Have been doing quite a bit of research here, Nerdwallet, Zillow, NY Times rent vs buy, etc. I've been getting some very conflicting advice and wanted to reach out to the community here for some pointers, especially from those much older and experienced.
I'm getting married in a few months and fiancee and I are looking to purchase a home in the next year or so. Target area is Oakland or Alameda in the East Bay. We both commute to SF.
Details:
-By the end of 2018 when we expect to buy, we'll have about 450k liquid. I imagine this as roughly 400k for downpayment and closing costs, with 50k for emergency and basic furnishings (?)
-90k in retirement accounts (401k + Roth)
-800+ FICO
-0 debt. We are incredibly fortunate to have had financial help from parents, allowing us to go through school debt free and also start saving and investing from a very young age.
-Income:
- Fiancee currently works part time 20k/year. Likely that she will start career in 2 years, making somewhere between 50-60k.
- I make 175k base + 20k in bonuses that I've consistently gotten for the past several years. Job also includes roughly 85k/year in stock options that have strong potential to grow. Nevertheless, I consider this a lottery ticket.
Net base income: 195k Net stretch income: 195k base + 20k bonus = 215k
- Current rent is $2400
- We are 25 and don't expect kids soon. Our families are healthy and well off financially. Job security for me is not a concern
Going by the 3x rule commonly stated here, we should only consider getting a loan of 600k and aiming for a house of 1m. However, both parents and everything I read tell us we have a LOT more wiggle room AND that we should stretch it as much as possible to a range of 1.2-1.3m.
Here are my budgeting numbers for 1.3M house, 400k down, 4.25% 30yr:
- Monthly aftertax, after deductions pay 10300
- Property Tax -1516.666667
- Interest -3417
- Principal -1372
- Home Insurance -83
- Food -800
- Car costs -150
- Utilities -100
- Charity -800
- Personal -500
- Tax deductions from giving 312
- Tax deductions from property tax 375
- Tax deductions from interest 1332.63
- Total left per month 3580.963333
- Total left over per year 42971.56
These are assuming property tax deduction cap of 10k, average interest amortization for year 1, a marginal tax rate of 39%, and maxing 401k. Are my numbers reasonable? This seems quite comfortable unless I am missing something.
In the bay, I've seen average rent increases of 5%/year and average home appreciation of 4.5%/year. Inputting such numbers into the NY times calculator makes buying not only a no brainer, but a significantly better investment than the stock market. What kinds of risks are we taking? I know many people believe Bay Area real estate is some kind of bubble that is about to explode, but everything I've seen points to the contrary - booming economy, high job/salary growth, limited housing supply, investors with loads of cash, several enormous impending IPOs.
Submitted February 19, 2018 at 04:20AM by throwaway01729221 http://ift.tt/2offgv0
