Love my Job - BUT VHCOL making it Extremely Tough!!

[cchoukal]

Whole Foods is full of Mexican strawberries. No matter where you buy or how much you pay, produce picked for shelf life will not be as good as produce picked ripe. Peaches are another example.

Also why does pork taste so much better in Europe and UK than it does here?

Preach.

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[The Knife & Gun Club]

Just an EM/Anes Crit fellow creeping but…

Am I missing something about this produce thing? There’s like so many places you can get fresh produce from local markets in this country. It doesn’t need to be served from a beachside market with fancy signage and stuff though. There’s local markets in plenty of modest markets in and outside of California.

I’m in the same boat as you - stuck in a locale where starter homes are 2M plus for a freestanding home in preferred neighborhood.

But recently my wife and I have been venturing out and checking out the neighborhoods 1-2 hours away. You’ll be suprised how many hidden gems there are a bit outside the Uber-zip-codes

 

[sloh]

Lots of perks living in SoCal but I can tell you it's a huge myth that one of the perks is going to the beach often. Many live far enough from the beach that the traffic to get to the beach makes the ROI poor, not to mention the beach is kind of boring.

 

[sevo00]

Lots of perks living in SoCal but I can tell you it's a huge myth that one of the perks is going to the beach often. Many live far enough from the beach that the traffic to get to the beach makes the ROI poor, not to mention the beach is kind of boring.

 

[aneftp]

Just an EM/Anes Crit fellow creeping but…

Am I missing something about this produce thing? There’s like so many places you can get fresh produce from local markets in this country. It doesn’t need to be served from a beachside market with fancy signage and stuff though. There’s local markets in plenty of modest markets in and outside of California.

I’m in the same boat as you - stuck in a locale where starter homes are 2M plus for a freestanding home in preferred neighborhood.

But recently my wife and I have been venturing out and checking out the neighborhoods 1-2 hours away. You’ll be suprised how many hidden gems there are a bit outside the Uber-zip-codes

U don’t even have to venture 1-2 hrs away. Just 30-45 min away even in high cost areas.

 

[GravelRider]

Some people get divorces. Some buy multiple houses. Some people collect expensive cars, buy large boats, or take lavish vacations. Happiness doesn’t always have to make the most financial sense. You only get one chance at this life, so you might as well try to squeeze a little bit of happiness out of it.

 

[NumTacos]

I see no problem using housing in VHCOL areas as a major part of your retirement plan.

Step-up basis for your heirs means that even if you reverse mortgage in retirement, whatever equity you have in the house is a very tax-efficient inheritance vehicle.

If you don’t need to reverse mortgage, you may be providing your kids a foothold in a real estate market that would otherwise be unattainable.

I have a neighbor in SoCal where I grew up who did just that. Basically gifted his ocean view home to his youngest son and moved into a (nice) trailer!

 

[NumTacos]

There’s some interesting psychology at play in this thread. Folks who live in VHCOL chime in with their opinion, but folks who have made the choice to live in LCOL places just can’t seem to let it go.

It’s almost as if making the smarter economic decision to live in a cheaper place comes with a need to justify why it’s actually a much wiser decision to everybody else. (And to one’s self?)

It is interesting. I think everyone is arguing in good faith though, they probably are happier living more rural. Or it’s a recruitment strategy for their bare bones practice!

 

[NumTacos]

Look. If there is Apple retail store and Best Buy within 15 min of me. I can live there. Having a Walmart and target nearby wont do it for me. That’s my only requirement. It’s very simple.

Such a good point, for a certain demographic like many of us, it’s all we need!

 

[NumTacos]

Something that’s been touched on but not addressed - it’s not fun to live around people who are all wealthier (or poorer) than you. Especially once you have kids and they expect to be doing a lot of the same things/getting the same items as their friends. Said another way - it’s nice to live in a community that’s relatively in the same financial situation as you.

It’s kind of fascinating that some of the most well paid physicians in the country are probably considered paupers in this situation. I kind of grew up in a similar environment, it could get weird sometimes (me being the pauper).

 

[teacher2md]

To OP:

What might help in your s decision is to map out in Excel exactly what the financial/retirement picture looks like for each scenario.

How many more years would it take to become financially free so that you can work part-time, or retire, in each scenario?

Seeing the hard numbers helped me prioritize things when I was changing jobs.

