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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: factoryflame on January 22, 2015, 11:53:28 AM

Title: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 22, 2015, 11:53:28 AM
I read MMM religiously, but we are not super mustachean. If my partner was interested in FI/RE, I believe we could do that right now (if we lived elsewhere), but he's not super interested in quitting his job and neither of us want to leave San Francisco. If I never have to work in an office ever again, I would be happy as a clam.

You are some of the finest personal finance thinkers around. Can you help us figure out if we should buy a house here or continue to rent?

My partner, our little one and I live in San Francisco.
Income:
Because his company was recently sold, we have a little over $900K in a variety of Vanguard and TIAA-Cref funds. His salary is $163/year base salary + ~$30k/ year bonus + stock units that could be worth a lot, eventually. He contributes the max to our 401(k), plus he has been promised a $500K retention bonus, paid out over the course of 5 years.  So for each year of the next 4 we can expect gross income to be around $270-300K.

While I have a work history, I am so so lucky to be able to stay home with our baby and make sure our household doesn't fall apart.  Before we had the baby, we agreed to live on his income and pay down debt/squirrel away savings with the mine. Because of this pre planning, we are essentially debt free and have emergency cash of $15K.

I know it sounds like we are rolling in it. We are! But we also live in one of the most expensive cities in the US. And with all of this, I question whether we could afford to buy a house here, in a neighborhood with access to a work shuttle. Houses in these areas list for $1M (tiny, tiny 2 bedroom houses that share walls with the neighbors) and sell for $1.3M!

We rent a lovely and large 2/bd 1/ba Victorian flat in the bustling Mission district. It has many fine qualities, but there are a thousand little things that we can't control that make us desire a place of our own.

What's great about our apartment:
* We've been here 3 1/2 years. It's rent-controlled. We pay $2,650/mo for our home, and that rate can't go up by more than 1% a year. It is far below current market rate. It would probably be close to $3,500/$4K on the open rental market today
* It's super walkable. I can literally walk out the door a half block and be on one of the busiest commercial corridors in SF, 24th Street. Steps away are grocery stores, coffee shops, ice cream parlors, fancy restaurants, a thousand burrito joins etc. etc. etc. Further out is even more walkable commerce
* It's close (about 6 blocks) to the shuttle that ferrys up my partner to and from work down in Silicon Valley
* It's very close to several parks and playgrounds that my kid enjoys daily
* It has plenty of space to house our three person, three cat family

What bothers us:
* We live on a noisy street where young, unemployed men hang out and sell dope and set off firecrackers and play thumpy music
* Our windows are single-paned and drafty/noisy/energy inefficient
* The heating in this place is super inefficient, and we have space heaters in our bedrooms
* We have a split bathroom (toilet in one room, tub and sink in another) which is annoying for many reasons. I yearn for two bathrooms.
* We aren't allowed a dish washer
* We aren't allowed laundry facilities
* We don't have access to a garage,
* While we have access to the back yard, it's in pretty bad shape/overgrown/uneven, and the landlord has no interest in changing this/letting us change it
* A third bedroom/guest room would be great. We want our baby’s grandparents to come out and stay with us a lot now, and perhaps more as they age. They live Back East.
* The wallpaper is ugly (i.e. the place is in fine shape, but doesn't look the way we want it to.

We feel like we could comfortably put down $600K and borrow $400K and maintain our current lifestyle. We’re having a really hard time finding houses in these neighborhoods for a million dollars or under that aren't serious (structural) fixer uppers.

Housing prices in SF have been gaining hugely in value over the past several years, and bounced back much more quickly than the rest of the country.

Are we crazy for thinking about leaving our good rental situation to spend more than a million dollars on a house in San Francisco?

Is it nuttier to spend so much of our 'stache on a house with a mortgage in earthquake country or to leave it invested, subject to the vagaries of the financial markets?
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: Hopper on January 22, 2015, 12:17:02 PM
I think you can AFFORD to buy, especially considering you are willing to plunk down a large part of your retirement nest egg.  I am interested in hearing the forum responses on whether you SHOULD.  I lived in San Francisco back before the 08 bubble burst and left the area in part because of the high prices and my desire to own a house AND more quickly pay off my large student loans. 

Are you afraid on missing out on an appreciating market?  I would say that the vagaries of the financial market that you speak of are less worrisome, long-term, than the vagaries of the housing market.  But in SF, that is less of a concern.

Have ruled out seriously looking for rentals (3 bedroom) a few blocks back from the main streets in your existing neighborhood or others close to your partner's work shuttle that would give you laundry and a dishwasher, and cosmetic upgrades that you would be happier about living in?  I would first crunch those numbers before pulling the trigger on buying.     
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: dragoncar on January 22, 2015, 12:26:25 PM
Afford, yes.  Should?  Depends on more factors, but I wouldn't. 

Number one question is how long you expect to stay in SF.  Most people do not raise children long term in SF, and end up moving to the suburbs.  Have you looked into the school situation?  If you aren't staying, I wouldn't buy.

Rent control is pure gold.   Best bet is to stick it out where you are until you leave SF.

If you are really worried about earthquakes, get the biggest no-recourse mortgage you can.  If the house is destroyed, walk away.  That being said, don't be inside the house when it's destroyed.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: iamadummy on January 22, 2015, 12:56:57 PM
buy house in east bay
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: MsPeacock on January 22, 2015, 12:59:12 PM
I am wondering about finding a better rental. Are rents lower compared to house prices? You may be better off renting in that case, if you can find something that suits you.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: Angie55 on January 22, 2015, 01:04:23 PM
Since you admit you're  underpaying by around $1000 a month would you consider doing some of the improvements on your own dime? I would not expect the landlord to say no to taking down wallpaper and painting or doing some simple landscaping if they don't have to pay or do anything. I would expect the outlay on some improvements to make you happier will be much less than the opportunity cost of not having 600k in investments.

Also, you could offer to pay for a long-term nearby rental through airbnb/vrbo when parents visit. My thinking is this would still be lower cost than 600k not earning you anything. Why pay the premium for an extra bedroom all the time when you will only be using it a few months a year.

Have you thought about portable dishwasher and clothes washer? Since you're in San Francisco you could line dry most of the year in your yard.
Add insulating curtains for a sound and draft barrier.

Think outside the box. With your income and savings from being rent controlled. I would chalk up the extra expenses as necessary to make you happy.  Even with low expectations of 5% annual earns that 600k would be making you 2500 a month that it couldn't if it were tied up in a house. Plus, with a house you'd be eligible for maintenance and repairs. Likely you would end up doing the same improvements (painting, landscaping, window treatments, etc.) on the house you buy so I would advocate to do them on the one you rent.

Now, I wouldn't advocate this for most people. But rent control in downtown San Francisco that allows you an easy commute and access to city amenities? That's a gold mine!
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: RapmasterD on January 22, 2015, 01:11:17 PM
1) I love your tone and writing style. Thanks for sharing your story.

