My BIL and his partner just closed on a $1M 4bed/2bath home in SF (south and outside of downtown). They actually paid $1.2M for it because they couldn't lose this place to another sucker so they bid up... you know, $200k: no biggie.
They have been living in a pretty nice loft up until this point since 2003 I think - they got that loft in downtown for around $400k and it would probably sell for over $900k now. It sounds like they want to try renting the loft out and seeing how much they can get for it. Of course, I'm pretty sure they're not taking into account the overhead from expenses and what not (the association for already is like $400-500). They still owe on that mortgage but being that it's pretty low, I think they would cash flow. I just don't know how much it would actually cash flow and if it's better than just selling the place. For that area, I would think it might be a better idea to sell the loft ASAP and use it to pay down the mortgage on the existing place so it's not as much of a burden - don't you benefit from a cap gains exclusions in doing this if you've lived in the place for 2/5 years? Their combined salary is probably close to $300k, so it's within target range of 'affordability' but them overbidding $200k plus certainly pushes it the boundaries.
I guess they got tired of the 'street noise' and area they live in where the loft is, even though it's within walking distance of everything. Not sure why they needed a bigger place for just the two of them. It seems like they want to host wine parties at their place or something. The other justification is "oh you guys and mom and dad can stay here when you visit" - I'm not sure how realistic that expectation is as I always stay with my parents on the other side of the bay and my in-laws barely ever go up to the Bay Area. Neither my wife nor I have the biggest desire staying with them when we visit either - they're just completely different people and I think we typically will get annoyed after only spending several hours with them. Whenever her brother comes to visit us, we feel like he expects us to cater to his every need (e.g. after 5 weeks of giving birth, my wife felt obligated to pick up a Starbucks coffee for him in the late morning while he was sleeping in - he didn't want to go get coffee on his own even though the Starbucks is a 5 minute walk from here but absolutely needed it because he can't go #2 in the morning without his coffee....?!?!?!). With a second LO now and him visiting again in several weeks, that's not going to happen ever again. My wife can easily have a pushover-mentality though. I generally try to stay out of her personal interactions with her family but maybe I should step-in and deny him this time around.
Anyway, back to OP's post - I posted something similar about a FB acquaintance who bought a $1M home which is slightly above the norm in my area (mid-HCOL). But it turns out, given their *estimated* salary, they might not be in over their heads after all. That said, as others have pointed out and what you know, there's much more than just the home and how much it costs at play here. It sounds like your BIL is a recipient of Economic Outpatient Care though, which is helping him afford this opportunity.