Another SF/Bay Area housing question

[hightower]

I'm so confused by your numbers (I'm also a little tipsy). This is me: https://www.whitecoatinvestor.com/fo...e-the-bay-area

We bought in Feb 2019 in Los Altos for ~3.25 MM, 20% down. On a lot less than you (income and NW). I think our NW was ~1MM and we put all our liquid (non-retirement accounts) into the down payment. We're a bit cash poor, which is common for the area...

People who aren't from here (Bay area in general) really can't offer any good advice. It's another world / they don't get it.

So let me get this straight. You admit to being “cash poor” and your excuse is “because everyone else is doing it?”
I hear these same excuses all the time from people out there. You are all acting as if it’s ok to overspend on housing just because everyone else is doing it. It’s not. You’re at risk and made a very expensive bet. Like everyone else. When the housing market crashes or the tech boom ends, everyone out there will be hurting the same because everyone is making the same mistake. If you’re cool with being in that basket that’s fine. But don’t tell others that we “don’t understand” because we’re not living there. There’s not a different set of rules just because you’re in an overpriced market. Personal finance is personal finance no matter where you live.

[Tim]

As usual this forum skews heavily away from real estate. Doesn't mean it's wrong either side.

What's discouraging is people dismissing it altogether, or worse spewing near vitriol at those who dare want to live there despite sound reasons and ability to swing it financially.

It's been said in the past that our forum tends to tread a bit heavy on intolerance. An earlier post today on the PSLF mentioning reddit being more supportive that here was a bit telling.

I hope we want to reverse some of that perception and be more welcoming and inclusive instead of pushing folk out the door. Just my $0.02 on the overall mood.

No, no, no. Supportive of what? SF is a world class city now? Salesforce and Oracle seem to think it is overpriced.
https://www.google.com/amp/s/www.biz...f-san.amp.html
The land prices and tax structures will have impacts too.
https://www.bizjournals.com/sanfranc...tml#g/443436/1

The “hurt feelings “ aren’t about real estate investing. It’s about the VHCOL of specific spots in California. The “world class" is subjective. It doesn't mean it's good or bad or world class since "world class" is really subjective. The question is whether the "compensated risk" for the high costs is really worth it in pure dollars and cents.
That is not political, that is numbers. Leveraged or pay cash is an investment decision. If one wants to take a doctor's loan for 100% have at it. The land is an illiquid alternative investment. It deserves hard thought. There seems to be a thought or attitude that "west coast is good" , "east coast is bad", and the rest just is "blah".
That is not disdain for real estate, it is and emotional reaction and produces emotional responses. "It worked for me" is not sufficient.

Sorry if a residence is a significant alternative investment that produces no income and relies on price appreciation.

[Lordosis]

It is the internet. Everyone gets to shout their opinion.

I think Hatton has it right though. There are many different ways to live and just because it does not agree with my way does not make it wrong. What may seem crazy to one person is run of the mill for another. It does not change the math though. If all that money is spent on a house it has to come from somewhere. That is less to spend on cars, kids, vacations, etc. If you can swing it and have it paid off before planned retirement and can still save 20% then who can really argue.

I worry about some crazy justifications about presumed appreciation or counting principle towards savings rate as a way to make it seem alright.

I am also someone who wants to plan extra cushion into everything and there is little wiggle room with a large fixed expense like that. Lost job or increase in taxes or divorce or any number of things can ruin your life. Where those same things would suck for me as well I have a lot more flexibility to maneuver being much more conservative. It comes at the cost of living below my means but I have everything I want so I am willing to pay it.

[danesgod]

So let me get this straight. You admit to being “cash poor” and your excuse is “because everyone else is doing it?”
I hear these same excuses all the time from people out there. You are all acting as if it’s ok to overspend on housing just because everyone else is doing it. It’s not. You’re at risk and made a very expensive bet. Like everyone else. When the housing market crashes or the tech boom ends, everyone out there will be hurting the same because everyone is making the same mistake. If you’re cool with being in that basket that’s fine. But don’t tell others that we “don’t understand” because we’re not living there. There’s not a different set of rules just because you’re in an overpriced market. Personal finance is personal finance no matter where you live.

You didn't take my full quote, I made the following claims:

• We bought an expensive house and, because of that, are cash poor
• Importantly, we are still meeting our savings goals (and are on track to retire early)
• Many people in our area are cash poor - I didn't intend this to be a justification for my own purchase.

Everyone has to do their own math. This is working fine for my family.

My claim that you "don't understand" is that most people on this forum haven't worked extreme housing expenses into their budget. But it absolutely can be done, if one chooses to do it.

I hope this clarifies my stance.