2) You've already received good advice. Short story: your current rent situation is 'gold.' I have former colleagues that would KILL to pay your rent. If you want to buy, you'll inevitably want to look into the East Bay (e.g., Pleasanton, which by now could be a stretch for a milli).

3) I'm truly sorry about smoking weed in front of your pad. It helps calm my nerves.

Seriously, best of success.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: Capsu78 on January 22, 2015, 01:12:03 PM
I always knew I would live in a $1,000,000 plus house.  I just couldn't imagine it was the one that backed up to the freeway in Fremont that we bought for $172,000!

Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 22, 2015, 01:23:45 PM
Quote
Have ruled out seriously looking for rentals (3 bedroom) a few blocks back from the main streets in your existing neighborhood or others close to your partner's work shuttle that would give you laundry and a dishwasher, and cosmetic upgrades that you would be happier about living in?  I would first crunch those numbers before pulling the trigger on buying.     

Actually, I hadn't considered looking for someplace else to rent. We're so happy with the space and location and (relatively) low rent, that I don't think we'll be able to do better. But it's a fun idea, and I may look on Craigslist for 3b/2bas for kicks.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 22, 2015, 01:29:46 PM
Number one question is how long you expect to stay in SF.  Most people do not raise children long term in SF, and end up moving to the suburbs.  Have you looked into the school situation?  If you aren't staying, I wouldn't buy.

I really like the thought of raising a kid here in SF. So much beauty and culture and walking life. Because of the way the school lottery is set up, we don't know where our kid might be assigned for public schools. In our apartment, we are in a "CTIP" area that gives us a better shot at a school of our choice. But if none of the schools we get accepted to are  a good fit for us, we could send the kid to private school. There are a LOT of kids in SF. Maybe most families choose to leave, but hella families stay here too.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 22, 2015, 01:32:24 PM
buy house in east bay

Can't! The shuttle that drives my partner to/from his golden handcuffs job in the valley makes his commute palatable. For a house in the East Bay, he'd be commuting 4 hours a day. That's some terrible quality of life, right there: never being home to see his ever-loving partner or our baby.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 22, 2015, 01:37:06 PM
Since you admit you're  underpaying by around $1000 a month would you consider doing some of the improvements on your own dime? I would not expect the landlord to say no to taking down wallpaper and painting or doing some simple landscaping if they don't have to pay or do anything. I would expect the outlay on some improvements to make you happier will be much less than the opportunity cost of not having 600k in investments.

Also, you could offer to pay for a long-term nearby rental through airbnb/vrbo when parents visit. My thinking is this would still be lower cost than 600k not earning you anything. Why pay the premium for an extra bedroom all the time when you will only be using it a few months a year.

Have you thought about portable dishwasher and clothes washer? Since you're in San Francisco you could line dry most of the year in your yard.
Add insulating curtains for a sound and draft barrier.

Think outside the box. With your income and savings from being rent controlled. I would chalk up the extra expenses as necessary to make you happy.  Even with low expectations of 5% annual earns that 600k would be making you 2500 a month that it couldn't if it were tied up in a house. Plus, with a house you'd be eligible for maintenance and repairs. Likely you would end up doing the same improvements (painting, landscaping, window treatments, etc.) on the house you buy so I would advocate to do them on the one you rent.

Now, I wouldn't advocate this for most people. But rent control in downtown San Francisco that allows you an easy commute and access to city amenities? That's a gold mine!

We've made a few minor improvements, like paint and a janky soundproofing on the kid's room windows, but the landlord is persnickety, and I bet she'd flip over an unsanctioned wallpaper change. Dishwasher and laundry machine are expressly forbidden in the lease. When I've brought up hiring a gardener, she's been pretty uninterested, even saying that she'd have to ask her lawyer about it. She doesn't welcome any changes/improvements to the property. I might try to have some landscaping done anyway.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 22, 2015, 01:42:12 PM
1) I love your tone and writing style. Thanks for sharing your story.

2) You've already received good advice. Short story: your current rent situation is 'gold.' I have former colleagues that would KILL to pay your rent. If you want to buy, you'll inevitably want to look into the East Bay (e.g., Pleasanton, which by now could be a stretch for a milli).

3) I'm truly sorry about smoking weed in front of your pad. It helps calm my nerves.

Seriously, best of success.

Oh, you're sweet to say nice things about my writing. We can't move to the East Bay until his job unlocks my partner's golden handcuffs with a $500K key. The commute times from the Beast to the Valley are not compatible with a happy home life.  And the weed? I don't mind the smoking of it at all, just the commerce. We have dispensaries for that.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: Angie55 on January 22, 2015, 01:44:07 PM
Sounds like your landlord is trying to get you to get fed up and leave so they can raise the rent. Personally, if there are no yearly inspections I might just see what I can get away with.... It would be hard to charge you above your security deposit upon moveout for improving the property.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: dapperdanj on January 22, 2015, 02:04:32 PM
Fellow San Franciscan here, born and raised in the area, in a somewhat-similar situation.  A couple of thoughts:


Your situation right now is good enough that when you have people visit, you can pay for them to have an AirBnb and still come out ahead. At the rate you can save right now, you can be one of those cash buyers in about three years, looks like. Not bad.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: SnackDog on January 22, 2015, 02:13:49 PM
You can not afford a $1MM home. Why? Because you can't afford to sideline 65% of your savings (600/900K) as a down payment.  Since you can't afford the payments with 20% down, it doesn't make sense.  If you had more  like $3MM invested, I'd be ok with putting $600K down.  I suggest you consider something closer to a $600K house (or condo/TIC), which is possible in SF but probably more like 2 bed/1 bath.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: dragoncar on January 22, 2015, 02:24:26 PM
Number one question is how long you expect to stay in SF.  Most people do not raise children long term in SF, and end up moving to the suburbs.  Have you looked into the school situation?  If you aren't staying, I wouldn't buy.

I really like the thought of raising a kid here in SF. So much beauty and culture and walking life. Because of the way the school lottery is set up, we don't know where our kid might be assigned for public schools. In our apartment, we are in a "CTIP" area that gives us a better shot at a school of our choice. But if none of the schools we get accepted to are  a good fit for us, we could send the kid to private school. There are a LOT of kids in SF. Maybe most families choose to leave, but hella families stay here too.

OK, I wasn't suggest you shouldn't, just making sure you knew what you wanted.