 

[dabears505]

Stay in California. You live once. Enjoy the sunshine and beauty. Can't take the money with you. If at this point be happier in a smaller house in Cali than a mansion in Illinois

 

[sloh]

It’s kind of fascinating that some of the most well paid physicians in the country are probably considered paupers in this situation. I kind of grew up in a similar environment, it could get weird sometimes (me being the pauper).

Really puts into perspective the average doc just can’t compete with VC, finance, quants, etc.

 

[gaspusher]

Haha yes ^

Meka Asonye | First Round Capital

First Round is a seed-stage venture firm focused on building a vibrant community of technology entrepreneurs and companies.

firstround.com

Just bought a 6 million dollar home. It’s surprising how many under 40 multi multi millionaires there are around here in tech, VC, PE, etc. If you are purely in it for the money best to become an angel investor rather than studying over and over again for tests in medicine during your 20s.

I get enormous satisfaction from my job, but I’m sure these finance people get enormous satisfaction from their stock options and tax exempt compensation.

 

[<(^_^)>]

$1.8 million for commuter hell.

If this is the "compromise" wow, get out of the bay area.

Well it’s 4 miles from the house he originally posted. I initially thought it was further. Either way, with minimal compromise (on lot size, or very very good instead of best schooling etc) OP can cut 30% off housing costs.

If I’m correct in assuming where OP works it’s a whopping 8 minute drive to the hospital lol.

I find these posts kind of funny because people are like “why is the location I choose to live in so expensive!?” And then when suggested to live in another city say “but this city offers an experience nowhere else can possibly touch (for me)” essentially answering their own question.

 

[DoctwoB]

Lots of perks living in SoCal but I can tell you it's a huge myth that one of the perks is going to the beach often. Many live far enough from the beach that the traffic to get to the beach makes the ROI poor, not to mention the beach is kind of boring.

Overrated: living near beach/mountains. Especially as a doc with kids, unless you are a diehard skier or surfer, it's not worth building your life around. Travel to these places if/when desired.

Underrated: Living somewhere where it is pleasant to be outside most/all of the year. I might not go to the beach or mountains often, but i go run outside in the sunshine almost every day. Or grill or read a book on my deck while watching the kids. This is hard to put a price on, but it is worth a hell of a lot to me.

 

[nimbus]

Haha yes ^

Meka Asonye | First Round Capital

First Round is a seed-stage venture firm focused on building a vibrant community of technology entrepreneurs and companies.

firstround.com

Just bought a 6 million dollar home. It’s surprising how many under 40 multi multi millionaires there are around here in tech, VC, PE, etc. If you are purely in it for the money best to become an angel investor rather than studying over and over again for tests in medicine during your 20s.

I get enormous satisfaction from my job, but I’m sure these finance people get enormous satisfaction from their stock options and tax exempt compensation.

I didn’t understand anything he wrote in his “story” so I must have been studying the wrong things my whole life.

 

[nimbus]

Overrated: living near beach/mountains. Especially as a doc with kids, unless you are a diehard skier or surfer, it's not worth building your life around. Travel to these places if/when desired.

Underrated: Living somewhere where it is pleasant to be outside most/all of the year. I might not go to the beach or mountains often, but i go run outside in the sunshine almost every day. Or grill or read a book on my deck while watching the kids. This is hard to put a price on, but it is worth a hell of a lot to me.

Same. Also people never mention the paucity of bugs. My med school friend who came to visit from Texas last summer said he doesn’t like to hang out outdoors during summer because he’d be eaten by bugs.

 

[gaspusher]

Sitting in a case, reading Reddit. Came by this quote. I think this fully exemplifies young doctors in the Bay Area. Note - no idea if this was written by a physician, but sure sounds like it:

“My household is in the top 1% by income nationwide.

