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  • Forever home investment

    Im wondering what everyone's thoughts are on investing in a million dollar forever home. I live in California in the Bay Area meaning most homes start at 800k for a 2-3 bedroom in a decent neighborhood with good schools. I'm 32, recently married, planning for children soon therefore would like to transition before pregnancy. I'm 4 years out, partner, assoc med director, making approx 300k a year. My husband brings in another 200k. I have two investment homes with 35% paid off and rental income is almost double my mortgage. approx worth of both homes is 1.3 mil total. I'm looking at homes in the 1.2-1.3 dollar range but I'm not sure if that may be above my means, especially if I plan to cut down to part time for a year once our family grows. We have about 120k for a down payment and additional 200k in our 401k. My husband is a former marine therefore I'm wondering if I can use the Bank of America loan first with a lower down payment then refi to the VA loan. I don't want to pull funds from my investment homes nor sell them as those are mine prior our marriage. Anyone have any thoughts? Much appreciated!

  • #2
    Complicated situation, not to mention you're tying up a lot of $$ in non-liquid assets. I'm sure you'll get various opinions, but the only way to be relatively sure that you're making the best decision for your family is real financial planning (not investment advice). Too many unknowns here.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      Congrats on you and your hubby making a good income.  I know housing is very expensive in the bay area but I agree with Johanna that if you buy a million plus house you have way too much tied up in real estate. I would build up my nest egg. I personally would not buy a house thinking you will have kids. Wait until they arrive and build up your nest egg.

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      • #4
        I did this and I regret it.  The compounding costs of living in a large home from property taxes, utilities, insurance, maintenance, paying to furnish and fill the home, etc..... I now cringe at all the money and time lost that could have gone to earlier maxing retirement, 529s, earlier student loan payoff, etc.........And in the end, I think I would have been just as happy in a modest home.

        IMO, this is one of the biggest mistake that young doctors make.  Skip the lavish house unless that is really what makes you happy.  Don't think of it as an investment.

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        • #5




          I did this and I regret it.  The compounding costs of living in a large home from property taxes, utilities, insurance, maintenance, paying to furnish and fill the home, etc….. I now cringe at all the money and time lost that could have gone to earlier maxing retirement, 529s, earlier student loan payoff, etc………And in the end, I think I would have been just as happy in a modest home.

          IMO, this is one of the biggest mistake that young doctors make.  Skip the lavish house unless that is really what makes you happy.  Don’t think of it as an investment.
          Click to expand...


          This isnt a large home, its in the bay area and could be a 2/2 condo at 1100 ft, no such concerns about utilities, etc....lol.  

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          • #6
            Sounds like you are doing great.

            For the bay area, it would be techincally very difficult to find a "turn key" 3BR home for much less than a million and still have a short commute to most area hospitals. You probably also don't save a lot by buying something cheaper that requires renovations -- renovations have huge cost overruns and delay move in date while you still pay mortgage. While conventional advice is to not spend more than 1.5-2.5x your combined annual salary on a house, the exception is consistently in high cost of living areas and classically -- that is SF.  You are not likely to have consistently better savings by continuing to rent as rent prices rise quickly and home prices rise a little more slowly. A basic "should i buy or rent" calculator should give you a roughidea. I like the one hosted by the NY Times.

            My advice would be to save up more cash for down payment and wait until you have a 1 or 2 year old - unless the NY Times calculator is overwhelmingly convincing otherwise. There is a lot of extra maintenance in home ownership and a lot of extra "1 time costs" including furnishings, a big move, remodels, etc. We are in the same process in a high cost of living area and are finding that are relatively expensive rent is still about 2000-3000 /mo saving over a 1.3million dollar home despite a large downpayment

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            • #7
              Price of home to income seems reasonable to me but I would wait until you have 20% down payment available. Unless you have a spending problem that shouldn't take very long. Any other major debts? I know a lot of people say wait until you have kids but given the market in my area of the BA it can be very hard to buy. I wouldn't want to juggle that with young kids. All of the houses in my area are older so it was nice to be able to get some of the needed work done before kid. Of course I could only afford a modestly sized house so it was a place I would have chosen to live even without kids. If you would make a radically different choice without kids you may want to wait.

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              • #8
                If you want to buy a home in the Bay Area and stay there long term, that doesn't sound like an unreasonable stretch to me. You're at less than 3X income, perhaps even 2X with a big down payment, at least once you go full time again.

                So I think you can do it, but there will be a price paid. Hopefully home appreciation in that area continues at the rate it has in the past. Then you'll be really glad you did it.
                Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                • #9
                  This is one of the reasons I left the Bay Area.  There are many great and desirable places to live in our great country almost all being cheaper than where you are.  Not to mention California taxes!  Californians and especially from Northern CA think there is no other place as great.  That is being short sighted.  And this is from a born and raised Bay Area native.   You save a ton of money and still live in a great place with lots of outdoor opportunities (usually why many love the Bay Area).  You will spend less time in traffic too!  You should give it some consideration.  Our finances are in a much better condition currently than if we had stayed in the Bay Area.

                  If not, why lot live in one of your rental properties for a couple years?  You would still be building equity in your owned properties and also would be able to save up even more of a down payment.

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                  • #10


                    If not, why lot live in one of your rental properties for a couple years?  You would still be building equity in your owned properties and also would be able to save up even more of a down payment.
                    Click to expand...


                    Hmmmmm - building off @squirrel 's idea: If you lived in one of your rental properties for 2 years, you would then have another 3 to sell it and still be able to exclude a cool 1/2 million in capital gains from your taxable income.
                    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                    • #11





                      If not, why lot live in one of your rental properties for a couple years?  You would still be building equity in your owned properties and also would be able to save up even more of a down payment. 
                      Click to expand…


                      Hmmmmm – building off @squirrel ‘s idea: If you lived in one of your rental properties for 2 years, you would then have another 3 to sell it and still be able to exclude a cool 1/2 million in capital gains from your taxable income.
                      Click to expand...


                      Tell more Johanna.  Not familiar with this.  Didn't realize I was being so bright with the suggestion (hey I'm still learning!).

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                      • #12








                        If not, why lot live in one of your rental properties for a couple years?  You would still be building equity in your owned properties and also would be able to save up even more of a down payment.
                        Click to expand…


                        Hmmmmm – building off @squirrel ‘s idea: If you lived in one of your rental properties for 2 years, you would then have another 3 to sell it and still be able to exclude a cool 1/2 million in capital gains from your taxable income.
                        Click to expand…


                        Tell more Johanna.  Not familiar with this.  Didn’t realize I was being so bright with the suggestion (hey I’m still learning!).
                        Click to expand...


                        If you have lived in a residence (as your main residence) for 2 out of the last 5 years, you qualify for the home sale exclusion of $250k in capital gains per spouse.
                        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                        • #13
                          Thank you everyone for the fantastic advice. It is difficult looking in the Bay Area especially in Silicon Valley. My mom bought her home 30 years ago for 80k and its valued at 1.5 mil. And it's a shack in comparison to homes in other areas.
                          Johanna thank you so much for the advice regarding rental homes. That sounds like the best plan right now. So that I can save a bigger down payment and have less financial burden if I move to the million dollar homes.

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                          • #14


                            Johanna thank you so much for the advice regarding rental homes. That sounds like the best plan right now. So that I can save a bigger down payment and have less financial burden if I move to the million dollar homes.
                            Click to expand...


                            You're welcome - and thanks for the assist, squirrel.

                            Not to be morbid, but, hopefully, your mom can transfer her home through her estate at death to utilize the stepped up basis.
                            Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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