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rated:
Hi, I'm new here, and searching for some home buying advice (preferably specific to our situation).  By the numbers, my wife and I are doing great: I earn 190K/yr, we have ~140K in savings, and ~$5K in debt. Our monthly debt is ~$1,500. The problem is that we live in the Bay Area of California, where $1M gets you a 1-bed/1-bath condo in downtown SF...

We're pre-approved for $750K, and can swing 10% down. I'm generally conservative, and want some cushion after we drop ~$110K to close. We'd like to buy a home for two reasons:
  1. We'd like to live in a good school district, for our 5 year old.
  2. We're 40 somethings who would like to feel like we've "made" it.

Here's the thing, our home price pushes us further away from my job (extending my commute), our support system, and lifestyle (e.g., family, friends, neighborhood, routine, etc.). I've begun thinking that we just buy into the upper-class areas near us, like Alameda (the city) and Piedmont. At the time of this post, both areas average homes for $900K and up.

My question is: If the school district is perfect, should I do all I can to buy there? The home we get won't have everything, but we'll be in the right area, with the right families (all richer than us). This is both about our ego and our parental responsibilities... I hope I've shared enough details, as I'd really appreciate your advice, expertise and wisdom.

Thanks in advance!!
 

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You obviously don't know the real estate market here very well. Real estate here has destroyed Google, gold, and virtua... (more)

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Agreed and thanks for the suggestion.

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rated:
I can't give advice, but I can share some thoughts. I was recently put in a similar situation and chose to buy. I do wonder if I would be better off living somewhere else and making $30k less per year.

Some thoughts:
- Being in the right area with the right families and right connections is good
- 20's is early. 40's is starting midlife.
- Say you borrow $750,000. That's going to be about $3,500 per month. Add property tax and HOA. You are looking at $4500 per month and that's before any repairs or upgrades. Your loan is for the next 30 years (until you are 70). Inflation will hopefully lower that number to 60 or so.
- I don't know how much rent is, but it will certainly go up over time. If you buy the house, you can sell it later when you want to retire and move to a cheaper area.
- Don't put too much emphasis on the schools. Obviously, avoid bad schools. You don't want your kids going to an under-performing school, but don't pick the area because the school is the best around. My kids go to one of the best performing schools, and it's not up to my standards. Because the school does so well, it's one of the most underfunded schools in the state. Most parents end up putting their kids in after school learning which makes our school look better. The better the schools are, the more average your kid might look to the colleges (I hear) and the harder your kids will need to work to get good grades.

rated:
Can't thank you enough for your response riznick! I recognize that being so rigid on schools has hindered our home options. Truth is, we've already been assigned to a school with a 3/10 greatschools rating that parents seem seem to love all the same - go figure. I'll begrudgingly share your epiphany with my wife, and we'll see what parts of the Bay Area we shop in next.

Also, I just ran some numbers by usmortgagecalculator.org, and we can't afford anywhere near $900K. My wife's take is that we move to the burbs, make new connections and have the in-laws over on weekends. I'm of that mind somewhat, but hope to delay buying another year, til our first school year ends.

We'll see, but nonetheless thanks for the guidance and testimony!

rated:
riznick said:   - I don't know how much rent is, but it will certainly go up over time. If you buy the house, you can sell it later when you want to retire and move to a cheaper area.
 

  
"Housing always increases in value!"

"Technology isn't in a bubble!"

rated:
BP just gave you an answer you didn't want to hear, and you marked his response red. Why ask a question, OP, if you're going to praise the people who affirm your decision and red the people who question your judgement?


You are making a huge investment, and the value of your house might go up or it might go down. California is a non-recourse state, so in the event of a foreclosure, you will be able to walk away with bad credit and no debt.

rated:
I hate to break it to you, but you're not doing great, especially for the Bay Area. You're doing fine, pretty good, even, but not great.

At your age, you should have more than $140K in savings, especially given your salary. I don't know if you have previous loans or other debt you had to pay off, if that comp is brand new or if you have been living a lifestyle you can't afford, but even so, in your forties, you should have multiples of what you have saved up to afford what you are asking ($900K).

