patrick.net

Under traditional ratios (28% of gross income towards housing), it's possible you might have trouble qualifying for a mortgage at the top end of the range you're saying with only $300K down. It's possible you could find someone more lenient than that, of course. If you put $400K down, you might find it easier.

I'd use the Submedian calculator to run the numbers on this if you're interested in Buy vs. Rent:

https://docs.google.com/spreadsheet/ccc?key=pM4Gw0s2zSeAnOTnop5I7Lg

It's possible that you're saving money renting right now if you'd buy a comparable place to where you live now, when you consider all costs of ownership -- insurance, maintenance, property tax, etc. -- but it may depend on how long you plan to live there. Also, will you ever have kids, and will you ever need a bigger place? Transaction costs are significant if you want to sell and buy a bigger place in the near future.

Assume that $1.3m is what you and wife need for your retirement. If you use some of it as down-payment, you need to save it back.

Do you want a kid? You need an extra $20K/kid.year for day care and other things.

How old are you? Do you have enough career in front of you to pay off the house and still save back your down-payment?

Last question: Do you think a 2BR is all you deserve for your life time savings and will you be happy with that?

You sure as hell better like 1. your job 2. your wife 3. San Francisco house for a long time for it to work out.

Put that $300K into Vanguard Wellington or similar and see what you want to buy in 5 years with it.

clambo says

You sure as hell better like 1. your job 2. your wife

If you divorce, assume your wife will get the house and you will have to continue paying for it.

Heraclitusstudent says

Assume that $1.3m is what you and wife need for your retirement. If you use some of it as down-payment, you need to save it back.

Do you want a kid? You need an extra $20K/kid.year for day care and other things.

How old are you? Do you have enough career in front of you to pay off the house and still save back your down-payment?

Last question: Do you think a 2BR is all you deserve for your life time savings and will you be happy with that?

No kids, not planning on having any. I'm mid 40's, working for another 20 years most likely. I dunno if I "deserve" more, we live in a fairly luxury apartment with lots of space in a great neighborhood, buying would be an equivalent place, actually maybe slightly worse, even at $1.4M.

Would love love love to pay about $750-$900K for a place, but there's just nothing under $1.2M that appeals to us after looking for a while. I mean basics with a parking space and laundry in a good neighborhood.

But I ran the numbers on the spreadsheet in comment #2, it says it makes more sense to buy.

jdubbs29 says

But I ran the numbers on the spreadsheet in comment #2, it says it makes more sense to buy.

There is a big benefit to begin a renter in SFO when the big one comes. Something to think about. It sounds like you have a good financial picture setup without buying a home. Why change that formula? Remember also, unless you are actually going to pay down the mortgage you are either renting cash or renting a home. There is very little difference unless you factor in appreciation of the house in your time horizon. From 1890 to 1990 houses only beat inflation by 0.2% There are sweet periods in that mix, and we definitely are in one now, but the question is the future.

Why would you want to be asset rich and cash poor. That makes for a miserable life.

The flip side is you can at least reverse mortgage it if you have no heirs so you'll eventually get some of your money back.
Imagine if you had invested that $300K in S&P 500 in Jan 2009, you'd be paying cash for your dream house.
Keep cash so this means don't pay more than 20% down. I'm surprised that there are no houses in San Francisco that are OK under $1.2 million.
Here's a little place that's not a lot of dough near your neck of the woods.
http://www.zillow.com/homedetails/1734-Bay-St-APT-104-San-Francisco-CA-94123/15069807_zpid/
Here's 2 bedroom, $800K
http://www.zillow.com/homedetails/1021-1025-Lake-St-San-Francisco-CA-94118/15089907_zpid/

Following may offend: Don't allow your wife's aspirations to affect your decisions.

You are almost always better off renting and saving, especially in grossly overpriced markets. A lot more flexibility as well.

Ceffer says

You are almost always better off renting and saving, especially in grossly overpriced markets. A lot more flexibility as well.

expensive does not make it overpriced. I can make a case it is underpriced.

In any case, If you are relatively sure Marina district is your "love" and long term, you'll need to buy.

clambo says

Keep cash so this means don't pay more than 20% down. I'm surprised that there are no houses in San Francisco that are OK under $1.2 million.

Here's a little place that's not a lot of dough near your neck of the woods.

http://www.zillow.com/homedetails/1734-Bay-St-APT-104-San-Francisco-CA-94123/15069807_zpid/

Here's 2 bedroom, $800K

http://www.zillow.com/homedetails/1021-1025-Lake-St-San-Francisco-CA-94118/15089907_zpid/

Following may offend: Don't allow your wife's aspirations to affect your decisions.

The first was a Tenancy in Common, which can be a nightmare, and the second was only a 1BR.

