Author Topic: Moving From the Midwest to NorCal -- What am I missing in my calculations?  (Read 5285 times)

GoingConcern

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Currently I live in a condo in the midwest that is paid off and could be sold for roughly $170-$180k. My property taxes are under $3k a year and our HOA is around $300/month. My wife and I currently make around $110k-$120k a year.

We are considering moving to NorCal (more specifically Sacto area) where I would have to take a small paycut (around 5% or so) and my wife would have the opportunity to make much more since her field pays much better in California (an additional $50k+ in the very least if she finds a full time position) which would put our salary around $170k+ per year.

The area we are looking in NorCal has houses selling for around $400-$450k. I figure we can sell our condo for around $170k net selling costs and put down an additional $100k as a down payment and our mortgage would be around $900 to $1200 (assuming 15 years at 3.3% and not including prop taxes.)

We never thought about moving to California but lately due to the weather we would like to move to a warmer state and although COL is higher in California, I think my wife’s improved salary would offset the COL difference and the income tax difference in California. Property tax is lower in California and even if we stayed in the current area, we plan moving to a nicer suburb where our property tax would be somewhere around 10-15k and housing costs would be slightly lower than the areas we are looking at in NorCal. 

With that said, I think moving to California makes financial sense if my wife is able to secure a job there. Our salary would increase and I think down the road our future potential salary is greater in California than in the midwest.

I understand this is a mustachian forum and the decision I am making could be unmustacharian like.  ie Moving to a higher COL area and selling a home that is paid off to buy another home that is significantly more expensive especially when it can be used to increase my net worth.  But I still think we will come out ahead financially when I run my numbers especially when considering relocation costs (we plan to use a professional mover since my wife likes the bedset, I know expensive), traveling costs back to the midwest to visit family, and other than housing costs, the difference isn't that great.

But what other factors am I missing in my analysis?  Any suggestions?

Spondulix

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Would you be open to renting your condo for a year? Then you'd have a buffer to figure out if you like it in NorCal, and time to house hunt and buy.

Even though the house would be more expensive (and you'll have a new loan), your net worth won't go down. The loan is counter-balanced by the higher value of the new house. It just means you have more equity in your home than you might have in investments.

john c

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What specifically attracts you to Sacramento?  Have you considered other Sunbelt cities?

GoingConcern

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Would you be open to renting your condo for a year? Then you'd have a buffer to figure out if you like it in NorCal, and time to house hunt and buy.

Even though the house would be more expensive (and you'll have a new loan), your net worth won't go down. The loan is counter-balanced by the higher value of the new house. It just means you have more equity in your home than you might have in investments.

Lately I have been more open to the idea since I'm not sure if I want to live in the suburbs or closer to the city and the fact inventory is extremely low in Sacramento and home prices are extremely high.

What specifically attracts you to Sacramento?  Have you considered other Sunbelt cities?

I would need to leave my job to transfer to those areas and my wife's salary wouldn't be as high as it is in California.  Sacramento appears to be a nice place to live and is close to other areas like San Fran,Tahoe, Nappa  and COL is bearable compared to other cities in California.

seamer

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Lived in Sacramento for 15 years until last fall, when I moved to the upper Midwest. Let me know if you want opinions on specific neighborhoods.

In general, there are a few things to consider.

How far will you need to live from your jobs? Sacramento traffic is not as bad as L.A. or S.F., but I knew a lot of people who drove 45 minutes each way every day. Public transportation to the suburbs isn't great.

Be sure to check the property tax rates for specific areas, and even specific neighborhoods. There often are additional assessments (called Mello-Roos) on top of the county rate. Sometimes you'll be assessed these extra taxes, but the house across the street won't be. The Sacramento County Assessor has a search tool where you can view the tax on specific properties.

Is your wife a nurse? I ask because I know that's a career with that type of pay differential vs. other states. Typically, the areas with the most nursing vacancies are in rural areas. However, there are 5 major hospital systems in the Sacramento area. I know a couple nurses there, and worked with some folks in a college nursing program, and they said it's more difficult to get your first choice as a nurse, in terms of shift or area, but there are jobs to be had.

All that said, I loved living in Sacramento. Many big city amenities, but much more affordable, and you can avoid many problems like traffic, parking, etc. There are also various pockets with more affordable housing, if you're willing to live in areas considered less posh. That's what I did and never had any problems. It's also a very bike friendly place. The weather is good. Still has seasons, but with the exceptions of a few 100+ weeks in the summer, the climate is pretty moderate.

