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?