Will I ever feel or be stable enough to buy a house?

I’m not sold that the American Dream of a white picket fence is the wisest financial move in the grande scheme of things. But, at 34 and pregnant with my first child, I long for the stability of a home with at least a small backyard and just – space.

Even though my networth is $540k, I’ve never felt stable enough in my career to purchase property. I thought by now I would – but I don’t and I don’t think I ever will. Given my husband is going back to school and will be starting over with a job making $50k, if we’re ever going to own it’s pretty much all on me. We can certainly rent a house – but when my child gets older, I’m afraid of having to downsize due to losing a job. I almost feel better about staying in a one bedroom apartment with the kid, and saving for as long as possible. Plenty of people do it, why can’t I?

I keep trying to figure out what the net worth number is when I finally feel ready to buy property — given a starter home here costs $1.3M, I’d need a $260k downpayment, plus enough cash to cover a year of mortgage payments + tax and insurance ($6662 x 12 = ~$80k.) So theoretically if I had $340k in cash, I might be ok to invest in home ownership.

But – that’s assuming I could get a job within one year that pays enough to pay a $6662 a month mortgage & fees. Even now, I don’t have that job. Sure, my husband’s salary would help out a bit (he could probably pay $1.5k-$2k a month of that) but I’d be left with $4662 a month that has to get paid… meaning if I lost my job, it could be easily devastating to us. It feels like I need a lot more money than $340k in order to make this work. Maybe it’s a net worth of at least half the amount of property value PLUS a 20% down payment… $910,000 will be enough in net worth for me to feel ok buying a $1.3M house. That’s pretty much the point in which I’d feel ok…(owing about $390k max) on a property. At that point, the mortgage should also be paid of in about 7 years, leaving only taxes and insurance of about $1.5k per month to be paid in perpetuity.

Or, we stay in our rent-controlled $2350/mo 1 bedroom apartment, and deal with it. For a few years, for a lot of years… for life. It’s not like losing my job would be ideal at any point in the future, but we can clearly survive at this rent amount on less than we jointly make now, even with his new career.

But — I am still aiming to have $1M in net worth within the next four years. So, the good news is that IF I get there… then that is really putting me over the $910k I need to buy that $1.3M starter home. In four years, that $1.3M starter home may be worth a lot more (in which case, fruck) – but, maybe that’s the answer. I get to $1M by age 38-40, and then I find a house and get that 30 year mortgage that will be paid off by the time I’m… 70.

By then (in four years), my first child will be ready to go to school (and we’re sending him/her to public school), so we can focus on buying a small but nice home in a reasonably good school district. Or, maybe we move just far enough away that houses aren’t quite so expensive, because I don’t need to work a full-time job at that point, or I can find a job where I’m allowed to telecommute, and I can earn less by have way more flexibility (heck, there are houses in the far, far out east bay that cost $500k still.)

I guess that’s the answer. I stop having house envy and I focus on somehow making this job work for four years. The plan is to save $4k per month from income plus get 50% of my bonus ($16.5k before tax) and 100% of RSUs (~$54k before tax) so that’s about $83.25k a year, or $333,000. Four years of growth on my current basis at 5% YoY gets me to $607.7k, or $107.7k growth. That’s $440,700 saved in four years, added to my current networth which puts me just shy of $1M ($980.7k) by the time I’m 38. With a slightly higher bonus performance and/or RSU value increasing, the “million before 38” thing is definitely doable…

And then, I have a 4 year old and am ready to buy property, which seems to be good timing anyway. The only thing is to achieve this goal, we need to stay in this one bedroom until I hit that $1M networth – i.e., until my kid is 4. That might drive me absolutely nuts — BUT it will be worth it, if I can reach this goal. My 30s are all about saving and building for the future. At 38, I’ll hopefully have or be pregnant with child #2, and we’ll be more than ready to find a place of our own. All I have to do is succeed in this job for a solid four years. That’s the biggest challenge of all. But I know what my goals are. And I really hope I can stick this landing.

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6 comments

  1. SP says:

    It is tough when a nothing-special house is $1.3M. I would not feel comfortable buying in your position, but on the other hand, you have always been able to find a new high paying job relatively quickly.

    We’re dual income engineers (sort of), but not the kind that make $200k+ each. We work in the east bay and aren’t in tech companies. My husband is an academic and didn’t start making real money until ~5 years ago, but his job came with a small amount of cash that accelerated our timeline slightly. After ~4 years and some prepayments, we finally have a mortgage that only scares me a little.

    I worked in the city for a year. BART is totally safe during commuting hours, just crowded and loud. Working SF I had lots of coworkers with nice places in Orinda/Walnut Creek/Danville but that is a stretch for a job in the peninsula.

    Good luck!

  2. Duckling says:

    I have taken Bart a few times. It’s old and dirty haha but sometimes so is the NY subway. Also sat next to a guy who barfed on the subway in Japan . Alcoholism is pretty bad in subtle ways there – like overworked, stressed but can’t go home to wife drunk for male pride reasons.
    I guess beggars can’t be choosers. Commuting on Bart is far from beggars of course . Hayward seems family friendly.
    Coastal cities keep their value and people all over the world will always continue to flock there hence the best schools, companies , and highest educated. Midwest not so much. Would not advise investing property there.

    1. Joy ( User Karma: 0 ) says:

      Yea BART isn’t that bad… I used to take it all the time. There have been some violent flash muggings in recent months — teens come on and swarm the train and punch people and take their phones. I’m sure it’s still rare, but would prefer to avoid that if possible. It wouldn’t be the end of the world to take BART. But where I work now, BART would not get me there… I’d have to drive, probably 1.5 hr – 2 hr each way in traffic. I’m fine with barfing people, I’m just worried about safety.

