Yes, I agree. Many professionals did this. We did too. Buy starter home, trade up (maybe once or twice), then buy in peninsula.
I agree that with a $300k salary he can buy something. For sure, not what he wants or what his parents had at his age but he isn’t even close to struggling.
However, he could afford a GREAT lifestyle even after a pay cut if he moved. The bay area has a ton going for it but so does Seattle…everything on @sfdragonboy’s list with the exception of weather and a number of top ranking universities.
This is something I personally wonder. Is the bay area worth it? I’m still here so I guess so for me…
Yes, I did
I’m very much pondering the same thing. Only thing really keeping me here is my son’s school. Cannot get that elsewhere. Otherwise, I’m ready for a break from taxes, crappy politicians and their horrible policies, and this housing market. I really do think we would do better elsewhere.
I think your son’s school situation is a manifestation of the richness of our environment here. Same as my kid’s Chinese immersion school. If I were to move to, say, Sacramento, there is nothing like that in the entire Sacramento metro.
There is a vibrant maker community in the Bay Area. It’s kind of crazy to make anything physical here, given the high price of real estate here. But we have tons of designers, investors, customers locally. Enough so it overcomes the real estate shortcoming.
I would leave CA entirely. I don’t need a nanny state to run my life. Taxachusetts got a bad rap for a 5%/5% tax rate? CA has that beat two fold!
Come on folks, you know what everyone says: once you leave, you won’t be able to come back to live here (unless you hit the lotto)…
Think real, real hard about it…
Resident Bay Area Ambassador
Terri is like Great Britain, she has always had one foot out the door…Trexit? Plenty of people will leave the BA, but plenty more will come…NYC has been unaffordable for 50 years but people still flock there…
Exactly. And we are pulling away from NYC in many respects.
That’s quite all right. Until all the current politicians are replaced by people who actually care about their constituents instead of getting $$ from Pharmaceutical companies and Monsanto to keep you sick, everyone here is just a cog in a wheel designed to milk you dry.
Owning a house would actually make the decision easier as I’d make a bundle on leaving. Would wait a couple of years for my son to finish middle school, but it would be an easy choice. Retire somewhere else where it might still be the land of the free.
I hear in Montana there isn’t even a law saying you have to send your kids to school. Imagine that! I bet the parents there don’t get nasty notices from the school district telling you your kid is sick too much and if they keep it up you’ll need to get a note from your pediatrician to prove to the district that you aren’t some scummy lying parent who is making these things up.
Nanny states love sheeple. I’ve never made a good sheep.
One thing I am not sure is where “300K by mid-30s” comes from.
If he is in mid-20s and expect 300K by mid-30s, his compensation should be close to 200K by now.
If I were him, I won’t assume my salary would jump to double in 10 years. Although this is possible with a few successful change of jobs or promotion, not everyone is lucky enough to achieve this. At least, I wouldn’t make such assumption unless I am making 200K now.
If he is making 200K in his mid 20s, there is no concern for him. He can definitely afford starter condo or townhome as Manch pointed out.
One more thing he needs to keep in mind is lenders don’t consider bonus or stock for your steady income. My loan officer said they may consider with exception (and with a very compelling letter of explanation) but generally no.
At that time, 40% of my compensation was “bonus+RSU” (total amount had been stable for a few years at least) and I think it is quite common in Tech world. Luckily, base salary was enough to cover the loan.
I suspect this person might count “bonus+RSU” in 300K estimation. If so, he needs to revisit his plan.
Although Tech salaries are quite inflated in many places, I hardly see 300K base salary in mid 30s (10 years of experience).
He is a lawyer, it is possible to have 300k or more in 5-7 years.
The best answer provided to him is
- Don’t forget that after you buy a $2m home, you’re paying $2k/month in property taxes, no matter what.
- You can put down less than 20% on mortgage loans these days without much trouble.
- Any loan greater than $625,500 is a “jumbo” loan, requiring 6 months of mortgage payments in liquid assets. That is, if you buy a 2.5m house and put 200k down, Zillow says you owe 11k/month. So that’s an extra 66k you need in the bank.
- If you take your 3k a month in savings and add that to your rent (call it 5k) that’s 8k you have with your current lifestyle. You’ll still need your girlfriend to contribute 5k to get to the 13k/month to pay for mortgage and property tax.
- The interest that you pay on your mortgage is tax deductible, so your take home pay will be higher than it is if you’re renting.
- If you want your kids to go to Menlo Park schools, look at the School District boundaries. There are parts of East Palo Alto and Redwood City that go to high school at Menlo-Atherton. Maybe you buy a normal house for 1m in a less ritzy neighborhood and send the kids to private school until high school?
- Your parents live in Menlo Park already. You might be able to defraud the school system into thinking you and your kids live there?
- Your parents live in Menlo Park already, but they don’t need those schools or a big house any more. Maybe you guys can work something out to live in the house yourself, and have them move to a condo, cottage, etc?
- If you somehow buy a house, you can always sublet a room or two to help save extra money for when those kids come around, and then kick out the renters.
- Realize that it may never get any better in terms of price. If you live in Menlo Park, you can ride your bike to work, have incredible free schools, enjoy the best weather on the planet, walk to a neighborhood cafe, have a vegetable garden, go trick-or-treating on quiet streets, and rest assured that your community will continue to vote against any meaningful growth.
Of course, they missed 20% down payment especially higher level of financial and seller acceptance in desirable areas.
BTW: Looks like we have more fun than giving him good ideas…Cool
I made totally wrong assumption.
Not necessarily. Most lawyers hate their jobs and thus their lives, end up quitting the profession.
With a person (like OP) thinking at this age of mid 20s about his future, he is aggressive on growth and will make it happen. Normally, ta that age, person like to enjoy the life with 200k income, but OP is different. He has farsighted vision and trying to compete with existing crowd. IMO, The probability of his success is higher than failure.
Not a matter of success or failure. He can well succeed in other professions.
Like where? East PA? Normal houses in peninsula all cost more than 1M.
This person’s answer crams a lot of numbers in but lacks clarity. I don’t like it.
Yup. Cause the bad part of North Fair Oaks hit $1M last year. Handful of other junky places sold under $800K like the one that was on the tracks by the Hanky Panky with the sewer line strip of land cutting through the backyard.
I think the guy can have his nice house and stay at home wife by the time he’s 35. He’s young and saving $40K a year already and sounds like he doesn’t have kids yet. He’s asking questions early.
To catch these crowd, I bought 3 SFHs in Austin . Thinking about Denver and Seattle… the rocket has flown very high up already.
Need to catch up with you. Only one in Austin (Pfluggerville - Blackhawk). Which area did you go with?