Hey all,
Some background on me. I live in the midwest with a stable tech job making ~95k/year, and am 26y/o. I have 120k in retirement accounts, 65k in post-tax brokerage accounts, and 35k liquid. No debt. Currently in a situation where my lease ends in March, and my current roommates will be buying a house. I have gotten used to the standard of living of splitting a house with roommates, and am not really looking forward to reverting back to renting an apartment. My girlfriend currently lives with me, and she would likely move in with me wherever I end up going and would pay rent. Our current share of the rent is 1150. Regardless, I want to make plans as if I were paying for the whole thing as a form of CYA.
My original plan was to buy a multifamily unit and live in one of the units and rent the rest. However, in a sellers market, there has been basically no supply in my area. On top of that, for a conventional loan, I would need 25% down to make that work, and clearly I have money tied up at the moment. So I started looking into just buying single family, and was approved @2.75% for a $380k home with 10% down. However, with the amount that I contribute to my retirement accounts and monthly budget, that would leave me with barely any cashflow at the end of the month, let alone my entire cash funds being used up. Clearly this is the absolute top of my budget.
Looking at the market for the last couple months has been rough. Barely anything good out there in a reasonable range, alongside an impending housing crash which has me scratching my head due to the demand out there. On the other hand, I can't find a decent apartment for under 1500, so my cost of living will go up at the same time as my standard of living going down. With my current mortgage approvals, I could put 20% down on a 300k house and my monthly payment would be around 1650. For reference, the 10% down on 380k house came out to 2100 with PMI.
It's clear that my 35k liquid funds also will not cover this. Looking into having my dad gift me some money for this - the yearly non-taxable limit seems to be 15k. So if he gifts me 15k before year's end, and 15k after newyears, I would be approaching 65k, which would get me close to that 20% down on a 300k house. Even without abusing the taxable gift limit, I could sell some extra stock.
I feel like I could make 20% down on a 300-350k house work, by selling some post-tax stock to close the gap. The payment being in the 1650-1850 range would still net me $500/mo cashflow, even after budgeting for my usual retirement account contributions.
Is this a dumb idea given the current economic climate? My job is tied to the government, with contracts flowing into the next decade, so I feel pretty safe there. Selling stock to buy into a housing bubble seems like a stupid idea to me. If I wait another year, I could buckle down and save another 10-20k, and more safely reach that 20% threshold. Not only that, but if housing prices go down due to the collapse, I will get more house for my money, and will have more options to choose from.
Am I being too chicken to pull the trigger? Or should I play it safe and rent for another year?
Thanks in advance!
Edit: Budget since someone asked:
Current Budget: Monthly income after retirement, benefits, etc - 3760 Costs: - Rent (my share) - 700 - IRA (max allowed) - 500 - Bills (no debt) - 300 - Transportation - 50 - Food - 250 - Discretionary - 250
Net Cashflow (savings) - ~1700
After buying a house (lets say $2k/mo to be aggressive):
Monthly income after retirement, benefits, etc - 3760 - Mortgage - 2000 - IRA (max allowed) - 500 - Bills (no debt) - 300 - Transportation - 50 - Food - 250 - Discretionary - 250
Net Cashflow (savings) - ~4-500
Please note in the above scenario I am not considering the rent income from my girlfriend which would probably be in the ~600 range. So my actual cashflow would be closer to $1k.
Submitted November 04, 2020 at 06:34PM by bert_throwaway https://ift.tt/3oXiUZ8
