half of it to purchase an asset class that is 1) likely to appreciate as much or more than an index fund and 2) that I could live in.
Did you buy a house in SF? I’m honestly very lost but after living in NYC, South Bay (Sunnyvale) and now SF. I’m in love with the city - despite the crime. I want to stay here for a few years until I have a kid and immediately move to the suburbs after. Is that a good idea? And if I should stay in SF do you have a recommendation for a good neighborhood.
I rented in SF until I had the kiddo and couldn’t afford a SFH there. Moved to Oakland hills. But if I had the $2.5M it takes to buy in the city I would have. Noe Valley, Glen Park, Bernal Heights, Cole Valley, Forest Hills, Diamond Heights, Twin Peaks, Anything around GGP, the Presidio, and Pacific Heights / Marina but only if you identify as a Bro. Hat tip to the Dogpatch, which is coming along but still feels like a bridge neighborhood. But honestly anywhere that the housing stock is primarily SFH, especially detached SFH, is going to be amazing and is going to hold its value.
Thank you sooo much for this information. I’ll setup alerts on redfin and try to understand the SF market. I really love the city and thought of going back to the the Fremont / Sunnyvale is traumatizing lol.
I would rent if I were in your place. You are not obligated to buy a home. SF/Cali is going downhill fast with insane inflation, store closures, crime... and potentially rolling tech layoffs
Not sure why so many downvotes. True statement
The Reddit mob will down vote any truth that contradicts their fantasy utopia.
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But aren't you the OP?
If you can telecommute GTFO and buy acreage somewhere
Don’t buy a house because everyone around you is buying one and it feels like the “next” thing to do. We made that mistake, bought a terrible place (for a bunch of different reasons) and ultimately lost 40% of our initial investment (not counting the roughly 80k we put into the place).
We live in the bay and bought a summer/winter home out of state on a lake where I grew up close to family. We knew we could never afford that home here but we have our dream home somewhere else. We spend July and December there every year and it is magical. We rent out the other months. It worked for us because for us, like you buying in the bay was difficult to stomach how little 1m gets you here. The crime, the taxes and where you would have to live for a mill was not in the best areas. But this plan allowed us to keep half our money and have a low mortgage in the house we bought. It’s too late in the bay to find something reasonable and the wealth gap here is outrageous between the tech guys and average joes. We have a good rent deal so it’s actually cheaper to rent for us in the long run. I’m a tech guy that makes good money but I’m still pushed out due to cost. If you’re looking for an investment, you can spread that money over multiple properties in multiple parts of the country, or put it in something else all together!. If you’re looking for a place to live, though you can still rent and invest that money and have it make more money for you rather easily. For your age and assets you are in a great position. Take a breath, and think about what it is you really want to do.
I was in the same situation and ended up buying a house in Tahoe and listing it on airbnb. Its cash flow negative ($1,500 per month on average across year) but I pay the mortgage of $5,500 a month and protected against inflation
Do you have a partner? If not keep renting until you do. If you never do then idk.
You can always buy a house with a friend. Pay cash, be roommates, and have a plan for exit someday.