If you are in it for the long haul, then yes I would probably buy if I were you. 

dapperdanj is right about the boom/bust cycle, so make sure you can survive job loss/paycut.  Don't need to go as far back as the gold rush,  just look at what happened in 1990, 2001, and 2007

(http://www.jparsons.net/housingbubble/san_francisco.png)

But I'm a demographic contrarian now.  All the GENY want to be in the city right now, raising their babies and such, sharing walls with neighbors, and walking to the beard bars.  Which is why I bought in the suburbs -- everything is cyclical.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 22, 2015, 02:28:43 PM
Fellow San Franciscan here, born and raised in the area, in a somewhat-similar situation.  A couple of thoughts:

  • Golden handcuffs - seems good, but not life-changing (for the Bay Area). The work shuttles are a terrible thing for your quality of life (speaking from experience, that 2 + hours per day on a bus is misery), and there is probably a company cityside who could match or come close to matching those handcuffs. Facebook and Google (I'm assuming it's one of those) can be matched.
  • I'd avoid buying in the city right now; we were in the same position (some cash, looking to get a place) last year and pulled out after getting blasted out of the water by all-cash people with a ton of money to burn. It's scary.
  • San Francisco is a boomtown. It will bust. Bide your time and read a book or two about the gold rush. One of my favorite quotes from that time involved something like "legions of bearded young men in flannel shirts moving to San Francisco to find gold." Nothing ever changes, especially people claiming that this time it's different.

Thanks for the insight of someone who's been there. He loves his job, and doesn't mind the bus commute (he used to drive, so to him a bus is the lap of luxury). He doesn't want to look for another job, though I would LOVE for him to work in the city. He gets recruiting calls all the time...

Housing is scary here. Glad to know we're not alone :)
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: MrFrugalChicago on January 22, 2015, 03:24:53 PM
Slightly different angles.

1) More kids? Will they come, may they come, will they NOT come? If you plan to have 3 more kids in the next 3 years, that would be motivation towards buying more.

2) Why do you need to pay 600k down? 200k down on a 1 mil house is a 800k loan.My math puts that at 3700 a month mortgage payment on a fixed, or 44k a year. You can save more with interest only or ARM, but more risk of course. That is a lot, but not a lot for someone making 300k (like 14% of pretax income). I prefer to pay under 10% myself, but when I lived in Chicago I had to pay a titch more due to the housing market. (I was lucky and made it all back + more when I left the city for kids, not everyone is so lucky)
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: iamadummy on January 22, 2015, 03:58:13 PM
is it possible he could WFH a 2 or 3 days a week? then moving out of SF could be doable.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: mm1970 on January 22, 2015, 04:11:04 PM
Yes you can afford it, but I wouldn't?  Looking at that chart, it makes me nervous.

And this, speaking as someone who bought in Santa Barbara in 2004.  (For almost $800k.  A 2BR, 1BA house.  In a bad school district.)

We bought because it was going up and I worried it would be soon out of reach.  Then it was out of reach, then it dropped.  Our house today, 11 years later, worth about $60k less than we paid for it.

But you know, that happens.

If I were you I'd wait a couple years.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: ysette9 on January 22, 2015, 04:20:31 PM
I just have a quick moment to reply and haven't read the entire post yet (will in the future!) but I wanted to direct you to this other topic since I have been asking some very similar questions recently about purchasing or not on the peninsula.

http://forum.mrmoneymustache.com/welcome-to-the-forum/rent-versus-buy/msg514949/#msg514949

I look forward to what you decide. For us it is coming down to a financial decision. Our current rental has many of the same problems yours does but fundamentally we can spend more to get exactly what we want and still save money by renting vs. buying.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: John74 on January 22, 2015, 04:51:36 PM
I struggle with the same question. We live in SF too, make a bit more money than you do and have more saved for retirement. We also pay more for rent (market rate, nice-ish neighborhood). We could pay cash for it, but spending $1M on a house or condo in the city still does not make sense to us. And the annual carrying costs alone on such a property are astounding. Most people in our situation would probably buy without hesitation - many are pushing us to do just that. But for me, a house in the city is in direct conflict with my early retirement goals. If I did not mind retiring at 60-65, I'd get the house. But I do mind. I wish we could stay here long term but it requires too much sacrifice.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: Señora Savings on January 22, 2015, 04:57:23 PM
If your husband wants a ride into work with internet, I bet you could get a part time chauffeur and unlimited 3G for 20k per year.  It sounds pretty ridiculous, but no more so than spending $1,000,000 to take advantage of a sweet job perk.  Whether or not you consider a chauffeur, putting a price on those commutes might help you make a more rational decision.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: Malaysia41 on January 22, 2015, 05:29:18 PM
Welcome to the forums! 

1. Awesome on maxing out the 401k!
2. Nice job locking in the rent controlled digs in an ideal location.

I'm chiming in with others here asking: do you plan on having another kid?  That should factor in at some point.  Personally I think you could go either way.  I can understand your trepidation; I'd be terrified buying a place in SF right now too.

Down the road, if you moved and rented it out - you may find yourself locked into rent control hell.  My friend lives on Nob hill - in a 2 bedroom 1 bath.  Her rent is extremely low (like $1k/ mo?) because she's been there since the 1980s.  I'd go squirrel-shit crazy if I owned a building and was prevented from increasing rent to market rates.   Dare I say I'd be...  persnickety!  Although, in your LL's position I'd happily let you hire a gardener and install dual paned windows on your dime.  Or would I?  Now I'm starting to see her thinking.  The more invested you are in the place, the longer you're likely to stay. 

That said, you could always rent our Si Valley house come August...  You sound like ideal tenants :).  4 bedroom 3 bath.  Big yard & patio.  The best neighbors possible.  Walking distance to a very cute downtown main street, multiple coffee shops, light rail, park, Trader Joes, Whole Paycheck, etc.   

Of course, we charge more than what you're paying in SF.   Really - you have a pretty sweet deal. 

Just sayin'.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: waltworks on January 22, 2015, 09:23:06 PM
I think we are friends again, once I get all this malt liquor residue out of my nostrils.

-W

1) I love your tone and writing style. Thanks for sharing your story.

2) You've already received good advice. Short story: your current rent situation is 'gold.' I have former colleagues that would KILL to pay your rent. If you want to buy, you'll inevitably want to look into the East Bay (e.g., Pleasanton, which by now could be a stretch for a milli).

3) I'm truly sorry about smoking weed in front of your pad. It helps calm my nerves.

Seriously, best of success.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: PathtoFIRE on January 23, 2015, 08:26:07 AM
To summarize, you love SF and specifically the area you are in, your spouse is well paid and does not want to retire any time soon, you like your discounted rent but you otherwise dislike many fundamental aspects of your home, and you want to know whether it makes financial sense to instead by a $1M+ home. Also, you have a stash of at least $900k.

In your situation, this is what I would do. First, I would have the stash invested in index funds with diversification between equities, bonds, and some international. That is an incredibly powerful engine that will give your family so many possibilities over the next decades, I wouldn't touch that. Second, I would question whether the $1-2k/mo I'm saving in rent-control is worth the less than ideal living conditions. In my mind, living in SF is a luxury, pure and simple, for a family like yours. And if you are committed to it, I would treat it as a luxury, meaning something I'm willing to pay more for, but can cut off at any time when situations change. I would not buy a house, instead I would seriously considering finding a new place to rent that will obviously be more expensive but better suited to my tastes and family situation.