We have a large 2BR, with a bonus room in the back, its about 1,400 Sq feet.

This is equivalent: http://www.trulia.com/property/3152953023-2249-Bay-St-San-Francisco-CA-94123

It's $1.5M, which is in line with what I've seen around here.

And don't worry, the wife isn't pressuring me. Just trying to figure out if its worth it to buy.

jdubbs29 says

Can someone run all of the numbers and figure out whether this makes sense? Or am I better off staying where I am?

You don't need numbers.
If you like to pay a high price for something that will go even higher, go ahead.

RentingForHalfTheCost says

jdubbs29 says

But I ran the numbers on the spreadsheet in comment #2, it says it makes more sense to buy.

There is a big benefit to begin a renter in SFO when the big one comes. Something to think about. It sounds like you have a good financial picture setup without buying a home. Why change that formula? Remember also, unless you are actually going to pay down the mortgage you are either renting cash or renting a home. There is very little difference unless you factor in appreciation of the house in your time horizon. From 1890 to 1990 houses only beat inflation by 0.2% There are sweet periods in that mix, and we definitely are in one now, but the question is the future.

Not in San Francisco. Prices shot up there well above inflation, and no reason to expect anything different in the future.

Strategic Renter says

Why would you want to be asset rich and cash poor. That makes for a miserable life.

Appreciation? It makes for a great retirement.

jdubbs knows the truth; he is renting a place that he could not afford to buy.

This is not a revelation to some of us.

Having your cake and eating it too will be possible but very expensive.

FYI Marina is built on bay land created with the rubble of 1906 quake which will suffer "liquefaction" in a quake as it did in 1989.

A CONDO that's 1.5 million is a very bad deal, a condo is never paid off, those fees never go down.

By the way, if you're set on the Marina, make sure you get things checked out structurally. Don't forget what happened in the Marina during Loma Prieta.

The marina is an "earthquake amplifier". The ground is nearly the worst in the city for quakes.

Strategist says

Strategic Renter says

Why would you want to be asset rich and cash poor. That makes for a miserable life.

Appreciation? It makes for a great retirement.

No thanks who needs money when you are too old to enjoy it

Strategist says

Not in San Francisco. Prices shot up there well above inflation, and no reason to expect anything different in the future.

Predictions are hard, especially when they are about the future.

SFace says

expensive does not make it overpriced. I can make a case it is underpriced.

hahah, SF is cheap, BUY BUY BUY!!!!

Strategic Renter says

Strategist says

Strategic Renter says

Why would you want to be asset rich and cash poor. That makes for a miserable life.

Appreciation? It makes for a great retirement.

No thanks who needs money when you are too old to enjoy it

You will never explain this to those who have been hoodwinked to believe otherwise. Let's remember, since the advent of the spoken word, retirement meant death.

Its only a century old scheme to redefine retirement as the golden years where one finally gets to enjoy all the sacrifices they made during their would be enjoyable years.

If you make it that long,,,,

JH says

SFace says

expensive does not make it overpriced. I can make a case it is underpriced.

hahah, SF is cheap, BUY BUY BUY!!!!

SF housing should start at $10 million for a studio with no modern amenities. That would only be for 1/2 share. If you don't have that cash then you shouldn't have protection from the elements. You don't deserve it.

JH says

SFace says

expensive does not make it overpriced. I can make a case it is underpriced.

hahah, SF is cheap, BUY BUY BUY!!!!

cheap/expensive, overprice/underpriced are completely different things. Don't commingle the two.

Based on those logic, everything good in nature are expensive/overpriced which are faulty logic.

notice Jdubb only wants the Marina district in San Francisco, which also means they would not live in Vallejo even if you pay him $500.

RE only goes up. There has never been a better time to buy!

I know this sounds obvious and I assume this is totally out of the question as I imagine its SF or nothing for you all.... but have you thought about the East Bay? You get WAYYYY more bang for your buck, better weather, and only about a 15-20 minute hop skip and a jump over to the city.

edvard2 says

I know this sounds obvious and I assume this is totally out of the question as I imagine its SF or nothing for you all.... but have you thought about the East Bay? You get WAYYYY more bang for your buck, better weather, and only about a 15-20 minute hop skip and a jump over to the city.

Especially if you have HOV access.

SFace says

cheap/expensive, overprice/underpriced are completely different things. Don't commingle the two.

cheap [cheep]
adjective, cheap·er, cheap·est.
1. costing very little; relatively low in price; inexpensive: a cheap dress.

JH says

SFace says

cheap/expensive, overprice/underpriced are completely different things. Don't commingle the two.

cheap [cheep]

adjective, cheap·er, cheap·est.

1. costing very little; relatively low in price; inexpensive: a cheap dress.