As hard as it is in the Bay Area, you have managed to live at your means and not below them. So, now you are asking us if it is OK to buy a house, deplete your savings and live beyond your means?

The short answer is, no. This doesn't make financial sense.

If you had enough savings for a 20% down payment and enough left over for a large cushion should you lose your single income, I'd say go for it.

Save up for a 20% down payment and buy a house you can afford ($750K max, but $650K would be better).

Now, if you're a physician or some other job with serious job security, I might have a slightly different opinion.

rated:
Op said, "If the school district is perfect, should I do all I can to buy there? The home we get won't have everything, but we'll be in the right area, with the right families (all richer than us). This is both about our ego and our parental responsibilities..."

So, on top of taking on more housing cost than you can reasonably afford you want to be the poorest parent in a rich school? Your costs are going to soar as you try to keep your kid in the designer clothes and expensive extracurricular activities the other kids are in.  You wouldn't want your child to be poorly dressed in comparison or be the only kid who doesn't go to gymnastics, swimming, or some other (costly) program or other after all.  

Keeping up with the richer neighbors only gets more expensive over time as your child gets older too - then you need to throw in expensive summer camps and the never ending list of costly gifts your kid will be expected to take to the myriad birthday parties they'll be invited to, plus the highly competitive and expensive birthday parties you'll need to throw for you kid (that you're expected to invite the entire class to).  Let's not forget the wealthy PTA mothers who constantly try to one up each other with ridiculous ways to demand your money for gifts to "thank the teachers" throughout the year too, plus ongoing fees for the numerous school trips and events that go on.  The school will be harder than average so you may even need to plan to pay for tutors to make sure your kid keeps up as well (most other parents have them).

Those are just some of the financial considerations you should think about before you decide to be an average family in a rich neighborhood. If you actually want to fit into their world you'll need to spend above your means on vehicles, home furnishings, décor and on the parties and dinners you throw at your home as well.  Is it really worth all that, or would you all not be happier being in a nice neighborhood more within your price range in the first place?



 

rated:
 
 By the numbers, my wife and I are doing great: I earn 190K/yr,
how much does your wife earn?

rated:
I agree that your current savings is a red flag. Did you leave out retirement savings that you expect is not available for housing costs?

We have friends who live in Southern California and have good incomes, and moved about 15 years ago to what is probably the best school district in the area. It was a slight budget stretch for them at the time but seems to have worked out great. Home value has appreciated decently and never took a big hit in 2007-2008. Their kids did well in the schools and are doing great in good colleges. Some of the kids friends' do have some impressive family wealth, and we hear a little bit about some of the outlier stories of vacations and brushes with fame. But it's not put any pressure on the parents or kids to overspend or "keep up". I think that's more about you than the environment around you. These folks aren't super-savers, but never were.

So, my personal experience (a bit more beyond that anecdote) is that real estate in an excellent school district is a very good investment.

rated:
SlimTim said:   
We have friends who live in Southern California and have good incomes, and moved about 15 years ago to what is probably the best school district in the area. 

  what district is that

rated:
What are your retirement accounts like? What about your job prospects, i.e., promotion, raise, etc?

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Rubl said:   What are your retirement accounts like? What about your job prospects, i.e., promotion, raise, etc?
  This needs to answered before you add a 900k home.  For your income you should have well over a mill in your retirement accounts.  If you just have 140k savings for a downpayment then you cannot even afford a 500k home.  You should have 20% down on whatever you get and I would say 30-35 would be better given your age.  I am under 40 and have 35% of my home paid for and have emergency savings for 6-12 months and properly funded retirement accounts.

rated:
Aurianne said:   Op said, "If the school district is perfect, should I do all I can to buy there? The home we get won't have everything, but we'll be in the right area, with the right families (all richer than us). This is both about our ego and our parental responsibilities..."

