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Can I afford a home in So Cal?

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  • Can I afford a home in So Cal?

    Can we afford a 2.5 - 3M home in SoCal?
    We are currently renting @4k/month

    My husband and I make about 500K/yr gross (we are in early 40's)
    $750K in cash - holding to make the downpayment
    $1.7M in stocks, index funds and bonds
    $800k in retirement accounts
    $200K in 529 plan for the kids
    $200K in downpayment/equity in our old home out of state that we are renting out (positive cash flow at the moment)

    i realize this is against the 2x gross pay rule but not sure how applicable that is in SoCal. Any thoughts or advice is much appreciated?

    thanks

  • #2
    Is the 200k downpayment/equity included in the 750k cash holding for downpayment?

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    • #3
      That would leave you house poor. I wouldn't do it.

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      • #4
        With the available information, I would be uncomfortable making that purchase.

        I know CA is expensive, but is 2.5 mil really the only option?

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        • #5
          Originally posted by wonderwoman77 View Post
          i realize this is against the 2x gross pay rule but not sure how applicable that is in SoCal.
          so you jumped to the 4-5x rule?
          while you could technically swing the payments, the rest of your budget will be shot.
          pass.

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          • #6
            Living in So Cal doesn't mean you get a pass on math.

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            • #7
              Is the rental that you are getting for 4K adequate? That doesn’t sound as exorbitant.

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              • #8
                Could you “get by” with something under $2M? You don’t need to move to Riverside or Palmdale to find an acceptable house in a decent school district for less than that amount. Heck, you can get an ocean view for under $1.5M in a safe neighborhood in parts of SoCal.

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                • #9
                  No matter how many VHCOL house threads we have, I just can't...

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                  • #10
                    Originally posted by Hank View Post
                    Could you “get by” with something under $2M? You don’t need to move to Riverside or Palmdale to find an acceptable house in a decent school district for less than that amount. Heck, you can get an ocean view for under $1.5M in a safe neighborhood in parts of SoCal.
                    manhattan beach or bust!

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                    • #11
                      Originally posted by Peds View Post

                      manhattan beach or bust!
                      Hey, I like Manhattan Beach and Venice Beach too. Maybe Rancho Palos Verde. If I had to live in LA, I’d want to live west of the 405 or in Pasadena. Might mean a smaller, older place, but you have to make sacrifices somewhere.

                      That said, San Diego is cheaper and the traffic is better than LA in regular non-Covid times. Same super efficient, low tax state government either way.

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                      • #12
                        Honestly dont see the issue.

                        2-3M, which is a wide range but almost 1M in down payment, so maybe 2.25M. Theres almost 3M in retirement, no need to worry or rush funding there. If you want this place/location, etc...its simply a purchase.

                        Some on here spend 50k/yr on vacations and chastise folks for starbucks. Everyone chooses their spots and you're in reality in a great position. House poor goes away over time, Im sure you're properly insured, etc....

                        Redondo/Manhattan is for the fight on family.

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                        • #13
                          Additional info?

                          How old are the kids. Any provate school or colleges. 200K in 529 will not get you far if there are multiple kids.
                          Your house budget
                          your job security for both.
                          Will you have any cash left after making mortgage payments or living paychck to paycheck.
                          What happens if it becomes one salary family or reduction in salary ( like they did during COVID)
                          $2.5-3.0M. Add another 250-500K for renovations and furnishings if older home.

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                          • #14
                            Are you cool with working enough to continue making your current income or more until your late 60s or are you trying to cut back/retire early?

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                            • #15
                              That's 20-30k per year in property taxes right? That's 4-6% of your annual income and probably more than the mortgage payments of half the posters on this board . And we're doctors.

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