Category Archives: Real Estate & Rent

Real Estate: Buying Property with Mother-in-Law?

The costs of home ownership in the Bay Area are, well, terrifying. My husband and I (and now my husband, his mother and I) have been visiting open houses each weekend –just to get an idea what, if anything, is in our price range. The short answer is–not much.

Although we’re definitely not wealthy, we now have the benefit (?) of his mother joining us in our home purchasing endeavor. And, by joining us I mean joining us to live with us in an in-law unit (or second unit of a duplex) that we purchase together. should be super-duper grateful that she’s offering a $1M cash downpayment to make this possible. I am. But I’m also super-duper nervous because the other $1M (since the properties we are looking at are about $2M) will come from my husband and I (mostly me myself and I) – and the way their family communicates is practically non-existent so I’d be wrapping my future everything up in a property that’s co-owned by his mother (or, she “gifts” him the money so it’s fully owned by us, but the ownership then is a lifetime of debt to her in other means.)

Do I like my mother in law? Good question. She is, for all intents and purposes, a quiet person who keeps to herself. She marches to the beat of her own drum, but we get along. Would I prefer not to live on the same property as her? Yes, of course. But she’s also willing to help out with childcare and as much as I am nervous about her providing childcare to my kid(s) once they’re of walking age (she’s doing a fine job now with the 10-week old), it’s certainly nice to not have to spend $20k+ a year on daycare, and it’s extra nice keeping it in the family.

The actual scenario we’re looking at is that his mother gifts us the $1M, we get a mortgage for $1M, then his father (who is not married to his mother–never has been–but who is friends with her) gives us $2k a month in “rent” to bring down the monthly costs. All-in-all, financially, doing this with a ~$2M duplex or a reasonable single family + in-law unit makes a hell of a lot more sense than spending $1.5M+ on a single family home with no future rental potential. Even if our mortgage is $7k a month, my husband’s father’s contribution of $2k brings that down to the $5k that is that max I feel comfortable paying monthly for our PITI. I’d like it to be less than that, but at this point realistically it’s not going to get under $5k for what we need to make this work.

I’m just struggling with the lack of fiscal communication here, and how it feels like I’m dealing with a bunch of elementary school students in handling a very serious, very costly purchase, should we make it. That said, what right do I have to ask for any sort of special communication when it’s my husband’s mother who is making this purchase possible at all… shouldn’t I just roll with it? He’s an only child, his mother has practically put her income after very low expenses under pillows her entire life, and she seems to want to offer that to my husband and my child(ren) more than spend it on herself… I mean, for a women who has never owned a home, car, or pretty much anything “new” in her life, I doubt she’s going to change suddenly and spend that money. If I thought she would, or even would enjoy spending it on something else, I’d refuse the cash. I don’t want to be responsible for destroying her retirement. But all she wants in her retirement is a small place to live with a backyard and, most importantly, to spend as much time with my child(ren) as possible.

The entire situation makes me so uncomfortable because even though I grew up with a lot of privilege and my parents providing for me, I have been extremely independent since I graduated college (outside of my wedding.) I feel guilty for the privilege I’ve had, but have always told myself that as long as I make my own money for the life I want to live once I graduate college, I’m doing right by the world.

There’s a very long post I will write one of these days regarding my own parent’s financial mess (my father passed away this summer and let’s just say the family networth went from $1M to $400k in about 4 years–again, that story will be saved for another post(s))–but I’ve been struggling too with coming to terms that I always thought there’d be something left to provide backup should I financially fall on my face one day–but the reality has sunk in that nothing will be left. I am in a much better financial situation than my sister who is 28 and still earning a little higher than minimum wage with no benefits, so I can’t complain. It’s still a scary feeling, nonetheless (to be written about in another post.)

But I’ve also saved up now $650k, give or take, in retirement and investment accounts, and I feel like I’m capable of buying my own property without the help of others. Well, I would be, anywhere else in the country. Here… anything under $1.5M is pretty terrifying, at least with a 30 minute commute from my job south of the city.