So, on top of taking on more housing cost than you can reasonably afford you want to be the poorest parent in a rich school? Your costs are going to soar as you try to keep your kid in the designer clothes and expensive extracurricular activities the other kids are in.  You wouldn't want your child to be poorly dressed in comparison or be the only kid who doesn't go to gymnastics, swimming, or some other (costly) program or other after all.  

Keeping up with the richer neighbors only gets more expensive over time as your child gets older too - then you need to throw in expensive summer camps and the never ending list of costly gifts your kid will be expected to take to the myriad birthday parties they'll be invited to, plus the highly competitive and expensive birthday parties you'll need to throw for you kid (that you're expected to invite the entire class to).  Let's not forget the wealthy PTA mothers who constantly try to one up each other with ridiculous ways to demand your money for gifts to "thank the teachers" throughout the year too, plus ongoing fees for the numerous school trips and events that go on.  The school will be harder than average so you may even need to plan to pay for tutors to make sure your kid keeps up as well (most other parents have them).

Those are just some of the financial considerations you should think about before you decide to be an average family in a rich neighborhood. If you actually want to fit into their world you'll need to spend above your means on vehicles, home furnishings, décor and on the parties and dinners you throw at your home as well.  Is it really worth all that, or would you all not be happier being in a nice neighborhood more within your price range in the first place?



 

Sorry, but I see this differently. While "keeping up with the Joneses" IS a temptation for many people, it is not any sort of mandatory foregone conclusion. It IS possible to live in a nice neighborhood with rich neighbors, wave to them from your driveway, and not buy new cars/expensive vacations/luxury furniture/designer china/etc.

As for birthday parties, come on, what is the difference in gift price for a "poor" 4-year-old's party and a "rich" 4-year-old's party? Even if we go to a nice birthday party, we're not buying the birthday boy a horse. I didn't know birthday parties were a "competition," but if you feel that way, I think that says more about you than the other parents. I think you are projecting a lot of your feelings onto the OP.

All that said, I agree with others who say that (without seeing more detailed financial info), it seems OP has not saved up enough based on his age & income. Having 20% available to put down on a house is a solid baseline, the first question you should generally ask when determining if you can afford a home. Since OP doesn't pass that test, I wouldn't even go on into payments and property taxes and extracurriculars at school.

rated:
tfmtkafytfo said:   ~$5K in debt. Our monthly debt is ~$1,500.
 


That doesn't make sense.

What do you mean?

Is your monthly debt payment really 1500 and you are just over 3 months from paying it off?
Or are the numbers wrong?

rated:
I'm not a financial nor RE expert. So all I'm commenting on is your housing. If you want to live in SF or adjacent rent will always go up. Home prices who knows but rent will always go up. I'd say earn more or move away. Because increasing rent will crush your COL.

rated:
one factor in PHX was that certain parts of the market didn't get hit by foreclosures as much during the last crisis i.e I got hit harder for buying a starter home.

rated:
San Francisco school districts are not the way you think they are. You can randomly get put into any school in san francisco. You have first/second choices but chances are you won't get them. I grew up in san francisco and just recently moved to San Jose, so if you have specific school questions etc let me know. I went to private catholic schools in sf and still better than any public schools in the city. I am not catholic either nor are my parents.

rated:
AlwaysWrite said:   
Aurianne said:   Op said, "If the school district is perfect, should I do all I can to buy there? The home we get won't have everything, but we'll be in the right area, with the right families (all richer than us). This is both about our ego and our parental responsibilities..."

So, on top of taking on more housing cost than you can reasonably afford you want to be the poorest parent in a rich school? Your costs are going to soar as you try to keep your kid in the designer clothes and expensive extracurricular activities the other kids are in.  You wouldn't want your child to be poorly dressed in comparison or be the only kid who doesn't go to gymnastics, swimming, or some other (costly) program or other after all.  