After a decade of working and saving, we were able to buy a modest two bedroom condo in the area of the bay we want to be in, and minimally renovated it to reduce our energy bill. We have a small backyard; I do all the maintenance on it. We don’t buy luxury cars, brands, or jewelry. The socks I’m wearing are over 3 years old. We have two cars, both new, hybrids, and paid off; we’ll drive them for about 10 years; we drive 15 minutes to Costco for gas; I change my own oil. We try to cook and eat at home as much as possible; we get groceries delivered. We should be set to retire on time, and although we can probably afford to pay for our kids’ college, we’ll encourage them to take loans to make the financial pressure real. We can afford to help our less fortunate family when they need it, but paying for long term care would be a challenge. Our jobs are demanding and we work a lot; we don’t have time for hobbies, watching sports, self-care, etc., but we do watch 20-60 minutes of TV per night. Only one of us owns a computer, and it aged out of software updates last year. We try to avoid flying; we’ve never flown business class or first class. I file taxes using TurboTax; the government takes over half and I feel that’s fair. We still have $300k of student debt. We don’t stress about money (this is the true luxury, right?), but it still feels precarious”

 

[anonperson]

Sitting in a case, reading Reddit. Came by this quote. I think this fully exemplifies young doctors in the Bay Area. Note - no idea if this was written by a physician, but sure sounds like it:

“My household is in the top 1% by income nationwide.

After a decade of working and saving, we were able to buy a modest two bedroom condo in the area of the bay we want to be in, and minimally renovated it to reduce our energy bill. We have a small backyard; I do all the maintenance on it. We don’t buy luxury cars, brands, or jewelry. The socks I’m wearing are over 3 years old. We have two cars, both new, hybrids, and paid off; we’ll drive them for about 10 years; we drive 15 minutes to Costco for gas; I change my own oil. We try to cook and eat at home as much as possible; we get groceries delivered. We should be set to retire on time, and although we can probably afford to pay for our kids’ college, we’ll encourage them to take loans to make the financial pressure real. We can afford to help our less fortunate family when they need it, but paying for long term care would be a challenge. Our jobs are demanding and we work a lot; we don’t have time for hobbies, watching sports, self-care, etc., but we do watch 20-60 minutes of TV per night. Only one of us owns a computer, and it aged out of software updates last year. We try to avoid flying; we’ve never flown business class or first class. I file taxes using TurboTax; the government takes over half and I feel that’s fair. We still have $300k of student debt. We don’t stress about money (this is the true luxury, right?), but it still feels precarious”

This couple sounds like weenies.

If they tried to live in Malibu or Martha's Vineyard, they would face a similar situation.. Being a physician puts you in a great position financially in life but there's always someone with a bigger wallet/income.

That's life.

 

[aneftp]

No one buys a 3 million dollar starter home out of residency regardless of what region.

I don’t care what the Op thinks or wants. If they want to live in that area. That’s fine. It’s their personal choice.

But the belief one buys a home like that out of residency is insane. 3x ur salary means 1.8 million. Really should be 1.2 million mortgage in my belief on a 600k salary.

And that’s before kids.

Look 20-30 minutes away if you want to buy.

 

[NumTacos]

Sitting in a case, reading Reddit. Came by this quote. I think this fully exemplifies young doctors in the Bay Area. Note - no idea if this was written by a physician, but sure sounds like it:

“My household is in the top 1% by income nationwide.

After a decade of working and saving, we were able to buy a modest two bedroom condo in the area of the bay we want to be in, and minimally renovated it to reduce our energy bill. We have a small backyard; I do all the maintenance on it. We don’t buy luxury cars, brands, or jewelry. The socks I’m wearing are over 3 years old. We have two cars, both new, hybrids, and paid off; we’ll drive them for about 10 years; we drive 15 minutes to Costco for gas; I change my own oil. We try to cook and eat at home as much as possible; we get groceries delivered. We should be set to retire on time, and although we can probably afford to pay for our kids’ college, we’ll encourage them to take loans to make the financial pressure real. We can afford to help our less fortunate family when they need it, but paying for long term care would be a challenge. Our jobs are demanding and we work a lot; we don’t have time for hobbies, watching sports, self-care, etc., but we do watch 20-60 minutes of TV per night. Only one of us owns a computer, and it aged out of software updates last year. We try to avoid flying; we’ve never flown business class or first class. I file taxes using TurboTax; the government takes over half and I feel that’s fair. We still have $300k of student debt. We don’t stress about money (this is the true luxury, right?), but it still feels precarious”

Sounds like "fun"

 

[triggermaster]

.

No one buys a 3 million dollar starter home out of residency regardless of what region.

I don’t care what the Op thinks or wants. If they want to live in that area. That’s fine. It’s their personal choice.