[Random1]

I live in a completely different world, my neighbor bought their house 15 years ago for 369k, they just sold it for 349K. After making payments for 15 of 30 years, they were barely able to get out with out paying anything. I think most of us who are somewhat more conservative with our money just don't understand this. My neighbors nest egg and retirement dream turned into a small apartment in town.

[VentAlarm]

VentAlarm and the one liner "that's dumb because I don't do it" poster are throwing this post off coming in with a position of inexperience and ideologue. I'm sure OP knows to skip over one line posts with 0 likes coming from those with limited assets to backstop an undertaking of this magnitude, and have never done a 3x+ property, trying to give advice on a $3M property. I'm sure those of us who have done it successfully while mitigating it's collateral impact have given the good advice, and will continue with the valuable insight of experience. The youngsters should stick to threads about paying of their student loans, cost effective vehicles, work schedules, etc. where they have some experience and therefore something of substance to offer.

Loved my time in the Bay Area. Sad to see the fires in Sonoma and Napa, as well as other areas of the state. I remember sitting so peacefully outside at the wineries, under the warm sun and the perfect blue sky with the perfect July breeze, enjoying the aged cheeses and wine selection overlooking a perfectly manicured landscape. How unique this alluring experience was. Hope cooler and more humid climate comes in soon to help get a handle on this.

I’m throwing a post off because I am calling you out about being intentionally opaque? Sure, it’s fine to get a >3x mortgage if you have 1-2x your income in cash reserves, but that doesn’t seem to be the situation OP is in.

[SwitchPool]

LOL why would anyone be jealous of someone with a 2 million dollar mortgage.

This thread seems to be triggering you and others in a certain way.

[fatlittlepig]

This thread seems to be triggering you and others in a certain way.

I’m here just calling it the way I see it. Doesn’t seem to make sense to me:

[clozareal]

I’m here just calling it the way I see it. Doesn’t seem to make sense to me:

Having lived in the bay area for years, I will say, that listing is just ridiculous. Why anyone would pay 4M for THAT...I have no idea. You could easily live in Berkeley/Oakland, Pacifica, most parts of nearby Marin County, or even SF proper for half of that in a much nicer place.

The little bubble of silicon valley; menlo park, palo alto, atherton (which has an average home value of at least 4M if I recall correctly) really isn't that great. I'd much rather live in any of the above mentioned places over silicon valley proper.

[fatlittlepig]

Having lived in the bay area for years, I will say, that listing is just ridiculous. Why anyone would pay 4M for THAT...I have no idea. You could easily live in Berkeley/Oakland, Pacifica, most parts of nearby Marin County, or even SF proper for half of that in a much nicer place.

The little bubble of silicon valley; menlo park, palo alto, atherton (which has an average home value of at least 4M if I recall correctly) really isn't that great. I'd much rather live in any of the above mentioned places over silicon valley proper.

Yep and that was literally a totally random listing when I typed in Palo Alto.

[clozareal]

I’m throwing a post off because I am calling you out about being intentionally opaque? Sure, it’s fine to get a >3x mortgage if you have 1-2x your income in cash reserves, but that doesn’t seem to be the situation OP is in.

You think a doc making 500k, who buys a 1.5M home, needs 1M in the cash to do so safely? This is ridiculously conservative.

[VentAlarm]

You think a doc making 500k, who buys a 1.5M home, needs 1M in the cash to do so safely? This is ridiculously conservative.

That’s not what I’m saying at all. EMD said he paid off a mortgage of 3x his annual salary in 5 years in spite of his income going down and used this as justification for saying a 3x income mortgage is a good idea. I said that that is not possible as taxes, mortgage interest, etc would cost 100% if his income over that period. He said something to the effect of “well, I had some cash on the side and you don’t know what OP has on the side.”

I was just saying that of course it’s fine to take out whatever mortgage you want if you have that sort of cash on side, but his example of saying “well, I paid off a mortgage of 3x my income of 5 years” is terrible advice because he was being opaque about the process. He still hasn’t said how much of that he paid off from a side fund; instead he just said “well, you’re young so you wouldn’t get it.”

[clozareal]

That’s not what I’m saying at all. EMD said he paid off a mortgage of 3x his annual salary in 5 years in spite of his income going down and used this as justification for saying a 3x income mortgage is a good idea. I said that that is not possible as taxes, mortgage interest, etc would cost 100% if his income over that period. He said something to the effect of “well, I had some cash on the side and you don’t know what OP has on the side.”

I was just saying that of course it’s fine to take out whatever mortgage you want if you have that sort of cash on side, but his example of saying “well, I paid off a mortgage of 3x my income of 5 years” is terrible advice because he was being opaque about the process. He still hasn’t said how much of that he paid off from a side fund; instead he just said “well, you’re young so you wouldn’t get it.”

You're right. I misread the post, you didn't actually say that.