From a distance, real estate in SF seems like a gamble, and once you are letting things like the worry of "missing" the opportunity to buy at today's prices because maybe tomorrow they will be even higher and other market timing-sounding things influence decisions, I would strongly hesitate moving a significant chunk of my money into such an asset. Think about it, the best you can hope for is that these really are the lowest that prices will ever be, and by buying now, you will save yourself some money in the future compared to ever-increasing rents and/or housing prices. Great, you timed things well, but have you really achieved that much in real savings doing so, and would it even come close to eclipsing the 80-100k you stand to make in the markets every year (on average) by leaving the 900k invested? And the worst case is scary, that maybe this is the peak, and prices/rents fall from here, and you've tied up so many of your assets into the house, and lost a lot of that engine invested in the market.

tl;dr: Financially, I think you are much safer and probably better served keeping your investments invested in the markets, and instead giving up your crummy rent-controlled home for a more expensive but more palatable rental that will cost your a little more each month but will give you the flexibility to change your mind about that home or SF in general, no matter the economic situation of the time.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: theonethatgotaway on January 23, 2015, 08:36:02 AM
Wowowowowoow!!!

Your rent is what and you want to buy?!

One of our best friends works for Google and shares a three bed with his two friends and he pays 2k for one room.

I would stay put because sheesh.

We used to have a deal like that in Manhattan and gave it up, unfortunately. Do not do as we did!

:))
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: dragoncar on January 23, 2015, 08:36:09 AM

From a distance, real estate in SF seems like a gamble, and once you are letting things like the worry of "missing" the opportunity to buy at today's prices because maybe tomorrow they will be even higher and other market timing-sounding things influence decisions, I would strongly hesitate moving a significant chunk of my money into such an asset. Think about it, the best you can hope for is that these really are the lowest that prices will ever be, and by buying now, you will save yourself some money in the future compared to ever-increasing rents and/or housing prices. Great, you timed things well, but have you really achieved that much in real savings doing so, and would it even come close to eclipsing the 80-100k you stand to make in the markets every year (on average) by leaving the 900k invested? And the worst case is scary, that maybe this is the peak, and prices/rents fall from here, and you've tied up so many of your assets into the house, and lost a lot of that engine invested in the market.

BTW, my SF real estate crystal ball says that SF has major structural issues that will keep supply low for decades (of course a tech pop will temporarily drive prices down).  Even when SF does build, it will be high density housing.  So the worst bet is a high rise condo in an area with empty lots -- those lots will get built up some day and will be the first to lose value in a crash.  The best bet is a standalone house, which they will simply not be building any more of.  Of course, you pay a premium for this.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: DeltaBond on January 23, 2015, 10:33:10 AM
1) I love your tone and writing style. Thanks for sharing your story.

2) You've already received good advice. Short story: your current rent situation is 'gold.' I have former colleagues that would KILL to pay your rent. If you want to buy, you'll inevitably want to look into the East Bay (e.g., Pleasanton, which by now could be a stretch for a milli).

3) I'm truly sorry about smoking weed in front of your pad. It helps calm my nerves.

Seriously, best of success.

Oh, you're sweet to say nice things about my writing. We can't move to the East Bay until his job unlocks my partner's golden handcuffs with a $500K key. The commute times from the Beast to the Valley are not compatible with a happy home life.  And the weed? I don't mind the smoking of it at all, just the commerce. We have dispensaries for that.

Maybe he got it in a dispensary.  :D
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 23, 2015, 01:45:06 PM
Fellow San Franciscan here, born and raised in the area, in a somewhat-similar situation.  A couple of thoughts:

  • Golden handcuffs - seems good, but not life-changing (for the Bay Area). The work shuttles are a terrible thing for your quality of life (speaking from experience, that 2 + hours per day on a bus is misery), and there is probably a company cityside who could match or come close to matching those handcuffs. Facebook and Google (I'm assuming it's one of those) can be matched.
  • I'd avoid buying in the city right now; we were in the same position (some cash, looking to get a place) last year and pulled out after getting blasted out of the water by all-cash people with a ton of money to burn. It's scary.
  • San Francisco is a boomtown. It will bust. Bide your time and read a book or two about the gold rush. One of my favorite quotes from that time involved something like "legions of bearded young men in flannel shirts moving to San Francisco to find gold." Nothing ever changes, especially people claiming that this time it's different.

Your situation right now is good enough that when you have people visit, you can pay for them to have an AirBnb and still come out ahead. At the rate you can save right now, you can be one of those cash buyers in about three years, looks like. Not bad.

Thanks for your viewpoint on this. I laughed at your "bearded young men" bit; so true! I appreciate your boomtown perspective. I guess I'm feeling like "we have a windfall, WHHHHYYYYY isn't it enough?!" where "enough" means sufficient to buy a house. But "enough" might also mean enough to continue living here and saving/earning interest. My partner perked up at your thought that we might be one of those all-cash buyers in a few years. What a cheering thought.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 23, 2015, 01:49:26 PM
Slightly different angles.

1) More kids? Will they come, may they come, will they NOT come? If you plan to have 3 more kids in the next 3 years, that would be motivation towards buying more.

2) Why do you need to pay 600k down? 200k down on a 1 mil house is a 800k loan.My math puts that at 3700 a month mortgage payment on a fixed, or 44k a year. You can save more with interest only or ARM, but more risk of course. That is a lot, but not a lot for someone making 300k (like 14% of pretax income). I prefer to pay under 10% myself, but when I lived in Chicago I had to pay a titch more due to the housing market. (I was lucky and made it all back + more when I left the city for kids, not everyone is so lucky)

Hey there Mr. FrugalChicago. We're feeling like one kid is plenty. Almost certain to stop here. The reason to put down so much was that with $600K down, it would leave our monthly payment (including principle, interest, taxes and insurance) at $400 over our current rental rate. On the face of it, a lower down payment makes sense, but dig a little deeper and we find that PITI is enormous. The taxes and interest alone make up 2/3 of the payment! We are not willing to do interest-only or ARM. Fixed or nothing!

Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 23, 2015, 01:50:35 PM
is it possible he could WFH a 2 or 3 days a week? then moving out of SF could be doable.

WFH is not an option for him. Frankly, I'd rather he get a job in the city. I'd go visit him for lunch, time to time.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: dragoncar on January 23, 2015, 01:52:42 PM
is it possible he could WFH a 2 or 3 days a week? then moving out of SF could be doable.

WFH is not an option for him. Frankly, I'd rather he get a job in the city. I'd go visit him for lunch, time to time.