But the belief one buys a home like that out of residency is insane. 3x ur salary means 1.8 million. Really should be 1.2 million mortgage in my belief on a 600k salary.

And that’s before kids.

Look 20-30 minutes away if you want to buy.

I repeat the option everyone keeps ignoring. Stay there if you love it and don’t buy a house… rent. If you invest all the money you save by renting vs mortgage, opportunity cost of down payment and home equity, repairs, renovations, insurance, maintenance, etc. you’ll almost certainly end up better off with less stress and more flexibility. You can always buy in the future or move in the future.

 

[gaspusher]

.


I repeat the option everyone keeps ignoring. Stay there if you love it and don’t buy a house… rent. If you invest all the money you save by renting vs mortgage, opportunity cost of down payment and home equity, repairs, renovations, insurance, maintenance, etc. you’ll almost certainly end up better off with less stress and more flexibility. You can always buy in the future or move in the future.

Yes. This is exactly what we have decided to do. As someone mentioned earlier, rent is so backwards here that the place we are renting for $7k a month would cost us $3.4 million by Zillow and Realtor estimates. With a 7% mortgage that’s obviously a no go and almost triple what we rent it for. The problem is that a house *can* get you 5% interest a year over a long period. Rent gets me 0%. Therefore we have to make up for that in the stock market.

 

[GravelRider]

Sitting in a case, reading Reddit. Came by this quote. I think this fully exemplifies young doctors in the Bay Area. Note - no idea if this was written by a physician, but sure sounds like it:

“My household is in the top 1% by income nationwide.

After a decade of working and saving, we were able to buy a modest two bedroom condo in the area of the bay we want to be in, and minimally renovated it to reduce our energy bill. We have a small backyard; I do all the maintenance on it. We don’t buy luxury cars, brands, or jewelry. The socks I’m wearing are over 3 years old. We have two cars, both new, hybrids, and paid off; we’ll drive them for about 10 years; we drive 15 minutes to Costco for gas; I change my own oil. We try to cook and eat at home as much as possible; we get groceries delivered. We should be set to retire on time, and although we can probably afford to pay for our kids’ college, we’ll encourage them to take loans to make the financial pressure real. We can afford to help our less fortunate family when they need it, but paying for long term care would be a challenge. Our jobs are demanding and we work a lot; we don’t have time for hobbies, watching sports, self-care, etc., but we do watch 20-60 minutes of TV per night. Only one of us owns a computer, and it aged out of software updates last year. We try to avoid flying; we’ve never flown business class or first class. I file taxes using TurboTax; the government takes over half and I feel that’s fair. We still have $300k of student debt. We don’t stress about money (this is the true luxury, right?), but it still feels precarious”

This post sounds particularly whiney and self entitled to me. It sounds like the worst thing about being in the Bay Area is the “keeping up with the Joneses” mentality that makes it sad to wear socks older than 3 years old, pay off your cars, shop at Costco, cook your own meals, and use TurboTax. Those sound like normal things to me, but I guess only “the poors” do those things in the Bay Area?

 

[aneftp]

Yes. This is exactly what we have decided to do. As someone mentioned earlier, rent is so backwards here that the place we are renting for $7k a month would cost us $3.4 million by Zillow and Realtor estimates. With a 7% mortgage that’s obviously a no go and almost triple what we rent it for. The problem is that a house *can* get you 5% interest a year over a long period. Rent gets me 0%. Therefore we have to make up for that in the stock market.

You are missing the bigger picture.

The 600k cash you put down payment into a 3 million dollar home is “dead” money.

You can reinvest the same exact money in treasury yields at a GUARANTEED 5% rate these days (state income tax exempt).

 

[gaspusher]

You are missing the bigger picture.

The 600k cash you put down payment into a 3 million dollar home is “dead” money.

You can reinvest the same exact money in treasury yields at a GUARANTEED 5% rate these days (state income tax exempt).

Are you sure about this? Over a 15-30 year period real estate does not generally go down. It goes up, typically 4-6%. So that down payment is actually making 4-6% per year. I would not call that dead money at all. Dead money is the $7,000 check I write to our landlord every first of the month. I will never see a return on that. However, that allows me to invest a higher percent of my income in guaranteed 5% savings and likely higher return riskier stocks.

