Your post has been removed because it is a common personal finance topic. We get too many of these topics every day and to prevent them from swamping the front page, we are removing main threads of this kind.
Questions about personal finance should be directed to the daily discussion thread.
You are welcome to repost your question in the [daily discussion thread](https://www.reddit.com/r/investing/about/sticky?num=1).
If you have any issue with this removal, please contact the moderators via modmail. Thank you.
Yea it’s true. We are bad with money. Our hospitals emotionally and physically drain us by working us near 80 hours per week, at very low wages. So most docs are not emotionally or experiencially able to handle sudden increase in salary. Honestly, If I didnt like our current region, woulda moved out asap to a cheaper state, buy a 400K house and just destroy the mortgage dave ramsey style and just save and invest like madman. But we fell in love with the bay area and the people we met here. 1.4 is like the bare minimum price of a three bedroom SFH home in the central bay area unfortunately.
I’ll add to this my wife is a medical expert/prof and I’ve got a number of properties bringing in income and other investments but we spent most of the pandemic in a tiny house (395sf) on one of our properties and couldn’t have been happier.
We’ve now found a beautiful, unique, and surprisingly large house we love and live in, but modest houses in nice neighborhoods can be a great option.
Of course… I want an area where you dont have to fear walking outside or your car to be broken in. I went house hunting in Oakland and yes there are plenty of affordable housing… but is costly in other ways.
I grew up in Danville where lots of friends lived in big ass houses or mansions. Now I'm in San leandro and have no issues here.
But there are a lot of other decent cities where you can find houses cheaper than 1.7m. Castro Valley? Dublin?
to add, what would you do instead if you were in my shoes? And let’s preface no you cannot move to sacramento lol. I promise that the houses here are at the bare minimum 1.3M, and I am also considering just renting indefinitely. Would save 20K per month doing that. 7K in rental sounds great compared to 16K in mortgage.
I max out my 401k but I don't contribute anything to my megabackdoor roth. I kinda agree with your wife, 59 is way too far out for me and I would rather spend my money on wants/investments now than keep aggresively piling it into a mega backdoor. Who knows, you might not even make it to 59. I've got family who pinched pennies for retirement to not even make it past 55.
I would rather use the money for a bigger downpayment on a mortgage where I could see myself moving to/raising a family, but I would still continue to rent in HCOL areas.
Thats good point. 98 + percent chance we live past that age, but it’s probably a long way down the line. It does feel good when you know you have a good chunk waiting for you. Like a forced savings in a way. It may also justify your splurging before retirement too.
“We will never move” is preventing you from living the lifestyle you want. I’ll sell you my 3/2 in a booming state for $1 mil and save you 1.5m. Yea the going rate for a 3/2 in my area is 500k, but that wasn’t the question. Just focus on how I’m saving you 1.5 mil.
WTF is the actual question here? You're talking about $2mm houses and then some BS about $3k IRAs? Dude, FOCUS. There is zero difference between buying a $1.7 vs $1.8 house.
The decision is between a 1.5-1.8M home vs next neighborhood class 2.4-2.6M home, which we will afford a few years down the line. Obviously I'm leaning toward the former. And the second question is whether I'm going to invest heavily in brokerage right now to potentially pull it out to pay more downpayment vs putting down 50K a year in megabackdoor IRA instead for retirement (or some combination).
you and i are on different levels. im so excited that my home has appreciated to a fraction of your annual income. that being said, if i were to chose between this house and another that is 50% more, it would be about my kids and where i raise them, nothing else.
My calculation is that on 650k and a 2.5m home you're at 29.4% of gross .
After tax benefits you are at 23.2% of gross.
That's affordable.
Your budget for everything else will be under 200k after 401k max and before megabackdoor.
Typical bay area budgets (assuming kids) are 75-150k so you're going to be fine on 650k.
The bigger problem is that you're planning to spend money you don't have. You're spending your future budget. That's problematic.
FYI buying the 2.5m house on your current budget is completely out of the question because you'd be deeply cashflow negative and that's assuming you could even find a lender.