Keeping up with the richer neighbors only gets more expensive over time as your child gets older too - then you need to throw in expensive summer camps and the never ending list of costly gifts your kid will be expected to take to the myriad birthday parties they'll be invited to, plus the highly competitive and expensive birthday parties you'll need to throw for you kid (that you're expected to invite the entire class to).  Let's not forget the wealthy PTA mothers who constantly try to one up each other with ridiculous ways to demand your money for gifts to "thank the teachers" throughout the year too, plus ongoing fees for the numerous school trips and events that go on.  The school will be harder than average so you may even need to plan to pay for tutors to make sure your kid keeps up as well (most other parents have them).

Those are just some of the financial considerations you should think about before you decide to be an average family in a rich neighborhood. If you actually want to fit into their world you'll need to spend above your means on vehicles, home furnishings, décor and on the parties and dinners you throw at your home as well.  Is it really worth all that, or would you all not be happier being in a nice neighborhood more within your price range in the first place?



 

Sorry, but I see this differently. While "keeping up with the Joneses" IS a temptation for many people, it is not any sort of mandatory foregone conclusion. It IS possible to live in a nice neighborhood with rich neighbors, wave to them from your driveway, and not buy new cars/expensive vacations/luxury furniture/designer china/etc.

As for birthday parties, come on, what is the difference in gift price for a "poor" 4-year-old's party and a "rich" 4-year-old's party? Even if we go to a nice birthday party, we're not buying the birthday boy a horse. I didn't know birthday parties were a "competition," but if you feel that way, I think that says more about you than the other parents. I think you are projecting a lot of your feelings onto the OP.

All that said, I agree with others who say that (without seeing more detailed financial info), it seems OP has not saved up enough based on his age & income. Having 20% available to put down on a house is a solid baseline, the first question you should generally ask when determining if you can afford a home. Since OP doesn't pass that test, I wouldn't even go on into payments and property taxes and extracurriculars at school.
 

  
AW, I wrote that based upon personal current real life situation and not conjecture.  I'm a very financially comfortable retiree in a million dollar plus home neighborhood that has the number one school in the entire county. My recently divorced daughter & granddaughter moved in with me two years ago and I can tell you from experience that you don't bring measly $25 gifts to elementary school kid's birthday parties, better think bigger, clothes DO matter or your kid will be the round peg in a sea of square ones, and who can throw the most elaborate birthday party (at various venues) is a huge thing. YES, birthday parties for kids are events that include everything from bouncy houses & water slides in the back yards to game trucks and live DJ's at the pool parties, to actual ponies delivered for the day to the house plus gift bags for the kids who come and their parents -- and this is only elementary school.   You might want your kid to be the weirdo who doesn't fit in, but OP did say his ego mattered, so I doubt he'll want to.

rated:
While there is value in not having one's kid not fit in a tacky-rich environment. What you describe is anything but typical.

rated:
bp was being sarcastic and snide. It's also called trolling, so I decided to flag a post which would lead to a tired debate about market bubbles and nothing to do with my question.

Thanks for the foreclosure insight. Never a direction one wants to go, but it's good to know.

rated:
Sorry for the confusion. I wasn't sure how to phrase this:

  • We have about $5K remaining in school loans. It's probably more like $3K now, actually.
  • We pay about $1500 (really $737) every month, towards our two cars ($400 + $200) and paying down the school loan ($137). Dunno why I rounded up so high, but there you go.

rated:
Aurianne said:   

So, on top of taking on more housing cost than you can reasonably afford you want to be the poorest parent in a rich school? Your costs are going to soar as you try to keep your kid in the designer clothes and expensive extracurricular activities the other kids are in. 


 

  
"We're going on a soccer tour of South America!"

rated:
tfmtkafytfo said:   bp was being sarcastic and snide. It's also called trolling, so I decided to flag a post which would lead to a tired debate about market bubbles and nothing to do with my question.

Thanks for the foreclosure insight. Never a direction one wants to go, but it's good to know.

His/her comment may have been a little sarcastic, but I wouldn't call it snide or trolling. They were simply pointing out that if there's a tech slowdown or crash, you could get hit disproportionately hard. Not only would house prices drop, but one or both of you could be laid off (depending on what field you work in).