Get a job in the city, move to oakland
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 23, 2015, 01:55:18 PM
I just have a quick moment to reply and haven't read the entire post yet (will in the future!) but I wanted to direct you to this other topic since I have been asking some very similar questions recently about purchasing or not on the peninsula.

http://forum.mrmoneymustache.com/welcome-to-the-forum/rent-versus-buy/msg514949/#msg514949

I look forward to what you decide. For us it is coming down to a financial decision. Our current rental has many of the same problems yours does but fundamentally we can spend more to get exactly what we want and still save money by renting vs. buying.

Yes, I read your thread with interest. It seems that we're in very similar circumstances. I don't think we can spend more than $1M and find a place that meets all of our requirements. I wish you the very best on your house hunt. I'm thinking we're probably going to stay put. That's why I posted here: I craved the clear-headed advice of MMM folks who wouldn't get as clouded with emotions surrounding ownership as I've been.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 23, 2015, 01:59:27 PM
If your husband wants a ride into work with internet, I bet you could get a part time chauffeur and unlimited 3G for 20k per year.  It sounds pretty ridiculous, but no more so than spending $1,000,000 to take advantage of a sweet job perk.  Whether or not you consider a chauffeur, putting a price on those commutes might help you make a more rational decision.

One of the reasons he loves the shuttle is that my partner used to drive himself (alone!) down to work each day. For as silly as your chauffeur suggestion was on its face, it really did make my partner and me pause and think and have a discussion. Thank you for your perspective and for monetizing this perk for us.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 23, 2015, 02:01:30 PM
Welcome to the forums! 

1. Awesome on maxing out the 401k!
2. Nice job locking in the rent controlled digs in an ideal location.

I'm chiming in with others here asking: do you plan on having another kid?  That should factor in at some point.  Personally I think you could go either way.  I can understand your trepidation; I'd be terrified buying a place in SF right now too.

Down the road, if you moved and rented it out - you may find yourself locked into rent control hell.  My friend lives on Nob hill - in a 2 bedroom 1 bath.  Her rent is extremely low (like $1k/ mo?) because she's been there since the 1980s.  I'd go squirrel-shit crazy if I owned a building and was prevented from increasing rent to market rates.   Dare I say I'd be...  persnickety!  Although, in your LL's position I'd happily let you hire a gardener and install dual paned windows on your dime.  Or would I?  Now I'm starting to see her thinking.  The more invested you are in the place, the longer you're likely to stay. 

That said, you could always rent our Si Valley house come August...  You sound like ideal tenants :).  4 bedroom 3 bath.  Big yard & patio.  The best neighbors possible.  Walking distance to a very cute downtown main street, multiple coffee shops, light rail, park, Trader Joes, Whole Paycheck, etc.   

Of course, we charge more than what you're paying in SF.   Really - you have a pretty sweet deal. 

Just sayin'.

Thanks for sharing your view on this. After reading all of these replies and discussing, we're becoming more inclined to stay in our pretty great situation. And thanks for your offer; it is tempting.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: tarheeldan on January 23, 2015, 02:05:30 PM
What's the price-to-rent ratio where you are and nearby?

http://money.cnn.com/real_estate/storysupplement/price_to_rent/
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 23, 2015, 02:05:46 PM
To summarize, you love SF and specifically the area you are in, your spouse is well paid and does not want to retire any time soon, you like your discounted rent but you otherwise dislike many fundamental aspects of your home, and you want to know whether it makes financial sense to instead by a $1M+ home. Also, you have a stash of at least $900k.

In your situation, this is what I would do. First, I would have the stash invested in index funds with diversification between equities, bonds, and some international. That is an incredibly powerful engine that will give your family so many possibilities over the next decades, I wouldn't touch that. Second, I would question whether the $1-2k/mo I'm saving in rent-control is worth the less than ideal living conditions. In my mind, living in SF is a luxury, pure and simple, for a family like yours. And if you are committed to it, I would treat it as a luxury, meaning something I'm willing to pay more for, but can cut off at any time when situations change. I would not buy a house, instead I would seriously considering finding a new place to rent that will obviously be more expensive but better suited to my tastes and family situation.

From a distance, real estate in SF seems like a gamble, and once you are letting things like the worry of "missing" the opportunity to buy at today's prices because maybe tomorrow they will be even higher and other market timing-sounding things influence decisions, I would strongly hesitate moving a significant chunk of my money into such an asset. Think about it, the best you can hope for is that these really are the lowest that prices will ever be, and by buying now, you will save yourself some money in the future compared to ever-increasing rents and/or housing prices. Great, you timed things well, but have you really achieved that much in real savings doing so, and would it even come close to eclipsing the 80-100k you stand to make in the markets every year (on average) by leaving the 900k invested? And the worst case is scary, that maybe this is the peak, and prices/rents fall from here, and you've tied up so many of your assets into the house, and lost a lot of that engine invested in the market.

tl;dr: Financially, I think you are much safer and probably better served keeping your investments invested in the markets, and instead giving up your crummy rent-controlled home for a more expensive but more palatable rental that will cost your a little more each month but will give you the flexibility to change your mind about that home or SF in general, no matter the economic situation of the time.

You've got the summary exactly right, and I think your thoughts on our situation are really interesting. We've been liking the flexibility that renting offers. And if it turns out in a few years that our kid can't get into a decent school or my partner gets a job offer elsewhere, we have the ability to move more easily. I'm coming to view our current rental as less crummy and more "golden" the more of these MMM opinions I read!
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 23, 2015, 02:06:57 PM
1) I love your tone and writing style. Thanks for sharing your story.

2) You've already received good advice. Short story: your current rent situation is 'gold.' I have former colleagues that would KILL to pay your rent. If you want to buy, you'll inevitably want to look into the East Bay (e.g., Pleasanton, which by now could be a stretch for a milli).

3) I'm truly sorry about smoking weed in front of your pad. It helps calm my nerves.

Seriously, best of success.

Oh, you're sweet to say nice things about my writing. We can't move to the East Bay until his job unlocks my partner's golden handcuffs with a $500K key. The commute times from the Beast to the Valley are not compatible with a happy home life.  And the weed? I don't mind the smoking of it at all, just the commerce. We have dispensaries for that.

Maybe he got it in a dispensary.  :D

They're all over here, and super easy to get access to. I like your FSOL icon :)
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: Cassie on January 23, 2015, 02:15:09 PM
It does sound like you are better off to keep renting & I bet your landlady is putting on restrictions because she wants you to move.  I would be a little concerned that you are not married & out of the job market raising your child. If things go bad you may be in a much worse situation then if you were married.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 23, 2015, 02:43:51 PM
I struggle with the same question. We live in SF too, make a bit more money than you do and have more saved for retirement. We also pay more for rent (market rate, nice-ish neighborhood). We could pay cash for it, but spending $1M on a house or condo in the city still does not make sense to us. And the annual carrying costs alone on such a property are astounding. Most people in our situation would probably buy without hesitation - many are pushing us to do just that. But for me, a house in the city is in direct conflict with my early retirement goals. If I did not mind retiring at 60-65, I'd get the house. But I do mind. I wish we could stay here long term but it requires too much sacrifice.