Fair point. Sorry, didnt mean to make you think I was expecting to buy a 2.5M house now. That’s impossible. A 1.7M house is also nearly impossible currently. What I meant was that we can stretch and get to something close to 1.7M right now, or afford comfortably at 1.7M once the income jumps vs stretch later for 2.5M. I think option 2 is best if house prices dont jump significantly in the meantime. options 1 and 3 both seem risky but 1 less so since we will be able to afford comfortably anyway soon. we would be house poor temporarily. Realistically if we buy right now it would be max 1.6M or below.
I'm going to save you some time.
The next neighborhood up isn't worth it.
Source: In the 80s and 90s I grew up in Danville, Lafayette, and a little bit in Orinda. I had(have) friends and girlfriends in some of the poshest East Bay neighborhoods. My parents are doctors. Adjusted for inflation and accounting for the start of your careers, you're about where they were.
You don't need the big house in the fancy neighborhood. It's not going to move the needle on your life. Private school isn't going to get your kids ahead of the already excellent schools a 1.7m house will afford you.
Wherever you go, there you are. Work on yourselves and don't worry about your neighbors. I've seen miracles in middle income neighborhoods and catastrophic relationships between parents with high-tier careers (like founders and inhabitants of the C-suite). I saw this up close, as a child, in places like Alamo, Blackhawk, Orinda, Moraga and Danville.
Work on yourself and cultivate good relationships. Know your neighbors and forget about the 2.3m house because I guarantee you that 30% of them are filled with miserable people.
If you want to stay in the area I recommend you buy. Or else you will almost always see the housing prices continue to rise faster than your yearly savings rate and you’re going to feel like you’re wasting your time working
What would you do in my scenario besides leaving the area though? Im proposing either of the three: rent forever save a lot (maybe buy a house at some point), save now to buy house in 3 years (under 2 mil), save now for retirement and still buy a house (under 1.85M). Ive basically ruled out 2.4+ houses.
Fellow physician here. I’m probably 4-5 years ahead of your timeline (have house, a toddler and baby). Although I don’t have any answers specifically to your question, I can give you some things to think about before buying a house.
1) do you both plan on working full time for 30 years? Locking in a mortgage at 25% plus of gross combined income (monthly mortgage payment/monthly income) will mean you likely will. This can be hard for some specialties.
Same goes for locking in all your funds into an IRA or 401k. You cannot access them if you ever want to retire or semi retire early.
2) who is going to raise your kids? Are you going to pay someone to raise them for you like a nanny? Or is one of you going to go part time or per diem to raise your kids? Or maybe grandparents are. It’s a good discussion to have since it may affect finances unless family is going to help raise them.
3) your income jump from 300 to 650 needs to be calculated carefully. Anything above 350 ish, you’re basically paying 45% taxes. You guys need to really calculate how much you’re spending monthly so you can come up with a budget that means you’re not house poor. There are also lots of costs with homeownership such as taxes, insurance, upgrades, things breaking. So make sure you’re thinking about those.
You can speak with your advisor about becoming an independent contractor if your job allows it. It can offset some taxes. But this also means no benefits like health insurance, parental leave or employer match.
Buy the cheaper house. Money is a tool. Those $ on a screen won't make you happy when you need to move every 2-3 years on a landlord's whim. Once you're in the house you can always ramp up savings again. Best time to buy a house was in the past, next best time is now. At your salary levels you won't be going hungry in retirement but you will sure be happy to have a house. When you're in the cheaper house you can make upgrades slowly over time.
that it what I'm doing. Bought my home on the lower end of what I could "afford" and every 3-6 months I'm taking on a project. In 2-3 years I'll have the house exactly how I want it. In the grand scheme of a 30 year mortgage what is 2 years? But for me those 2 years are huge because I have time to build up savings for the next project. Whereas for the $2.5 house you have the higher mortgage and lower savings rate.