Your question was whether or not you should buy an expensive house where you're not even pre-approved for its value. BP was answering that if you did this, you could be left with a house worth significantly less than you paid for it with no way of paying the mortgage, HOA fees, etc.

rated:
tfmtkafytfo said:   bp was being sarcastic and snide. It's also called trolling, so I decided to flag a post which would lead to a tired debate about market bubbles and nothing to do with my question.

 

  It's not snide at all.  Your original question is if it's "smart" to overspend and buy the most expensive property you can.  Its unreasonable to say rent will continually go up and also assume property values must continually go up.

You should retitle the thread "Tell me I'm smart to exhaust savings and risk several times my networth in a single piece of speculative real estate!" rather than the fake "question" if you don't want the possibility of anyone answering in the direction you don't want.

*you have not answered others' questions in the thread whether or not you have $X00k-$1M+ retirement savings like it's reasonable to expect from someone "smart" at those income levels/age.  So, assuming you don't.  If you had $1M retirement then 700k+ into a property would not be >100% of your networth, and would change the mix of suggestions.  The retirement accounts would mean using the other funds would not really be exhausting all savings.

rated:
You still haven't answered the question that several have asked - is the $140k just your liquid "slush fund" savings, or does it represent all of your savings including retirement?  In just a flat out answer to your original question, I wouldn't buy ANY property that you can't swing a 20% down payment and still be comfortable/able to meet all your needs. 

rated:
tfmtkafytfo said:   Hi, I'm new here, and searching for some home buying advice (preferably specific to our situation).  By the numbers, my wife and I are doing great: I earn 190K/yr, we have ~140K in savings, and ~$5K in debt. Our monthly debt is ~$1,500. The problem is that we live in the Bay Area of California, where $1M gets you a 1-bed/1-bath condo in downtown SF...

We're pre-approved for $750K, and can swing 10% down. I'm generally conservative, and want some cushion after we drop ~$110K to close. We'd like to buy a home for two reasons:
  1. We'd like to live in a good school district, for our 5 year old.
  2. We're 40 somethings who would like to feel like we've "made" it.

Here's the thing, our home price pushes us further away from my job (extending my commute), our support system, and lifestyle (e.g., family, friends, neighborhood, routine, etc.). I've begun thinking that we just buy into the upper-class areas near us, like Alameda (the city) and Piedmont. At the time of this post, both areas average homes for $900K and up.

My question is: If the school district is perfect, should I do all I can to buy there? The home we get won't have everything, but we'll be in the right area, with the right families (all richer than us). This is both about our ego and our parental responsibilities... I hope I've shared enough details, as I'd really appreciate your advice, expertise and wisdom.

Thanks in advance!!

  
I hate to break it to you but despite having a HH income of $190k, it's not much in the Bay area.  In other parts of CA yes, but not there.

You might have to save up for a few more years to put down enough for a "home" in SF, or move away to a more slightly affordable area like San Jose.

rated:
Thanks BostonOne!

We're doing well for ourselves and do not live an extravagant lifestyle. The ego aspect is based on our interest in keeping each other comfortable, not to keep up with peers.

We have not saved up enough for 20% (on a >$500K home), plus college tuition and retirement. We're looking at $700K homes, in the East Bay suburbs (e.g., Martinez, Pleasant Hill, Concord, etc). To be clear, I’m not asking whether I should buy a 900K home. I’m asking if I should buy more than I can afford now, since we’re so late in the game.

My wife earns 125K. I don’t include her in our budgets because she’s less fiscally responsible and has under $5K in savings. Still, we’ll recoup ~$2K/mo, once we’re done with daycare. That will bring our COL down to $4K/mo.

Our retirement savings are both under $100K. I began working late in life and she did the same with saving money. I work in tech and she’s in social services.

The default plan is to continue saving, pay $1700/mo in rent and utilizing our local public schools. With riznick’s foresight about overrated school districts, I’m more comfortable with that plan now.

