Author Topic: All of a sudden we want to buy a house...  (Read 4183 times)

kisserofsinners

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All of a sudden we want to buy a house...
« on: July 19, 2012, 02:39:17 PM »
Hey kids!

This is my first topic and post that really outlines why i'm here. My wife and i have been slowly building our savings into long term options (401k, IRA, Roth IRA etc). We want to have a baby and set $100k of savings as a goal before we get started.

We got up to about $90 when our landlord said they're selling. We asked them when we got stared if this was an option and were told they were saving the house for retirement. "Great!" we thought and resigned ourselves to rent there forever. It's been a year since then. The rental market right now in SF is crazy, as of last year it's the fastest growing cost of rental prperty in the country at something like 14%!!! We do not want to move. It would double our rent and kill our current savings levels. My wife WILL NOT leave the city. She makes most of the money so i don't mind her entitlement on this point.

There's been a little drama back and forth, mostly because it's a flat in a TIC building.

Starting with about $10k in cash savings we have approximately 14 months to scrape together $120k.

My question is, other than saving everything we can and spending as little as possible, while picking up extra work where i can, is there anyway to invest that money into something that will give reasonable returns over a traditional savings account that i can get back within this time frame.

Please, if you can, give me details. I know there is a similar post on here about a guy wanting to buy a house, but the answers don't make sense to me. The general consensus seems to be keep it cash, but i don't understand why and i don't want to thread jack.

Can someone please explain? Videos, pictures and audio highly encouraged, I have trouble reading, but will plow through what ever i can get. :)
Peace

velocistar237

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Re: All of a sudden we want to buy a house...
« Reply #1 on: July 19, 2012, 03:14:44 PM »
The general consensus seems to be keep it cash, but i don't understand why and i don't want to thread jack.

High-yield investments tend to fluctuate quite a bit, so it's best to hold them long-term and let those fluctuations basically even out. If you choose an investment like that for the short-term, there's a big chance that the value would have gone down when you want to withdraw the money. So, people usually put short-term money in something stable, which tends to have a lower return.

If buying soon is a goal you're willing to make sacrifices for, then you can turn to some options that are generally frowned upon here on the forum, like borrowing from your 401k, getting a loan with a low down payment and paying PMI, etc. It's all about your own goals.

JohnGalt

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Re: All of a sudden we want to buy a house...
« Reply #2 on: July 19, 2012, 03:19:27 PM »
Just about anything that will give you enough of a single year return to make any sort of dent towards what you need will come with a ton of risk. 

I'm not entirely clear what the situation.  Do you have $90,000 saved up of the $100,000 goal before having kids?  Is the $120,000 in addition to that?

Is this money for a down payment or to pay cash?

You say that you want to buy it because renting would cost twice as much.  Twice as much as your current rate (why is it so much better than other options)? Have you checked to make sure that buying is actually a superior option to renting elsewhere?  I hear that SF is a terrible market to buy in these days.  You should run all of the numbers to be sure before making the decision.   


kisserofsinners

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Re: All of a sudden we want to buy a house...
« Reply #3 on: July 19, 2012, 05:06:57 PM »
Just about anything that will give you enough of a single year return to make any sort of dent towards what you need will come with a ton of risk. 

I'm not entirely clear what the situation.  Do you have $90,000 saved up of the $100,000 goal before having kids?  Is the $120,000 in addition to that?

Is this money for a down payment or to pay cash?

You say that you want to buy it because renting would cost twice as much.  Twice as much as your current rate (why is it so much better than other options)? Have you checked to make sure that buying is actually a superior option to renting elsewhere?  I hear that SF is a terrible market to buy in these days.  You should run all of the numbers to be sure before making the decision.

The $90k is about $60 in 401k and IRA type accounts. There is another $30k in stocks/bonds (indexs through schwab). In the drama that is not discussed, i only recently (like when you asked) realized that i can sell some of that later when it's "up". When this first started we had 6mo. :( You are absolutely correct we do have a little 'stache already. :)

My wife has been in her rent controlled apt for 8 years. We have a 3 br/1b top floor unit in a prime city location, with a roof deck and enough space to regularly host 50+ppl, for slightly < $3000/mo. That is what you'd currently pay for a 1br in a similar area if you signed a leave today.

If we're forced out of this house, we're likely to move to the east bay. This has a whole host of other issues, like how do we get to work in the city? Leaving the city is particularly hard on the wife. She's a disabled and struggles managing a bike on transit. This is also why we can't go to far out of prime areas, she needs to stay connected.

We are definitely looking at every option, including buying in the east bay. However, this is where our hearts are set at the moment. If it all fails, we'll at least have our nice 'stache growing. We've had a lot of really hard conversations and i'm proud of us for not freaking out. I'm just wanting to know if there's anything else i could be doing.

I understand the risk and timing issue better thank you both for your response!!!

sol

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Re: All of a sudden we want to buy a house...
« Reply #4 on: July 19, 2012, 05:23:00 PM »
Hi, I'm new here.  Does anybody know of a surefire way to double my money in 12 months with zero risk?  KTHXBYE!

arebelspy

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Re: All of a sudden we want to buy a house...
« Reply #5 on: July 19, 2012, 10:06:18 PM »
Hi, I'm new here.  Does anybody know of a surefire way to double my money in 12 months with zero risk?  KTHXBYE!

I'm pretty sure smedleyb has some ideas for you, if you subscribe to his newsletter.



(just kidding smeds ;) )
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grantmeaname

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Re: All of a sudden we want to buy a house...
« Reply #6 on: July 20, 2012, 07:39:50 AM »
If you can't spend more and you can't move farther out, you have to downgrade your place. What's wrong with a 1br place? There's just the two of you, right? I know it's not a thrilling compromise, but it's a better compromise than cutting your savings rate (if you want to retire early) or moving out of the city (which isn't an option due to your wife).

kisserofsinners

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Re: All of a sudden we want to buy a house...
« Reply #7 on: July 20, 2012, 10:58:22 AM »
If you can't spend more and you can't move farther out, you have to downgrade your place. What's wrong with a 1br place? There's just the two of you, right? I know it's not a thrilling compromise, but it's a better compromise than cutting your savings rate (if you want to retire early) or moving out of the city (which isn't an option due to your wife).

The current plan is for us to stay working. There is a goal to "shache enough to set me working part time and spending more time managing the house and family.

If we don't get this flat, we'll certainly be moving someplace smaller for a while. ...Even considering Oakland/Berkeley. I do realize these things will not kill us. :)

Thanks again!