      Hayward and areas around there are definitely options if we’re going to buy one day. It is slightly more affordable. Bridge tolls will ad up going to work, but prob still not as much as buying on the peninsula. And who knows where I’ll be working then.

  3. Duckling says:

    Hi, me again. Glad your site is back.

    Being female millenial in my 30s I can relate to the house envy. Have you considered just buying that east bay, Contra Costa county not so awesome house in the $500K budget, renting it out, leverage on the mortgage fixed 30 year rate, then porting the mortgage when you sell the house and use the gains else where? (Yea, diversification, liquidity is out of the window), but at least you’re just sinking $100K into one asset instead of $310K you mentioned above for that 1.3M house. I think many ppl in the bay already do this (rent a crappy room in the peninsula, and own elsewhere outside the bay), and those who don’t might be at disadvantage when price rise starts stretching out to other counties. The owners although far from the bay at least have a chance to ride a price rise on their property. Human nature dictates when they can’t afford the core to logically stretch their search further out.

    Benefits to this strategy:
    – locked mortgage rate for 30 year – think of it as getting head start on a mortgage before actually owner occupying the mortgaged dwelling
    – get into the market now than later as per Buffett’s “rising tide lifts all boats”. With a mortgage in a cheaper part of the bay, at least you can be part of the real estate wave, gain the momentum when price rises, and stay relative to everyone else when price goes dips.
    – This way you won’t have to rely solely on aggressively saving employment income to race against rising house price (think of the incremental change of employment income vs realty price change YOY. Even if your salary goes up 10% YOY, you are racing against realty that goes up say 20% YOY so how can your employment income catch up to house price? Realty outpaced employment income in the last 18 years -excluding the start up lottery)
    – treat realty like a speculative investment/piggy bank, which @ 100K is only 20% of your NW.
    Possibly cash flow negative a bit after tax+insurance even after rent for a while, but it could get your dollars further ahead if single family house is a high priority.
    – learn to repair the rental house now and gain the skills to repair your own house when you move into it someday. Even if you have to hire help, you gain experience, so when you become owner occupant of a house, a leaking sink won’t be a shock. By then you will be a seasoned home owner from lessons in land lording and might know just how to repair it yourself!

    Everyone in the bay I’ve talked to always have a super bad wrap on east bay? Is that really true? Blue collar, not as wealthy/successful as the south bay inhabitants? I guess nothing can compare with Atherton/Purtola Valley/Palo Alto, but can you confirm the negative bias I keep hearing about? High crime rates, ghetto are other things I hear.

    Also I’m guessing your coworkers are around your demographic. What are their situations like with starting a family and buying a house working in tech start up?

    Lastly, thank you for posting so I can live vicariously through you as a millenial in the bay.

    1. Joy ( User Karma: 0 ) says:

      Haha, glad I’m helping you live vicariously as a millennial in the bay. I’m not sure I am representative of others here (well, most others here are married to engineers, oops) so…

      As far as buying in East Bay and renting, that’s a GREAT idea, except that sounds really hard, esp with a new kid on the way. What if I can rent the property consistently or something goes wrong? Yea, a lot of this is good to learn for future home ownership stuff… but neither my husband and I are fixer upper types, so we’d prob just spend a lot on hiring help to do the work. That’s the reality.

      I’ve considered buying property in other states (like $100k for a house property) and renting out through a management property… but then, is that even really worth it vs stocks? Maybe would be good to diversify, but then I’ll never have enough for my own down payment since it would be locked up in the mortgage.

      Unfortunately, I don’t talk to my coworkers much about their housing situations – or age. Just thinking about a few I know, I think one lives at home still, one bought a small place with some money made in stock options (rare, but it does happen – I think it was just enough for a down payment), and… the others, I don’t know. The older employees, esp those with families, typically commute from far away and I don’t know how they do it… their commutes sound miserable and they must never see their kids/partners. But, then again, they love work (some people do I guess) so it might not be as big of a deal to them as it would be to me. A few other people my age I believe live in the city – so they have that lifestyle – apartments and roommates, or I assume they bought condos with family money.

      I have 4 close friends in the area — one lives with her husband in a 1 bedroom in the city (rented), one lives in a studio apartment not far from me with her boyfriend, one has a small business with two kids and a husband who is a bit older and works as an engineer for a major tech company – they own a house worth $1.4M (but if you saw it you wouldn’t think it was – it’s nice and all, but… you know, Bay Area prices), and the other one is a stay at home mom, married to an engineer, and living in a condo that their parents bought and they’re renting it from them (or something like that.) Come to think of it, another woman I know about my age is married to a tech guy who is older as well. They have three kids and I believe they bought (though in a slightly lower cost area in South Bay.)

      I really don’t know that many people. 🙂

      1. Joy ( User Karma: 0 ) says:

        Also, East Bay is not that bad. Well, it depends WHERE in the East Bay you are talking about. There are some pretty bad areas. There are also super residential areas that are further out that are kind of nice for a standard suburb, but they are FAR away from jobs in the South Bay/Peninsula. There is BART public transit from East Bay into the city, and that works, but BART is kind of dirty and there have been some muggings on it lately and I try to avoid – it’s not like the NYC subway. Traffic over the bridges to get to east bay at rush hour is nightmare. That’s the real problem. If you can work from home, then it’s a great place to live.

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