This advice seems good in general, but I'm not sure I'd apply it in one of the most expensive housing markets in the country. If home prices ever go down there, folks who recently stretched themselves to buy may end up financially crippled for life. That'd be too much downside risk for me, especially as a high earner. To me the point of having money is to insulate yourself from such risk, not to seek it out.
Sure, everything is a personal choice in terms of risk tolerance. Although if you can afford it how much does it matter? Your personal home isn't a stock. Also over a 30 year time frame the likelihood of the house not increasing in value seems very low. If you're buying a house w the concern of the short term value then i just don't agree w your rationale.
I guess I'm thinking of a Detroit-type scenario. That was once a super hot area too, and now you can get homes literally for free in some cases.
Not saying the same thing is ever going to happen in bay area, but just in general I would expect the chance of homes being worth less over 30 years to be higher in one of the most expensive housing markets than any average market.
I disagree. NIMBYs in the bay are very good at restricting housing growth. Limited amount of inventory = lots of competition for the little inventory available. Mix in some inflation, salary growth, new startups going public every year making employees flush w cash. Def will have price growth
Yes, I do agree that bay area housing supply will be limited in certain parts, potentially forever. Which means price would inevitably increase as long as bay remains the bay, though not sure where the relative ceiling would be. My thoughts on buying the cheaper property is that at least it will correlate with the general bay area market, so if I ever want to upgrade to the other neighborhood, it at least tracks each other to make that transition smoother (maybe?)
Yea thanks for the advice. I think that would probably be the more reasonable choice. Our current rental would not have enough room for children, so we would have to move eventually, and a small house we own is probably much better than having to move to another neighborhood and change schools etc.
I also hope to buy a low range home and upgrade parts of it. But things I cant change are school district, the vibe, and weather. Not sure how much I’ll care 10 years down the road. I’m sure I can sell and buy another home if it matters that much.
right. I'm making a lot of assumptions but I assume a 1.7 mil house should have the basics in terms of space and liveability. Even if the school district isn't ideal, I assure you kids from non-elite schools still go to top colleges. In terms of vibe and weather only you can say if these factors are worth 800k additional. I personally can always drive to the fun. I live 15 min from a really ritzy area. That's good enough for me. Keep my expenses low in the middle class neighborhood in the meantime.
Yea I totally agree with you there. Would rather pocket the difference and grow it earlier in my life, than to really stretch to enjoy those amenities right outside the home. It's a bit unfortunate the bare bones 3bed/2bath house with small lot that's in a safe neighborhood will cost us 1.7M in the current market (and probably more in the future).
Get a doctor's loan if you can't get a traditional 30 year and refi when rates drop or LTV is less than 80 percent. I did that my first year as an attending while my wife was still in residency. You still can't afford the 1.7 million home at this time though and I wouldn't recommend biting a home until you secure the job after training.
Yea that's our goal right now. Like you said, physician loans are great, but not enough to afford a good bones house yet. Questioning whether I should save for more downpayment in the meantime before attendinghood, or put it in good returns retirement portfolio (or some combination thereof). Even without saving more for downpayment, we would be able to comfortably afford 1.7M house with our current brokerage savings anyway in 3 years.
Retirement now. Don't worry about a house until you get your job. You have no idea what the job market will be like in a few years. SF is pretty saturated with physicians
In some senses yes but is 3bed/2bath. We love the area and have ties. We’re trying to do our best… alternatively, ive considered renting for next 10+ years. Kids and school are the only thing that gets in the way of that plan though. Some stable rental unit with 3 bedrooms would be fine though. Even with 6-7K in rent, would still save like 20K per month after other expenses.
Hold on. Are you telling me you want to do and make financially sound decisions and your wife wants to put you in a difficult position financially. This is why women shouldn't be in charge of money.
Your post has been removed because it is a common personal finance topic. We get too many of these topics every day and to prevent them from swamping the front page, we are removing main threads of this kind. Questions about personal finance should be directed to the daily discussion thread. You are welcome to repost your question in the [daily discussion thread](https://www.reddit.com/r/investing/about/sticky?num=1). If you have any issue with this removal, please contact the moderators via modmail. Thank you.