There will always be the urge to buy, in a given area or school district. With the perspective of how much else we’re unprepared for, however, it’ll be easier to limit our offers to ~$650K. Thanks for all the insight and feedback!

rated:
tfmtkafytfo said:   
My wife earns 125K. I don’t include her in our budgets because she’s less fiscally responsible and has under $5K in savings. Still, we’ll recoup ~$2K/mo, once we’re done with daycare. That will bring our COL down to $4K/mo.

 

  that's kind of important in the picture!

rated:
So wait, you're saying that you have a gross household income of $315k but aren't including $125k of it in this equation because your wife spends it all ("less fiscally responsible")?  Something weird is going on here.  I'm not sure any of us can give you a reasonable answer because the inputs are so strange. 

To answer the question, no, you should never buy more than you can afford. 
 

rated:
tfmtkafytfo said:   
The default plan is to continue saving, pay $1700/mo in rent and utilizing our local public schools. With riznick’s foresight about overrated school districts, I’m more comfortable with that plan now.

 

At $1700 a month in rent, I'd stick to what you got and save up.  That's fairly affordable for the Bay Area.  At that low of rent, you could easily put your child into a decent private school if you don't like your current public one, instead of paying for more house and the maintenance and additional costs involved with it.

rated:
AlwaysWrite said:   
Aurianne said:   Op said, "If the school district is perfect, should I do all I can to buy there? The home we get won't have everything, but we'll be in the right area, with the right families (all richer than us). This is both about our ego and our parental responsibilities..."

So, on top of taking on more housing cost than you can reasonably afford you want to be the poorest parent in a rich school? Your costs are going to soar as you try to keep your kid in the designer clothes and expensive extracurricular activities the other kids are in.  You wouldn't want your child to be poorly dressed in comparison or be the only kid who doesn't go to gymnastics, swimming, or some other (costly) program or other after all.  

Keeping up with the richer neighbors only gets more expensive over time as your child gets older too - then you need to throw in expensive summer camps and the never ending list of costly gifts your kid will be expected to take to the myriad birthday parties they'll be invited to, plus the highly competitive and expensive birthday parties you'll need to throw for you kid (that you're expected to invite the entire class to).  Let's not forget the wealthy PTA mothers who constantly try to one up each other with ridiculous ways to demand your money for gifts to "thank the teachers" throughout the year too, plus ongoing fees for the numerous school trips and events that go on.  The school will be harder than average so you may even need to plan to pay for tutors to make sure your kid keeps up as well (most other parents have them).

Those are just some of the financial considerations you should think about before you decide to be an average family in a rich neighborhood. If you actually want to fit into their world you'll need to spend above your means on vehicles, home furnishings, décor and on the parties and dinners you throw at your home as well.  Is it really worth all that, or would you all not be happier being in a nice neighborhood more within your price range in the first place?



 

Sorry, but I see this differently. While "keeping up with the Joneses" IS a temptation for many people, it is not any sort of mandatory foregone conclusion. It IS possible to live in a nice neighborhood with rich neighbors, wave to them from your driveway, and not buy new cars/expensive vacations/luxury furniture/designer china/etc.

As for birthday parties, come on, what is the difference in gift price for a "poor" 4-year-old's party and a "rich" 4-year-old's party? Even if we go to a nice birthday party, we're not buying the birthday boy a horse. I didn't know birthday parties were a "competition," but if you feel that way, I think that says more about you than the other parents. I think you are projecting a lot of your feelings onto the OP.

All that said, I agree with others who say that (without seeing more detailed financial info), it seems OP has not saved up enough based on his age & income. Having 20% available to put down on a house is a solid baseline, the first question you should generally ask when determining if you can afford a home. Since OP doesn't pass that test, I wouldn't even go on into payments and property taxes and extracurriculars at school.

I agree with Aurianne that living in the situation she described could be a little bit more difficult than you are giving credit.  Sure, you can live in a neighborhood and act a certain way, but I do think it is more difficult to have to associate with the rich people/kids on a regular basis (going to school, church groups, parties, etc.) especially for kids.  Living in a neighborhood among the rich is easy because you don't have to be around the rich people other than the waving at them and going about your business.  I do the same to my poor/equal class neighbors in my all middle class neighborhood. 