That leads me down the road of… why buy now? The prices are coming down a bit (I’ve seen a bunch of $100k price drops in the last few weeks which seems substantial), but do we really need to buy this year? Our 1 bedroom, 1 bath apartment lifestyle isn’t that horrible, especially given the size of our apartment (800 square feet) provides rather large rooms compared to 3br, 2ba houses for sale (some of those “master bathrooms” are masterly tiny.)

His mother doesn’t have to move now either. She’s still living in her parent’s house (I believe, for free, which she’s done her entire life), so she is ok there until her mother, who is in her 90s, passes away (clearly not wishing this on her at all, but there’s the reality that few humans live past 100.) Once she passes away, we don’t know what will happen with the property other than that it will be sold and, we think, his mother will get 1/3 of its value (possible that won’t be the case but no one talks in the family about things like that.) Even without that inheritance, though, she will still have the $1M waiting its use for a home purchase with or without us.

Part of me wants to power through the next few years in our 1br/1ba and enjoy the rent control we have with our $2450 rent. I’m 45 minutes from my office in rush hour, but maybe I can work out an alternative travel the where I get that sweet 30 minute each way drive. I’ve considered moving us closer to my office… but we can’t get anything near nice enough at $2450 a month. We could pool resources and live with his dad for $4450 a month… but we know without a private unit / in law that would be a mess. We’re not even going to try that…

So, we may just wait it out as long as we can. When his grandmother passes away, that will make everything happen faster, since his mother will have to move. Until then, nothing is making us leave this place. Our son can easily manage to live in a 1 bedroom with us until he’s at least one, and maybe longer. It does suck not being able to invite people over, but heck, what people would I invite over? I don’t really know anyone. And I work all the time anyway, or at least I will when I get back from maternity leave.

That seems like the right option– even though we could qualify for a loan that, with his mother’s cash, would enable us to buy a property now. Yet I’m not sure buying is right at all anyway… home ownership is a hot mess from what I can tell… it’s costly, it takes all your time, there are issues you don’t know about when you buy that pop up later… and in the Bay Area you have to buy “as is” with no contingencies which just sounds like a recipe for financial ruin. Why bother?

Well, why bother because I have a kid and I want him to have a stable life… both my husband and I grew up in houses from the day we were born until adulthood, and we value not moving around every couple of years, especially for our family. So there’s that.

Leave the Bay Area? Maybe. If we don’t buy now… and if I can keep my current job for the next 3.5 years to collect my stock, and that stock remains valued at what it’s worth now or more, then who knows… we could pick up and move. His parents won’t want to, but we could buy a place on our own. He wouldn’t want to be far from his parents, so–I’m not sure it’s really an option, but if we can have another kid (or two more kids) it may be the best one.

In any case, I’m not sure what to do… as always… but after looking at probably 100 open houses over the last year… all I can say is I really don’t want to buy anything I’ve seen. That’s not a good sign.

Should we buy a house with my husband’s parents?

It has become increasingly clear that owning a house in the Bay Area (unless I want a 1.5+ hour each way commute in bumper-to-bumper traffic for the rest of my life) is pretty much an impossible feat on our own.   Theoretically I can become a VP and make $200k a year for the next 30 years of my life, but with my husband’s expected $50k income, we just can’t buy a house on $250k. And that’s IF we both are gainfully employed in such roles for the next 30 years straight.

His parents, not married but quite friendly with each other, are both seemingly interested in purchasing a home with us and living together. My husband, thankfully, realizes it’s not a good idea to live in the actual same house without an in-law unit (attached or dettached), and I’ve recommended if we’re going to go this route we look at duplexes which would be more expensive up front, but would give us more options long term as rental properties should they no longer want to live there for any reason (and we spend more than we would just us since there needs to be space for them.)

Duplexes around here seem to go for anywhere from $1.6M to, well, much higher. A really nice duplex could be $2M. The duplexes don’t come with much of a backyard usually (not that any property here does) but what’s nice about them is that together we might actually be able to afford ownership and the stability that affords.

His father is open to paying $2,000 a month towards a mortgage. I don’t know yet about his mother as she could likely help with the downpayment and then have to pay less monthly for a while (she apparently has most of her savings in cash, for better or worse.) Then, between all of us, maybe we could afford an $8k monthly mortgage. And, although I’m not quite sure how it would work, I think we could split the mortgage interest deduction three ways (since they’re not married) and thus actually be able to take the full deduction (though it would be worth much less to retired people, and I’m not sure it would be worth much of anything at all to them.)