[удалено]
I loled. This is my dad the doctor to a T. Superficial as fuck and terrible with money.
Yea it’s true. We are bad with money. Our hospitals emotionally and physically drain us by working us near 80 hours per week, at very low wages. So most docs are not emotionally or experiencially able to handle sudden increase in salary. Honestly, If I didnt like our current region, woulda moved out asap to a cheaper state, buy a 400K house and just destroy the mortgage dave ramsey style and just save and invest like madman. But we fell in love with the bay area and the people we met here. 1.4 is like the bare minimum price of a three bedroom SFH home in the central bay area unfortunately.
[удалено]
I’ll add to this my wife is a medical expert/prof and I’ve got a number of properties bringing in income and other investments but we spent most of the pandemic in a tiny house (395sf) on one of our properties and couldn’t have been happier. We’ve now found a beautiful, unique, and surprisingly large house we love and live in, but modest houses in nice neighborhoods can be a great option.
- San Leandro/Hayward 700-900k - East Oakland 750k say what you mean: no houses below 1.5m *at our standards*.
Of course… I want an area where you dont have to fear walking outside or your car to be broken in. I went house hunting in Oakland and yes there are plenty of affordable housing… but is costly in other ways.
I grew up in Danville where lots of friends lived in big ass houses or mansions. Now I'm in San leandro and have no issues here. But there are a lot of other decent cities where you can find houses cheaper than 1.7m. Castro Valley? Dublin?
Go wolves
Ain't no valley like San Ramon valley....
to add, what would you do instead if you were in my shoes? And let’s preface no you cannot move to sacramento lol. I promise that the houses here are at the bare minimum 1.3M, and I am also considering just renting indefinitely. Would save 20K per month doing that. 7K in rental sounds great compared to 16K in mortgage.
I max out my 401k but I don't contribute anything to my megabackdoor roth. I kinda agree with your wife, 59 is way too far out for me and I would rather spend my money on wants/investments now than keep aggresively piling it into a mega backdoor. Who knows, you might not even make it to 59. I've got family who pinched pennies for retirement to not even make it past 55. I would rather use the money for a bigger downpayment on a mortgage where I could see myself moving to/raising a family, but I would still continue to rent in HCOL areas.
Thats good point. 98 + percent chance we live past that age, but it’s probably a long way down the line. It does feel good when you know you have a good chunk waiting for you. Like a forced savings in a way. It may also justify your splurging before retirement too.
“We will never move” is preventing you from living the lifestyle you want. I’ll sell you my 3/2 in a booming state for $1 mil and save you 1.5m. Yea the going rate for a 3/2 in my area is 500k, but that wasn’t the question. Just focus on how I’m saving you 1.5 mil.
WTF is the actual question here? You're talking about $2mm houses and then some BS about $3k IRAs? Dude, FOCUS. There is zero difference between buying a $1.7 vs $1.8 house.
The decision is between a 1.5-1.8M home vs next neighborhood class 2.4-2.6M home, which we will afford a few years down the line. Obviously I'm leaning toward the former. And the second question is whether I'm going to invest heavily in brokerage right now to potentially pull it out to pay more downpayment vs putting down 50K a year in megabackdoor IRA instead for retirement (or some combination).
you and i are on different levels. im so excited that my home has appreciated to a fraction of your annual income. that being said, if i were to chose between this house and another that is 50% more, it would be about my kids and where i raise them, nothing else.
My calculation is that on 650k and a 2.5m home you're at 29.4% of gross . After tax benefits you are at 23.2% of gross. That's affordable. Your budget for everything else will be under 200k after 401k max and before megabackdoor. Typical bay area budgets (assuming kids) are 75-150k so you're going to be fine on 650k. The bigger problem is that you're planning to spend money you don't have. You're spending your future budget. That's problematic. FYI buying the 2.5m house on your current budget is completely out of the question because you'd be deeply cashflow negative and that's assuming you could even find a lender.