Thanks for your insight on this. When my partner and I were reading through these responses, we agreed that we were more in line with your philosophy than trying to find a house right now.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: Happy in CA on January 24, 2015, 01:40:56 PM
If I were in your shoes (and had all that cash available) I would want to buy if only because of the lack of dishwasher, in-house laundry and usable back yard.  The guys selling dope would bug me too.  I used to live on a busy SF street where it happened regularly and it it didn't bother me much, or so I thought.  When I moved out of that neighborhood I realized that I felt much more relaxed and secure.  That can be important, especially with a toddler running around.

The issue in my mind is more one of where should you buy?  SF is so ridiculous right now I don't think a $1M home is necessarily a great investment.  It might be, but in the safe, sure-to-appreciate parts of SF, a SFR is a lot more than $1M.  Depending on where your partner works in Silicon Valley, there are neighborhoods in San Jose that might work, where walking and biking are good and so are the schools.  I know, San Jose is unexciting.  But you could get a decent house for several hundred thousand less than SF, and your partner could still probably catch a shuttle and spend more time with the family.  And the weather is better.  Anyway, before I plunked down all that $ to buy in SF, I would at least check on homes near your partner's job - you might get lucky. 
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: Malaysia41 on January 24, 2015, 04:34:21 PM
If I were in your shoes (and had all that cash available) I would want to buy if only because of the lack of dishwasher, in-house laundry and usable back yard.  The guys selling dope would bug me too.  I used to live on a busy SF street where it happened regularly and it it didn't bother me much, or so I thought.  When I moved out of that neighborhood I realized that I felt much more relaxed and secure.  That can be important, especially with a toddler running around.

The issue in my mind is more one of where should you buy?  SF is so ridiculous right now I don't think a $1M home is necessarily a great investment.  It might be, but in the safe, sure-to-appreciate parts of SF, a SFR is a lot more than $1M.  Depending on where your partner works in Silicon Valley, there are neighborhoods in San Jose that might work, where walking and biking are good and so are the schools.  I know, San Jose is unexciting.  But you could get a decent house for several hundred thousand less than SF, and your partner could still probably catch a shuttle and spend more time with the family.  And the weather is better.  Anyway, before I plunked down all that $ to buy in SF, I would at least check on homes near your partner's job - you might get lucky.

Dishwashers are over-rated IMO.  We currently live with no dishwasher. (I've learned its a uniquely American luxury).   In house laundry - however - yeah - that's a pain.  But, not the end of the world.  I'd go to the laundry mat 2x per week if it saved us thousands per month.

South Bay - It's worth looking - but - don't get your hopes up for finding a bargain.   Our friends just bought a house a couple blocks over from our property.  They paid $150k over asking price of $1.2M.  Sure it's 4 bdrm 3 bath ( I think?) and has a pool (that needs a lot of work), but holy shite - $1.35M?   And the house itself needs a lot of work.  It feels like 2007 all over again. It's a total frenzy down there.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: waltworks on January 24, 2015, 04:55:58 PM
FWIW, that is from 2009.

What's the price-to-rent ratio where you are and nearby?

http://money.cnn.com/real_estate/storysupplement/price_to_rent/
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 25, 2015, 11:21:28 AM
If I were in your shoes (and had all that cash available) I would want to buy if only because of the lack of dishwasher, in-house laundry and usable back yard.  The guys selling dope would bug me too.  I used to live on a busy SF street where it happened regularly and it it didn't bother me much, or so I thought.  When I moved out of that neighborhood I realized that I felt much more relaxed and secure.  That can be important, especially with a toddler running around.

The issue in my mind is more one of where should you buy?  SF is so ridiculous right now I don't think a $1M home is necessarily a great investment.  It might be, but in the safe, sure-to-appreciate parts of SF, a SFR is a lot more than $1M.  Depending on where your partner works in Silicon Valley, there are neighborhoods in San Jose that might work, where walking and biking are good and so are the schools.  I know, San Jose is unexciting.  But you could get a decent house for several hundred thousand less than SF, and your partner could still probably catch a shuttle and spend more time with the family.  And the weather is better.  Anyway, before I plunked down all that $ to buy in SF, I would at least check on homes near your partner's job - you might get lucky.

I just find zero appeal in San Jose, you know? It's pretty, but its so BOOOORING. I'm getting the feeling that we should stay here. With rent control, we're feeling pretty secure and stable. Why leave a good time in search of a better one?
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: dragoncar on January 25, 2015, 11:40:59 AM
If I were in your shoes (and had all that cash available) I would want to buy if only because of the lack of dishwasher, in-house laundry and usable back yard.  The guys selling dope would bug me too.  I used to live on a busy SF street where it happened regularly and it it didn't bother me much, or so I thought.  When I moved out of that neighborhood I realized that I felt much more relaxed and secure.  That can be important, especially with a toddler running around.

The issue in my mind is more one of where should you buy?  SF is so ridiculous right now I don't think a $1M home is necessarily a great investment.  It might be, but in the safe, sure-to-appreciate parts of SF, a SFR is a lot more than $1M.  Depending on where your partner works in Silicon Valley, there are neighborhoods in San Jose that might work, where walking and biking are good and so are the schools.  I know, San Jose is unexciting.  But you could get a decent house for several hundred thousand less than SF, and your partner could still probably catch a shuttle and spend more time with the family.  And the weather is better.  Anyway, before I plunked down all that $ to buy in SF, I would at least check on homes near your partner's job - you might get lucky.

I just find zero appeal in San Jose, you know? It's pretty, but its so BOOOORING. I'm getting the feeling that we should stay here. With rent control, we're feeling pretty secure and stable. Why leave a good time in search of a better one?

Sorry, but I can't help but think anyone who calls San Jose unexciting or boring is at best immature and at worst an inveterate snob.

edit: I can see the appeal if you are single, but for a married couple?  Unless you are looking to swing, I think SJ has plenty to do.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 25, 2015, 11:49:23 AM
If I were in your shoes (and had all that cash available) I would want to buy if only because of the lack of dishwasher, in-house laundry and usable back yard.  The guys selling dope would bug me too.  I used to live on a busy SF street where it happened regularly and it it didn't bother me much, or so I thought.  When I moved out of that neighborhood I realized that I felt much more relaxed and secure.  That can be important, especially with a toddler running around.