I’m torn on whether living with his parents makes sense. His father is already offering to help out with the kiddo and I wouldn’t mind living with his dad if his father had an in-law type unit, or we had a duplex. He is very quiet and a nice, introverted guy that isn’t bothered by much. He’s a bit older too, in his 70s, and I think he just wants to spend time with his grandkid, which I appreciate. And it would be nice for my child to have a grandma it is close with (since my dad is across the country and due to his cancer may not be around that much longer unfortunately.) He currently lives in a very small one bedroom apartment in a 55+ apartment complex and I think his quality of life would increase substantially should he live in a house. He’s been sending my husband links to houses for rent with makeshift in-law units so clearly he’s very big on this idea of living together.  It certainly makes sense to offer him decreased rent/mortgage payments in trade for helping out with the baby.

His mother is a bit of a different story. She’s also quiet and independent, but she’s a mess. Like, more of a mess than I am. I’m a mess, but she’s like a “I have a bunch of cats I gathered from the outside and a billion purchases from thrift stores I’m hoarding” a mess. My husband knows this, and doesn’t want to live with her if she will continue this behavior. But he seems pretty confident she will change if she moves into a new space (she lives in her own parents house now, and her parents also collected  lot of junk so that place is just chaotic.) She isn’t ready to move yet, but her mother is in her 90s and eventually she will have to leave the house and find somewhere else to live. At that point, we could all put our savings together and find a home that works.

I wish the duplexes weren’t so expensive. While I’m still a little concerned that she would let the house become disgusting, if she lived with my husband’s father I don’t think it would happen. I mean, maybe her room (if we had a duplex with a 2br for them) would be messy, but the rest of the place and the outside areas wouldn’t be. If they were detached units on the same property, that wouldn’t be so bad.

The other option is to rent a house that happens to have a room with a private entrance. This wouldn’t work with his mother, but she’s not ready to move right now anyway. My husband’s father would move in a heartbeat. I think we’re still pretty set on staying in this apartment for the first year of our kid’s life, but it really might make the most sense to move now since the first year is when grandpa will be helping out the most (and taking 30 minute train rides to get here, since grandpa doesn’t drive.)

I’m pretty certain if I pushed for it and found the perfect place, we could move in together next month. I’m not sure that makes any sense though — our rent is now about $2500 a month. So we’d have to find a house that is $4500 a month max. The houses around here that are $4500 are not that nice, and I haven’t seen any with in-law type units. We could maybe get a regular 2br/1ba for $4500 a month… but I think we all agree that living in the same house–especially with one bathroom–is a bad idea.

So we’ll probably just stay in this apartment at least for a year, but be opportunistic in purchasing should the right property come along. His mother may change things if she needs to move sooner than later. But we’ll see. I do think her savings would make it possible for us all to purchase something a bit nicer. If we could split taxes on the property 3 ways, that would help as well, since there is the $10k per person/couple limit on that deduction now, including income tax.

What do you think? Should I consider a duplex or house with in-law purchase? Should we rent a house? Should we wait?

 

Who can afford to own a house?

I’ve committed to remaining in our $2500/month one bedroom apartment for as long as we can stand it with our soon-to-be child. I’ve even gotten to appreciate the forced closeness we’ll have living in a small space with kiddo, especially in the first year when it’s recommended baby sleeps in the same room with parents…

However, I’m very concerned about what happens “next.” Yes, we can leave this overpriced corner of the country and live somewhere that a much lower salary would enable home ownership. I don’t even care about “owning” so much as I care about being able to afford some sort of residence that feels less like an apartment and more like a home. A townhouse would be perfectly fine, especially if it has a little grassy area in the back, and a community park nearby… Continue reading

A Loose 5 Year Plan

The whole “being pregnant” and going into “nesting” mode is real. I’ve been spending way too many hours scouring Redfin and Zillow despite knowing that I can’t afford a home here, other than maybe a 1 bed, 1 bath in a really bad part of the bad part of town.