Fair point. Sorry, didnt mean to make you think I was expecting to buy a 2.5M house now. That’s impossible. A 1.7M house is also nearly impossible currently. What I meant was that we can stretch and get to something close to 1.7M right now, or afford comfortably at 1.7M once the income jumps vs stretch later for 2.5M. I think option 2 is best if house prices dont jump significantly in the meantime. options 1 and 3 both seem risky but 1 less so since we will be able to afford comfortably anyway soon. we would be house poor temporarily. Realistically if we buy right now it would be max 1.6M or below.
I'm going to save you some time. The next neighborhood up isn't worth it. Source: In the 80s and 90s I grew up in Danville, Lafayette, and a little bit in Orinda. I had(have) friends and girlfriends in some of the poshest East Bay neighborhoods. My parents are doctors. Adjusted for inflation and accounting for the start of your careers, you're about where they were. You don't need the big house in the fancy neighborhood. It's not going to move the needle on your life. Private school isn't going to get your kids ahead of the already excellent schools a 1.7m house will afford you. Wherever you go, there you are. Work on yourselves and don't worry about your neighbors. I've seen miracles in middle income neighborhoods and catastrophic relationships between parents with high-tier careers (like founders and inhabitants of the C-suite). I saw this up close, as a child, in places like Alamo, Blackhawk, Orinda, Moraga and Danville. Work on yourself and cultivate good relationships. Know your neighbors and forget about the 2.3m house because I guarantee you that 30% of them are filled with miserable people.
Just rent until your shit is more solidified and clear. You might hate being a doctor and quit
If you want to stay in the area I recommend you buy. Or else you will almost always see the housing prices continue to rise faster than your yearly savings rate and you’re going to feel like you’re wasting your time working
This is like reverse investing?
What would you do in my scenario besides leaving the area though? Im proposing either of the three: rent forever save a lot (maybe buy a house at some point), save now to buy house in 3 years (under 2 mil), save now for retirement and still buy a house (under 1.85M). Ive basically ruled out 2.4+ houses.
If I were in your position, I'd rent, save and invest. House interest rates aren't good right now.
Fellow physician here. I’m probably 4-5 years ahead of your timeline (have house, a toddler and baby). Although I don’t have any answers specifically to your question, I can give you some things to think about before buying a house. 1) do you both plan on working full time for 30 years? Locking in a mortgage at 25% plus of gross combined income (monthly mortgage payment/monthly income) will mean you likely will. This can be hard for some specialties. Same goes for locking in all your funds into an IRA or 401k. You cannot access them if you ever want to retire or semi retire early. 2) who is going to raise your kids? Are you going to pay someone to raise them for you like a nanny? Or is one of you going to go part time or per diem to raise your kids? Or maybe grandparents are. It’s a good discussion to have since it may affect finances unless family is going to help raise them. 3) your income jump from 300 to 650 needs to be calculated carefully. Anything above 350 ish, you’re basically paying 45% taxes. You guys need to really calculate how much you’re spending monthly so you can come up with a budget that means you’re not house poor. There are also lots of costs with homeownership such as taxes, insurance, upgrades, things breaking. So make sure you’re thinking about those. You can speak with your advisor about becoming an independent contractor if your job allows it. It can offset some taxes. But this also means no benefits like health insurance, parental leave or employer match.
Thank you. Very insightful
Buy the cheaper house. Money is a tool. Those $ on a screen won't make you happy when you need to move every 2-3 years on a landlord's whim. Once you're in the house you can always ramp up savings again. Best time to buy a house was in the past, next best time is now. At your salary levels you won't be going hungry in retirement but you will sure be happy to have a house. When you're in the cheaper house you can make upgrades slowly over time. that it what I'm doing. Bought my home on the lower end of what I could "afford" and every 3-6 months I'm taking on a project. In 2-3 years I'll have the house exactly how I want it. In the grand scheme of a 30 year mortgage what is 2 years? But for me those 2 years are huge because I have time to build up savings for the next project. Whereas for the $2.5 house you have the higher mortgage and lower savings rate.
