Author Topic: Another Bay Area,CA Question  (Read 1689 times)

brightblade81

  • 5 O'Clock Shadow
  • *
  • Posts: 14
  • Location: SF Bay Area
Another Bay Area,CA Question
« on: April 01, 2016, 02:10:18 PM »
I'm trying to figure out if we should move closer to our work or tough it out until we hit FI in ~7 years, any advice on how to figure out when its best to stay or move closer?
My wife typically drives, averaging about 2 hours commute total per day.  I leave at 6:40am, biking to bart, so about 2.5 hours commute total.  So that is why I'm leaning towards moving closer...

Some background:
We live in the Bay Area, Concord and we work in Alameda and Berkeley.  We're thinking about moving significantly closer, to one of those 2 cities to drastically shorten our commute, spend more time with the kids.  Houses / townhouses range from $650K to $1M in Alameda, recently I've seen a few duplexes $800K-$850K steps from my office.  Rent would be at least $2500 to $3500 for a 2 bedroom.

Information that maybe interesting to know although probably too many details:
My income: $125K
My side hustle: ~$20k(consulting services as a s/w engineer)
My wife's: ~$30-35K(fluctuates depending how much full time vs part time)
Our expenses average between $2500-$3500 per month, not including mortgages(details below), so our saving rate very high.

We have 2 kids, 4year old and 18month old, which my parent-in-laws typically watch half the year(during this time, live with us) otherwise childcare.

Our current house we own in Concord:
Market Value: ~480K
Original Purchase price:  282K
Original Mortgage Amount:  215K
Interest Rate:  3.5%
Mortgage Term:  30
Term remaining: 27
Amount remaining on mortgage: $205K
Gross Rents: $0, we live here
Principal and Interest(monthly): $965
Taxes and Insurance(monthly): $410
HOA costs: $0
Deferred maintenance notes: None
Anything else special:  My wife would like this to be our retirement house, so she never wants to sell this house.  Should be able to easily rent it out for $2K, 4 bedroom house.

Our investment property in Pacheco:
Market Value: ~230K
Original Purchase price:  150K
Original Mortgage Amount:  112.5K
Interest Rate:  4.25%
Mortgage Term:  30
Term remaining: 27
Amount remaining on mortgage: $101K
Gross Rents(monthly): $1,400
Principal and Interest(monthly) : $553
Taxes and Insurance (monthly): $264
HOA costs(monthly): $355
Deferred maintenance notes:  None
Anything else special: Nothing special, although the current tenant is my parents ex-neighbor who short sold their house and have been renting this house the entire time we've owned it, they've offered to buy this house from us once they are able to(declared bankruptcy 3 years ago so I think 4 years before they can?).  Always pay on-time and I'd be willing to sell it to them at a discount since we wouldn't need a realtor.

Thank you for taking the time to read all this.
« Last Edit: April 05, 2016, 10:33:02 AM by brightblade81 »

PR Mustachian

  • 5 O'Clock Shadow
  • *
  • Posts: 16
  • Age: 38
  • Location: Point Roberts, WA
Re: Another Bay Area,CA Question
« Reply #1 on: April 10, 2016, 04:52:39 PM »
Bay area housing prices are due for a correction in the next two years. My advice would be to sell Pacheco property while you can get top dollar for it and invest proceeds conservatively until Oakland prices drop

cchrissyy

  • Pencil Stache
  • ****
  • Posts: 743
  • Location: SF Bay Area
Re: Another Bay Area,CA Question
« Reply #2 on: April 10, 2016, 06:34:17 PM »
Both of your commutes sound painfully long!

I think you should rent out the concord house, rent a place to live in Berkeley or Alameda, and after a year or two of trying out the new city, decide if you want to keep doing that, or move back to Concord, or sell the Concord house to buy a place here.   

I think the only real mistake you can make here is keep doing things the way they currently are - two people commuting hours each day, when you workplaces are rather close together and in cool towns with good schools. Yikes. whatever you do, don't keep living in concord and giving all your free time to commuting.

aFrugalFather

  • Stubble
  • **
  • Posts: 219
    • Life/Finance Blog
Re: Another Bay Area,CA Question
« Reply #3 on: April 20, 2016, 02:34:16 PM »
Seems like a ton of driving indeed. 

I don't think I saw how much you have in retirement accounts, but if little to none, then everything you have seems heavilily invested in bay area real estate.  Could end up being great or could ruin you if things tank.  Seems prudent to rent unless you get a great deal on a duplex somehow (e.g., fix up while living in to gain equity).  800K sounds like move in ready pricing. 

In any case, pulling in 150K a year, you should be saving quite a bit, so not sure why you say you are not?  Even at 3500 a month spend there should be plenty to sock away?

tonysemail

  • Pencil Stache
  • ****
  • Posts: 725
  • Location: San Jose, CA
Re: Another Bay Area,CA Question
« Reply #4 on: April 25, 2016, 06:18:05 PM »
I assume the difference in interest rate (4.25% vs 3.5%) is due to primary residence vs investment property.
If you plan to keep both rentals, then I would recommend borrowing more from your primary residence.
The cashflow would be better and I'd check if there would be a tax benefit too.

Childcare plus a long commute adds up quickly..
How close are you to the point where it's financially better for your spouse to stay at home?