The issue in my mind is more one of where should you buy?  SF is so ridiculous right now I don't think a $1M home is necessarily a great investment.  It might be, but in the safe, sure-to-appreciate parts of SF, a SFR is a lot more than $1M.  Depending on where your partner works in Silicon Valley, there are neighborhoods in San Jose that might work, where walking and biking are good and so are the schools.  I know, San Jose is unexciting.  But you could get a decent house for several hundred thousand less than SF, and your partner could still probably catch a shuttle and spend more time with the family.  And the weather is better.  Anyway, before I plunked down all that $ to buy in SF, I would at least check on homes near your partner's job - you might get lucky.


I just find zero appeal in San Jose, you know? It's pretty, but its so BOOOORING. I'm getting the feeling that we should stay here. With rent control, we're feeling pretty secure and stable. Why leave a good time in search of a better one?

Sorry, but I can't help but think anyone who calls San Jose unexciting or boring is at best immature and at worst an inveterate snob.

edit: I can see the appeal if you are single, but for a married couple?  Unless you are looking to swing, I think SJ has plenty to do.

You are absolutely right. I've actually never spent much time in SJ, and I don't really know at all. I'm just parroting. However, most of our friends live in the Bay Area. Its snobbery based on hearsay.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: chasesfish on January 25, 2015, 01:48:10 PM
I may be the outlier here:  Do what makes you happy, you already have enough money to say FU and go move if you really want to.  You can only live once and by my math you're already at that point.  The advice starts to change when you hit this point in your life. 

As for specifically how to buy the house, I would recommend putting 20% down and borrowing the rest on a 15 year loan.  The interest rate is around 3% fixed for 15 years and you can afford the payment.   Your interest cost is $28,000 in the first year, which then falls by $2,000 each year, then you have taxes, maintenance, and repairs.  The rest of your payment is just a savings transfer.  Your not THAT much further off then you would be by just paying rent.

If there is a complete crash in SF where the house goes underwater and your husband can't find work, then the mortgage is non-recourse and you're only out your 20% and still have enough for retirement.  (Only 12 states allow this and the morality of this is iffy - but its mainly boom or bust states).

Best of luck to you

Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: brandino29 on January 25, 2015, 01:56:38 PM
One thing I don't completely get -- I understand that you love San Francisco, but sitting on such a big pile of money (especially if you stayed put for a few more years for the extra income and retention bonus), I can only think of one thing --- get the hell out of dodge!  There are nearly unlimited places around the country (many that aren't all that bad, even) that you could buy a nice house and retire for good. 

Is there a specific reason you are planning to continue in the rat race for longer?  Just to stay in San Francisco indefinitely?
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: factoryflame on January 26, 2015, 02:59:05 PM
One thing I don't completely get -- I understand that you love San Francisco, but sitting on such a big pile of money (especially if you stayed put for a few more years for the extra income and retention bonus), I can only think of one thing --- get the hell out of dodge!  There are nearly unlimited places around the country (many that aren't all that bad, even) that you could buy a nice house and retire for good. 

Is there a specific reason you are planning to continue in the rat race for longer?  Just to stay in San Francisco indefinitely?

Well, *I'm* not in the rat race, my partner is. He loves his work and has no interest in retiring early. I just love SF. I love the weirdos, and I love the conversations I overhear other people having, and I love the food, and I like the weather. I just feel at home here. It's changing all the time, but I don't mind the changes (I guess because I'm on the lucky side of this gentrification/boom).  If we were to move, I suppose we'd have to go Back East, like near Atlanta. And I don't relish that thought.

Where would you move, if you were in our situation? What places turn you on, and why?
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: Malaysia41 on January 26, 2015, 05:59:08 PM
I just find zero appeal in San Jose, you know? It's pretty, but its so BOOOORING. I'm getting the feeling that we should stay here. With rent control, we're feeling pretty secure and stable. Why leave a good time in search of a better one?

Sorry, but I can't help but think anyone who calls San Jose unexciting or boring is at best immature and at worst an inveterate snob.

edit: I can see the appeal if you are single, but for a married couple?  Unless you are looking to swing, I think SJ has plenty to do.

You are absolutely right. I've actually never spent much time in SJ, and I don't really know at all. I'm just parroting. However, most of our friends live in the Bay Area. Its snobbery based on hearsay.

Regarding San Joser: yes - it is a sea of urban sprawl.  But - there are pockets of cute little downtown areas surrounded by nice neighborhoods.  Willow Glen, Campbell, Los Gatos, Mountain View, etc.   I'd continue to list others but places like Los Altos, Saratoga and Palo Alto are often more expensive than SF.   

But there are also a lot of soul-sucking poorly planned swathes of suburbs down there.  We were fortunate to find a house near one of the cute main street towns. 

So, there's good and there's bad.  But that's the case in SF too. Honestly, when I was in SF - Nob Hill -  a few weeks ago, the whole hipster vibe - emanating from both people and cutesie ironic storefronts - was a little too much to take.  Same feeling in Portland.  It's just a mild allergic reaction, however.  I still love both places. 

As I type I'm realizing what a hypocrite I am. I feel toward east SJ & south SJ as you feel toward all of Si Valley.  IMO, the only redeeming feature of Fremont is the Indian food.  The only redeeming feature of Gilroy is the redolence of garlic.  But honestly I haven't spent much time in either. 
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: brandino29 on January 27, 2015, 10:51:39 AM
One thing I don't completely get -- I understand that you love San Francisco, but sitting on such a big pile of money (especially if you stayed put for a few more years for the extra income and retention bonus), I can only think of one thing --- get the hell out of dodge!  There are nearly unlimited places around the country (many that aren't all that bad, even) that you could buy a nice house and retire for good. 

Is there a specific reason you are planning to continue in the rat race for longer?  Just to stay in San Francisco indefinitely?

Well, *I'm* not in the rat race, my partner is. He loves his work and has no interest in retiring early. I just love SF. I love the weirdos, and I love the conversations I overhear other people having, and I love the food, and I like the weather. I just feel at home here. It's changing all the time, but I don't mind the changes (I guess because I'm on the lucky side of this gentrification/boom).  If we were to move, I suppose we'd have to go Back East, like near Atlanta. And I don't relish that thought.

Where would you move, if you were in our situation? What places turn you on, and why?

I didn't mean for that to sound snarky if it did.  I just see your numbers and think "Wow! They could already be living free and clear on their own terms."

Personally, all I need is something near mountains and trails with half-decent weather, a local microbrewery nearby would be nice to go with it :)  Or maybe a move abroad --- Latin America abroad not Europe abroad (though I could go that route myself as well, but it would probably require a good bit more cash). 
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: CanuckExpat on January 27, 2015, 05:57:17 PM
..
Depending on where your partner works in Silicon Valley, there are neighborhoods in San Jose that might work, where walking and biking are good and so are the schools.  I know, San Jose is unexciting.  But you could get a decent house for several hundred thousand less than SF, and your partner could still probably catch a shuttle and spend more time with the family.  And the weather is better.  Anyway, before I plunked down all that $ to buy in SF, I would at least check on homes near your partner's job - you might get lucky.
I just find zero appeal in San Jose, you know? It's pretty, but its so BOOOORING. I'm getting the feeling that we should stay here. With rent control, we're feeling pretty secure and stable. Why leave a good time in search of a better one?
Sorry, but I can't help but think anyone who calls San Jose unexciting or boring is at best immature and at worst an inveterate snob.
edit: I can see the appeal if you are single, but for a married couple?  Unless you are looking to swing, I think SJ has plenty to do.