One of my kids are currently attending a fairly expensive, catholic private school (we are catholic and attend the associated church) and it is hard for them to distinguish between "normal" spending and "rich" spending.  (We wound up at the school to skirt the entry age requirement for kindergarten in our state and will be sending our kid to public school next year).  Fortunately, they have uniforms which makes the kids mostly the same, but it does require constant explaining to the kids when all of their friends take beach, ski, Disney, etc vacations over every 4 day weekend/break in school.  The other kids have everything imaginable toy and gadget wise and parties do tend to be larger and more involved.  Sure, we roll up in our 10 yr old car that we have almost outgrown, with our $15 gift and you can tell others spent multiplies of that and I do feel uncomfortable about it, but those are my kids friends at this point.  

My wife experiences similar things in her women's group and parents at the school, but hers is more the others just spend money doing everything (getting together for drinks/dinner several times a week, spa treatments, day trips, etc.).  None of these things are expensive by themselves and the better off people don't notice/care, but it adds up to a lot over time which makes it unaffordable to us.  That means she can't attend these as often and then she get invited out less which is just uncomfortable.  Yes, everyone is looking for new friends when we move to the new school. 

rated:
tfmtkafytfo said:   Thanks BostonOne!

We're doing well for ourselves and do not live an extravagant lifestyle. 

My wife earns 125K. I don’t include her in our budgets because she’s less fiscally responsible and has under $5K in savings.

Still, we’ll recoup ~$2K/mo, once we’re done with daycare. That will bring our COL down to $4K/mo.

Our retirement savings are both under $100K. I began working late in life and she did the same with saving money. I work in tech and she’s in social services.


 

  Whoa!  40-something years old, 190 + 125 - 315K/yr.  If your COL is $6K/mo., and you have only $140K in savings, then you are living an extravagant lifestyle, or someone has a gambling problem.
Figure out where all your money is going before you consider buying a house.  You're not in trouble, and have top-tier incomes, but a fortune is being lost, like sand through an hourglass.
 

rated:
bppcomplete said:   
riznick said:   - I don't know how much rent is, but it will certainly go up over time. If you buy the house, you can sell it later when you want to retire and move to a cheaper area.
  
"Housing always increases in value!"

"Technology isn't in a bubble!"

  
Real Estate Agent to Buyer: "It's a Buyer's Market!"

Real Estate Agent to Seller: "It's a Seller's Market!"

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bassmanben said:   
tfmtkafytfo said:   
The default plan is to continue saving, pay $1700/mo in rent and utilizing our local public schools. With riznick’s foresight about overrated school districts, I’m more comfortable with that plan now.

 

At $1700 a month in rent, I'd stick to what you got and save up.  That's fairly affordable for the Bay Area.  At that low of rent, you could easily put your child into a decent private school if you don't like your current public one, instead of paying for more house and the maintenance and additional costs involved with it.

  +1. $1700 monthly rent is very low for the area. Even if it were to double in say 5-10 years, it is well within what your mortgage plus HOA/tax/insurance will be on a house you are considering buying.
At your income levels, I hope you are making every use of pre-tax and tax-deferred savings. By this I mean fully funding your 401k (18k each), backdoor Roth IRA for both (5.5k each), HSA if it is available and makes sense for your situation etc.

The nice thing about being 40-somethings: you will qualify for catch-up  retirement contribution in a few years!

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hairybeast said:   
The other kids have everything imaginable toy and gadget wise and parties do tend to be larger and more involved.  Sure, we roll up in our 10 yr old car that we have almost outgrown, with our $15 gift and you can tell others spent multiplies of that and I do feel uncomfortable about it, but those are my kids friends at this point.  

  Not judging, but is that good etiquette to goto a party you were invited to and bring a gift a fraction of what others bring? what would mrs manners (not mrs cheap) say?

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I will look into the HSA and catch-up contributions. Thanks fwuser12!