There are many people in San Francisco that overpay for housing in cheap areas because they trust the expensive advice of Realtors.

If you acknowledge you messed up by NOT buying three years ago.

YET, you are still willing to buy.

If you're giving away money, I got a few ideas. Let me know.

APOCALYPSEFUCKisShostikovitch says

You forgot to buy before 1974?

I guess you're fucked.

But but but interest rates are so low now...loans were so hard to get in the 70s.

Even at 1.2 mil, you are looking at over 22 annual rents. Don't ever buy primary residence if it's over 20 annual rents. Personally, I would get the hell out of there because paying 54Gs a year in rent is colossal expenditure, but if you insist on staying in marina, I would continue to rent.

dublin hillz says

Even at 1.2 mil, you are looking at over 22 annual rents. Don't ever buy primary residence if it's over 20 annual rents. Personally, I would get the hell out of there because paying 54Gs a year in rent is colossal expenditure, but if you insist on staying in marina, I would continue to rent.

Don't do the math. Just pay the genius who bought the home all your current and future savings and watch your testicles get pulled back into your body. You deserve nothing in this life unless you were part of the baby boomer generation and went up to your eyeballs in debt.

Well, the way I see it, rent is about a little less than 1/3 of my take home. It's too much, but it is what it is. I hope to make some more money from my job over the next 5 years. I'm not big on lots of debt, I can sleep pretty easy knowing I can pay all my bills with no problem, go travel the world if we want to. Freedom. If I could buy a place for a payment equal to or a little less than my rent with say, $100K down, it would be a no brainer to buy.
But this market makes it tough.

jdubbs29 says

If I could buy a place for a payment equal to or a little less than my rent with say, $100K down, it would be a no brainer to buy.

That'll work in Idaho or Illinois. In California even the homeless have a few hundred thousand in the bank. They made that from just washing windshields at stop lights. Your preaching to the choir. If you want to buy around here, be prepared to get stripped naked and taken in all directions while you cry out in agony. Not for the weak at heart.

RentingForHalfTheCost says

In California even the homeless have a few hundred thousand in the bank. They made that from just washing windshields at stop lights.

What street corner? I want a piece of that! All the bums on street corners where I lived aren't getting shit. Everyone is broke. Except for the few that aren't...the few who bought in 80s or 90s.

RentingForHalfTheCost says

In California even the homeless have a few hundred thousand in the bank. They made that from just washing windshields at stop lights.

hmmmmmm, I need that job. Where do I apply.
Get some sun, work at your own pace, no tax, flirt with pretty women. A few hundred thousand in the bank.

Don't laugh. A couple of years ago, they had a news show and one of the features was a street guy who would forcibly and unsolicited start cleaning windows of cars stopped at intersections in New York City until people gave him money.

He estimated he cleared tax free 80k to 100k a year. He would make money up to a point, then go to a pay phone, call a limousine to pick him up to take him to Atlantic City, where he would gamble until he lost the amount.

Then being a good loser, the casino would comp him a limousine to take him back to his street corner to make more money.

Ceffer says

Don't laugh. A couple of years ago, they had a news show and one of the features was a street guy who would forcibly and unsolicited start cleaning windows of cars stopped at intersections in New York City until people gave him money.

He estimated he cleared tax free 80k to 100k a year. He would make money up to a point, then go to a pay phone, call a limousine to pick him up to take him to Atlantic City, where he would gamble until he lost the amount.

Then being a good loser, the casino would comp him a limousine to take him back to his street corner to make more money.

To make $100K tax free, you would have to clear about $273 a day. At a generous $3 a car, you would have to clean 91 cars every day (or about 8 cars an hour for 12 hours) for 365 days a year.

Unlikely.

jdubbs29 says

To make $100K tax free, you would have to clear about $273 a day. At a
generous $3 a car, you would have to clean 91 cars every day (or about 8 cars an
hour for 12 hours) for 365 days a year.

Unlikely.

Plus they better have good insurance cause it's only a matter of time until a type A personality driver who's in a hurry runs them over like a stray dog.

JH says

RentingForHalfTheCost says

In California even the homeless have a few hundred thousand in the bank. They made that from just washing windshields at stop lights.

What street corner? I want a piece of that! All the bums on street corners where I lived aren't getting shit. Everyone is broke. Except for the few that aren't...the few who bought in 80s or 90s.

http://www.outhousedaily.com/2013/05/worlds-richest-bum-offering-panhandling.html

http://www.sfgate.com/bayarea/article/S-F-man-is-homeless-by-choice-He-has-a-2833486.php

http://www.huffingtonpost.com/2012/07/23/shane-warren-speegle-says_n_1694577.html

We are the stupid ones. Actually working trying to get ahead.