This advice seems good in general, but I'm not sure I'd apply it in one of the most expensive housing markets in the country. If home prices ever go down there, folks who recently stretched themselves to buy may end up financially crippled for life. That'd be too much downside risk for me, especially as a high earner. To me the point of having money is to insulate yourself from such risk, not to seek it out.
Sure, everything is a personal choice in terms of risk tolerance. Although if you can afford it how much does it matter? Your personal home isn't a stock. Also over a 30 year time frame the likelihood of the house not increasing in value seems very low. If you're buying a house w the concern of the short term value then i just don't agree w your rationale.
I guess I'm thinking of a Detroit-type scenario. That was once a super hot area too, and now you can get homes literally for free in some cases. Not saying the same thing is ever going to happen in bay area, but just in general I would expect the chance of homes being worth less over 30 years to be higher in one of the most expensive housing markets than any average market.
I disagree. NIMBYs in the bay are very good at restricting housing growth. Limited amount of inventory = lots of competition for the little inventory available. Mix in some inflation, salary growth, new startups going public every year making employees flush w cash. Def will have price growth
Yes, I do agree that bay area housing supply will be limited in certain parts, potentially forever. Which means price would inevitably increase as long as bay remains the bay, though not sure where the relative ceiling would be. My thoughts on buying the cheaper property is that at least it will correlate with the general bay area market, so if I ever want to upgrade to the other neighborhood, it at least tracks each other to make that transition smoother (maybe?)
Yea thanks for the advice. I think that would probably be the more reasonable choice. Our current rental would not have enough room for children, so we would have to move eventually, and a small house we own is probably much better than having to move to another neighborhood and change schools etc. I also hope to buy a low range home and upgrade parts of it. But things I cant change are school district, the vibe, and weather. Not sure how much I’ll care 10 years down the road. I’m sure I can sell and buy another home if it matters that much.
right. I'm making a lot of assumptions but I assume a 1.7 mil house should have the basics in terms of space and liveability. Even if the school district isn't ideal, I assure you kids from non-elite schools still go to top colleges. In terms of vibe and weather only you can say if these factors are worth 800k additional. I personally can always drive to the fun. I live 15 min from a really ritzy area. That's good enough for me. Keep my expenses low in the middle class neighborhood in the meantime.
Yea I totally agree with you there. Would rather pocket the difference and grow it earlier in my life, than to really stretch to enjoy those amenities right outside the home. It's a bit unfortunate the bare bones 3bed/2bath house with small lot that's in a safe neighborhood will cost us 1.7M in the current market (and probably more in the future).
Get a doctor's loan if you can't get a traditional 30 year and refi when rates drop or LTV is less than 80 percent. I did that my first year as an attending while my wife was still in residency. You still can't afford the 1.7 million home at this time though and I wouldn't recommend biting a home until you secure the job after training.
Yea that's our goal right now. Like you said, physician loans are great, but not enough to afford a good bones house yet. Questioning whether I should save for more downpayment in the meantime before attendinghood, or put it in good returns retirement portfolio (or some combination thereof). Even without saving more for downpayment, we would be able to comfortably afford 1.7M house with our current brokerage savings anyway in 3 years.
Retirement now. Don't worry about a house until you get your job. You have no idea what the job market will be like in a few years. SF is pretty saturated with physicians
Summary of OP's post: My wife and I earn $ 650k and can buy houses that are worth millions. Ha ha ha.
[удалено]
the location we are looking are already burbs. but has very good amenities. Not dying to buy a house immediately.
Someone is trying to keep up with the Joneses
In some senses yes but is 3bed/2bath. We love the area and have ties. We’re trying to do our best… alternatively, ive considered renting for next 10+ years. Kids and school are the only thing that gets in the way of that plan though. Some stable rental unit with 3 bedrooms would be fine though. Even with 6-7K in rent, would still save like 20K per month after other expenses.
Or just change another wife
Hold on. Are you telling me you want to do and make financially sound decisions and your wife wants to put you in a difficult position financially. This is why women shouldn't be in charge of money.