So. I’m trying to focus my energy on longer-term, more realistic goals, while also ensuring that I keep my job in order to hit them.

2018

  • Age: I turn 35(!)
  • Networth: Close out the year at $645k-$650k
  • Housing: Live in 1 bedroom / 1 bath apartment (50% = $14.1k yr)
  • 401k: invest $22.5k
  • Stocks: invest $30k 
  • Baby #1: born, 0 – 5 mo
  • Baby #2: not born yet

Continue reading

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? Continue reading

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Just Another Post of Sadness RE: Being Priced Out of Bay Area Housing

I really try to take life one day at a time, because thinking too far into the future puts me in a constant state of unproductive panic. Right now, I need to focus on the next four years of our lives:

  • 2018: baby #1 born (0 – 6 mo), I turn 35, 1 yr at job
  • 2019: baby #1 turns 1, I turn 36(!), 2 yr at job
  • 2020: baby #1 turns 2, preg w/ baby #2(!?!), I turn 37, 3 yr at job
  • 2021:  baby #1 turns 3, baby #2 turns 1, I turn 38, 4 yr at job

Then we… GTFO of the Bay Area. >Insert frown face and sad heart.< Continue reading

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To Move or Not To Move… That is the Question

7 months, 3 weeks in counting until the arrival of baby “E” (we have two names picked out for girl or boy child, both start with E, so calling it baby E .) 7 months, 3 weeks is not that much time before our lives change forever.

Outside of finally figuring out how to keep my apartment clean, focusing on obtaining stability at my job, and trying to eat healthy and exercise and such, I’m perturbed  by our housing situation and whether or not we should move or stay put. The general consensus until my anxiety attack of this last week was stay put until kid is 1, then figure it out / move to a two bedroom / etc. Continue reading

Should I Buy a Condo?

Most jobs in my industry are an hour north of where I live (more than that in traffic) and I’m growing weary from the commute. We’re paying $2500 a month in rent currently for our 800 square foot one bedroom and I’m starting to think renting is no longer cost effective for us. Granted, we won’t be able to afford a 1 bedroom quite a nice as the one we are renting – BUT – we could buy a 1 bedroom condo closer to the city and then at least we’d lock in our monthly rates so we can actually afford to stay here.

My crazy thought is buying a 1 bedroom 1 ba condo. I wouldn’t have considered this before, but it’s the only way we can own property for <$600k. My goal would be to get the monthly mortgage under $2000 so with standard $500 HOA, we’d be paying the same (or even less next year) than what we are paying to rent. Continue reading

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It Takes $450,000 to Be Middle Class in the Bay Area

The other day I was having a debate with one of my blog readers about the definition of Middle Class. We were both trying to sort out what the income requirement was to be “middle class” in the Bay Area or any region of the country. I came up with a pretty simple equation…

Middle Class, to me, equals being able to afford a modest house for a family (3br, 2ba) in a reasonably good neighborhood within one hour of where you work (i.e. a suburb of a major city.) Based on various estimates you should spend about 25% of your AFTER TAX income on your monthly home payment. Thus, in order to determine what it takes to be middle class in any region, we can look at what homes cost in that region, and base our definition on that. Continue reading

No Cable TV for Now, Fast Internet Instead

Since I’m determined to read more, get out of the house more to see friends and exercise, and generally not be a lazy couch potato, I decided to avoid getting cable for the time being. Instead, we’re getting 50MB internet and skipping cable altogether.

The cable bill for the first year wouldn’t be that bad, but then I’d get used to it and have to pay the ridiculous fees charged after the first 12 month rates expire. It really is ridiculous to pay $100+ per month for cable television when most of the shows are available through other means. I even already have Amazon prime which offers many shows and movies as part of the membership. There’s also the option to buy Hulu Plus or Netflix if this isn’t enough.

Instead of the cable membership, I splurged on a waterproof case for my Kindle ($70) so I can come home after work, fill up the tub, and read myself silly. Better that then starting mindlessly at the screen. I figure if I’m desperate for television I can sign up for the local gym, which offers tv screens in every cardio machine… at least then I’ll be able to get healthy while watching television instead of the opposite.