You are absolutely right. I've actually never spent much time in SJ, and I don't really know at all. I'm just parroting. However, most of our friends live in the Bay Area. Its snobbery based on hearsay.

Eh.. I live in San Jose and can't totally disagree with you. It's not what I would call urban. All other things being equal, I'd rather live in San Francisco, but I hate commuting, can ride my bike to work, and am really enjoying sunshine. Life is all about trade-offs, you just have to decide which ones work for you :)
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: chasesfish on January 28, 2015, 06:01:07 AM
One thing I don't completely get -- I understand that you love San Francisco, but sitting on such a big pile of money (especially if you stayed put for a few more years for the extra income and retention bonus), I can only think of one thing --- get the hell out of dodge!  There are nearly unlimited places around the country (many that aren't all that bad, even) that you could buy a nice house and retire for good. 

Is there a specific reason you are planning to continue in the rat race for longer?  Just to stay in San Francisco indefinitely?

Well, *I'm* not in the rat race, my partner is. He loves his work and has no interest in retiring early. I just love SF. I love the weirdos, and I love the conversations I overhear other people having, and I love the food, and I like the weather. I just feel at home here. It's changing all the time, but I don't mind the changes (I guess because I'm on the lucky side of this gentrification/boom).  If we were to move, I suppose we'd have to go Back East, like near Atlanta. And I don't relish that thought.

Where would you move, if you were in our situation? What places turn you on, and why?

Near Atlanta isn't bad, and that kind of money will go a long way!  It all depends on what you like.....

I hope you saw my other post about the actual interest carrying cost, I think you have the means to go through with this purchase.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: Ricky on January 28, 2015, 07:18:39 AM
The only deterring factor for me is the rent controlled place you're at now. For that reason alone, buying would be a bad idea. You're much better off with those funds invested, from a financial perspective.

Your cons, honestly, sound pretty typical and even the sum of the parts don't add up to counter that rent controlled pricing in any way. There will always be vagrants and punks in any large city, and any neighborhood that close to downtown is going to have that. I don't see why you need a backyard with all of the beautiful parks in SF.

Long term, I think you'll grow old of being so close to everything. Unless you plan on constantly draining your bank account to the shops around you, I don't see the point long term. The only thing nice about living in a dense neighborhood is proximity to transit, grocery stores, and maybe parks and local facilities. There is no allure to me to be next to coffee shops, cafes, or clothing stores as I know I'd never frequent any of them anyway!

Again, logically, buying is way more expensive than your rent in this case and I don't think you're getting a whole lot more for the money. That said, I agree with the "YOLO" mentality of another poster to an extent. It doesn't make sense to be unhappy with a housing situation with that kind of income. Considering you both could retire yesterday and live anywhere in 99% of America, why skimp on something so essential?  However, if you're not going to buy EXACTLY what you want in a house, which could be well over $2M, then there's no point in making the switch. Trading trade offs for trade offs doesn't make much sense.

So to answer your question, of course, yes, you can afford it. But as you can see there are many intrinsic values at play too when deciding where to live.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: chasesfish on January 28, 2015, 08:12:12 PM
I don't think I've ever had anything I've said referred to as "YOLO" before
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: jmusic on January 28, 2015, 11:04:49 PM
One thing I don't completely get -- I understand that you love San Francisco, but sitting on such a big pile of money (especially if you stayed put for a few more years for the extra income and retention bonus), I can only think of one thing --- get the hell out of dodge!  There are nearly unlimited places around the country (many that aren't all that bad, even) that you could buy a nice house and retire for good. 

Is there a specific reason you are planning to continue in the rat race for longer?  Just to stay in San Francisco indefinitely?

Her SO has the "OMY" syndrome due to a $500k retention bonus in 5 years.  It helps to read through the first few posts... :)
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: frenchlentils on January 28, 2015, 11:35:13 PM
I was in your position a year ago and went for it - moved from a $2400/month two bedroom apartment to a $1.2m two bedroom house with garage, backyard, etc in Bernal. I probably couldn't defend the choice in the court of mustachianism, but I still feel great about it. Owning a home means feeling settled and not ever worrying about Ellis act evictions or shitty landladies. Neighbors are more interested in getting to know me and I feel more like I'm part of the community. I would happily raise a kid in this house, knowing she would have a yard to play in and a stable place to live out her childhood. Maybe prices will go up and down but I don't plan to sell anytime soon. It sounds like your partner is following the excellent boom town rule of making money while the sun shines - in a cheaper city he'd make 1/4 the salary - so why not make the most of it? You'll rebuild your 'stash quickly with your good habits.
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: brandino29 on January 29, 2015, 08:36:25 AM
One thing I don't completely get -- I understand that you love San Francisco, but sitting on such a big pile of money (especially if you stayed put for a few more years for the extra income and retention bonus), I can only think of one thing --- get the hell out of dodge!  There are nearly unlimited places around the country (many that aren't all that bad, even) that you could buy a nice house and retire for good. 

Is there a specific reason you are planning to continue in the rat race for longer?  Just to stay in San Francisco indefinitely?

Her SO has the "OMY" syndrome due to a $500k retention bonus in 5 years.  It helps to read through the first few posts... :)

(bolded emphasis added)

JMusic, it helps to read my comment thoroughly too :P
Title: Re: Can we afford to buy a $1M+ home in San Francisco?
Post by: dragoncar on January 29, 2015, 08:20:26 PM
I was in your position a year ago and went for it - moved from a $2400/month two bedroom apartment to a $1.2m two bedroom house with garage, backyard, etc in Bernal. I probably couldn't defend the choice in the court of mustachianism, but I still feel great about it. Owning a home means feeling settled and not ever worrying about Ellis act evictions or shitty landladies. Neighbors are more interested in getting to know me and I feel more like I'm part of the community. I would happily raise a kid in this house, knowing she would have a yard to play in and a stable place to live out her childhood. Maybe prices will go up and down but I don't plan to sell anytime soon. It sounds like your partner is following the excellent boom town rule of making money while the sun shines - in a cheaper city he'd make 1/4 the salary - so why not make the most of it? You'll rebuild your 'stash quickly with your good habits.

I'm also a fan of making hay while the sun shines.  But consider that it may not be prudent to buy the field in the summer when you will be moving next winter.