GoingConcern

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Yes my wife is a nurse with around 4 years of experience and we hope she can get a part time job in the very least.

We are currently looking at areas like Land Park and East Sacramento and possibly Folsom if we decide to live in the burbs. We like the idea of living in the city and plan to have a kid in a few years and think Land Park and East Sacramento is a good option. However it appears inventory is extremely low and prices are high as a result so we might need to consider some alternative areas.

Sibley

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I lived in the Sac area (Citrus Heights, worked in Roseville) for 6 years before moving back to the midwest.

Yes, cost of living tends to be high. Expect your car insurance to be high (mine dropped by half when I moved to Chicago area), gas prices are high. Income tax is high, at least compared to what I pay now. When I moved to Chicago, my overall cost of living went down a little, but the big categories shifted around too.

Property taxes are 1% of assessed value for the county plus whatever else is thrown in - school/utility debt, special districts funding, sewer/trash, etc. Assessed value is the purchase price + the lessor of 2% or cost of living index change. So if the COL index goes down, then your assessed value actually goes down too. That happened in 2012 I think (can't remember the exact year). If you do an addition, major work, etc that can trigger a reassessment as well.

Non-financial considerations. Allergies tend to be a problem in Sac. Even if you don't have them, a lot of people develop them after a few years.

Climate in Sac (not the foothills) is different than the midwest. It doesn't rain in the summer, and there was always a day or so of 115+ F. It's a dry heat, but at that point it's a blast furnace anyway. Winters are 40-50s generally. You don't really get spring and fall. It's basically 2.5 seasons. For me, that messed with my head after a while. Once you get into the foothills, the climate changes quite a bit. California as a whole has just about every possible environment. If you do move there, make it a point to do some travel to the middle of nowhere that is much of the state. Some beautiful places (after the 5 hour drive to get there).

Culture - is different. Some of it's obvious, but a lot is subtle. I'm blunt, and people didn't like me much because I'm not PC enough. San Fran is just plain nuts. Go north and you get in to very rural areas that tend to be very conservative. SoCal tends to be very liberal, and since they have more people you're stuck with it.

Politics - living in California is the reason I don't follow politics anymore. It can be maddening. The state is also having financial problems, much of it caused by being stupid (told you I'm blunt).

Something that I was told many times: if you move to California, you're either there for 5 years (I'm stubborn) or forever. Not a lot of in-between.

There's also a ton of attractions. San Fran is great to visit and tons to do. Sac has Old Town - a tourist thing, but still cool. Theater life in Sac is pretty good, and San Fran is even better. Monterrey Bay is nice - go for the aquarium rather than the shopping. There's all the national parks which are worth the trip. Muir Woods outside San Rafael is great. North up I-5 is the Avenue of the Giants. I didn't go south much, but Disney is down I-5, there's various amusement parks, Hollywood, LA, you get the idea.

Bottom line - I am never moving back to California. You may love it.

Calvawt

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I moved from Kansas to central California in 2010.  Outside of housing costs, it has really been fuel and food as the main differences.  Property tax was actually lower!  And so was my heating and cooling bills with he lower humidity and warmer temps.


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seamer

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My take is that your price goal in those city neighborhoods is possible, but the house will be smaller and older. I'd figure in higher maintenance costs. And be sure to get a sewer inspection of the place has a lot of trees. If you are not dead set on those precise neighborhoods, there are areas that get you close, but that are more affordable. For East Sac, you can look at Elmhurst, College Greens, areas north of Folsom Blvd., and even on the edges of Midtown. For Land Park, there's the Pocket, Riverside, Hollywood Park and the less expensive part of Curtis Park. Some people aren't thrilled about the schools in some of those areas. I personally think that is ridiculous. Before I moved, I was looking at homes in East Sac and the neighborhoods I listed so am fairly familiar.

In Folsom, the older areas are less expensive, and you still get Folsom schools and a relatively short drive to retail. Long drive into Sac, though. You could also try Rancho Cordova. The new areas south of the freeway and east of Zinfandel are affordable and don't have some of the issues that the rest of Rancho has. However, there are fewer options for entertainment and shopping, as you'd most likely end up in Sac or Folsom.