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You are both in 40's and have only "under 100K" in retirement savings. Unless one of you has some terminal illness, that's way too low. With your income you should have been maxing out everything for the past 10 years at least and be somewhere around 500K-1M. You and your wife need to put 36K into 401K every year and then start saving more.

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tfmtkafytfo said:   Thanks BostonOne!

We're doing well for ourselves and do not live an extravagant lifestyle. The ego aspect is based on our interest in keeping each other comfortable, not to keep up with peers.

We have not saved up enough for 20% (on a >$500K home), plus college tuition and retirement. We're looking at $700K homes, in the East Bay suburbs (e.g., Martinez, Pleasant Hill, Concord, etc). To be clear, I’m not asking whether I should buy a 900K home. I’m asking if I should buy more than I can afford now, since we’re so late in the game.

My wife earns 125K. I don’t include her in our budgets because she’s less fiscally responsible and has under $5K in savings. Still, we’ll recoup ~$2K/mo, once we’re done with daycare. That will bring our COL down to $4K/mo.

Our retirement savings are both under $100K. I began working late in life and she did the same with saving money. I work in tech and she’s in social services.

The default plan is to continue saving, pay $1700/mo in rent and utilizing our local public schools. With riznick’s foresight about overrated school districts, I’m more comfortable with that plan now.

There will always be the urge to buy, in a given area or school district. With the perspective of how much else we’re unprepared for, however, it’ll be easier to limit our offers to ~$650K. Thanks for all the insight and feedback!

  You are burning cash and getting a home for more than what you can afford is going to accelerate this behavior.  Get a home that has a size you can live with, you don't need a movie theater, gourmet kitchen, heated tiled bathroom floors ect...  all the luxuries that will cost you square footage.  Time to pay those retirement accounts first, you should budget for 36k pre tax a year + 12k ROTH so you are on track and not further behind the 8ball.  This may be easier for your wife if its just set and not seen.  Banking the 2k a month that will come later is a future ride, other things will come up, where is the other 5-6k going?

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Pics or I don't believe you let your wife burn 125k a year. As in her money is her money & my money is our money.

Skipping 135 Messages...
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investorama said:   
gnopgnip said:   
house17 said:   
BostonOne said:   
matrix5k said:   
imetitemi said:   Something to think about- almost nobody relatively affluent is going to consider buying in an area with sub-10-rated schools. It's a competition these days, and almost nobody with school-age children is going to take chances risking sub-par districts. It trumps everything else, especially with the wife (I find)... whether the perception of 10-schools is accurate or not, it totally guides the real estate market IMO.

I would NEVER invest in communities with bad schools. That's a dead-end deal.

Wow, you joined in 2007 and this was your very first post?

Anyway, I've never even seen a 10 rating for a school district in my area (Boston suburbs) yet every house sells for well above asking price just days after the open house.

For landlords, districts with lousy schools often provide the best value/return.


Thats because you have the FWF attitude of cash flow being the most important. Anyone worth a lick around here knows capital appreciation is where the real money is at. Look at the recent FWF threads that say a house bought in the 70s for 80k is now worth 250k. We appreciate that much in a year here.

  If you had invested $80k in the S&P 500 you would have $2 million now. If you reinvested dividends over that time you would have almost $7 million. The annualized returns of the stock market have far outpaced capital appreciation on single family homes historically.


You obviously don't know the real estate market here very well. Real estate here has destroyed Google, gold, and virtually any investment you can think of let alone the stock market index. Rest of the country (except nyc) I agree stocks are better.

  
So use your time machine and go back 10-15 years and buy more real estate.  It isn't sustainable going forward because it has significantly outpaced the ability of the working population to buy.  It may not "crash" or "burst" but it isn't going to increase 10%+ a year anymore.

Edit to add:  those car expenses don't look that bad to me, they are in CA where you have to add a "compliance" cost factor into prices.  I mean it is not as cheap as a pair of paid off beaters - but not everyone wants or even CAN use them.  Once you decide not to have a beater you also have to get real insurance and not just liability.   

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