If mortgage rates were 2%, I’d move in a heart beat and buy in an adjacent cheaper neighborhood. At 7%, or heck anything over 4%, I’m feel like I’m throwing money out the window…kinda like I’m doing by renting. The rent to mortgage ratio is just also very messed up.

 

[anonperson]

This post sounds particularly whiney and self entitled to me. It sounds like the worst thing about being in the Bay Area is the “keeping up with the Joneses” mentality that makes it sad to wear socks older than 3 years old, pay off your cars, shop at Costco, cook your own meals, and use TurboTax. Those sound like normal things to me, but I guess only “the poors” do those things in the Bay Area?

Lol. Now that I'm an attending and make decent money, I happily have a Costco membership.

Love grabbing a cart after work and checking the store out.

Where else can you really get prime trip tips and whole briskets?

 

[anonperson]

Are you sure about this? Over a 15-30 year period real estate does not generally go down. It goes up, typically 4-6%. So that down payment is actually making 4-6% per year. I would not call that dead money at all. Dead money is the $7,000 check I write to our landlord every first of the month. I will never see a return on that. However, that allows me to invest a higher percent of my income in guaranteed 5% savings and likely higher return riskier stocks.

If mortgage rates were 2%, I’d move in a heart beat and buy in an adjacent cheaper neighborhood. At 7%, or heck anything over 4%, I’m feel like I’m throwing money out the window…kinda like I’m doing by renting. The rent to mortgage ratio is just also very messed up.

At the end of the day, you still need a place to live whether you rent or buy.

Northern and Southern California real estate has pretty much been on fire but who is to say prices won't stagnate or decrease. What if that $3 million house eventually comes down to a market value of $2.5 million. Still a lot, but you would lose $500k in value. That is a lot.

 

[aneftp]

Are you sure about this? Over a 15-30 year period real estate does not generally go down. It goes up, typically 4-6%. So that down payment is actually making 4-6% per year. I would not call that dead money at all. Dead money is the $7,000 check I write to our landlord every first of the month. I will never see a return on that. However, that allows me to invest a higher percent of my income in guaranteed 5% savings and likely higher return riskier stocks.

If mortgage rates were 2%, I’d move in a heart beat and buy in an adjacent cheaper neighborhood. At 7%, or heck anything over 4%, I’m feel like I’m throwing money out the window…kinda like I’m doing by renting. The rent to mortgage ratio is just also very messed up.

That 600k you put down in the stock market generally goes up 10% annually over the course of 10-15 years as well

You are way too young to think 7% is high

6%-7% was the normal for the better part of 20 years 1990s-2000s.

As for $7000 a month rents. It’s a lot

But Think about this.
If your mortgage is 1.2 milllion even using a 5 year arm around 5%. That’s cost to $5000 a month in interest alone. Excluding property tax costs and other costs. Your monthly cost will be well over $8000 a month. So even accounting for principal payments. You aren’t coming out ahead. And that’s on a 1.8 million dollar home with 600k down payment

And you are looking at a 2.5-3 milloon dollar homes??

My suggestion is you are dead set on buying a home. Get a jumbo arm and refinance later.

The real question is “what’s the rush?”

And I know the answer without even knowing who you are. It’s the woman who’s pushing for a home. Your spouse wants a home. Don’t lie. And you are just going for the ride.

 

[mmag]

If you want to stay in SF buy now and lock in your property tax. Prop 13 is still amazing despite the recent changes. No other place will keep property that low despite any appreciation.
If you want to life in SF, find a nice rent controlled place and don't ever give it up.
You can be wishy washy all you want but every day that you don't commit or delay leaving is a waste.

There's great produce in other places - I wasn't impressed by the farmers markets in the Bay area. You might have to grow it yourself or hire a gardener.

 

[GravelRider]

Are you sure about this? Over a 15-30 year period real estate does not generally go down. It goes up, typically 4-6%. So that down payment is actually making 4-6% per year. I would not call that dead money at all. Dead money is the $7,000 check I write to our landlord every first of the month. I will never see a return on that. However, that allows me to invest a higher percent of my income in guaranteed 5% savings and likely higher return riskier stocks.

If mortgage rates were 2%, I’d move in a heart beat and buy in an adjacent cheaper neighborhood. At 7%, or heck anything over 4%, I’m feel like I’m throwing money out the window…kinda like I’m doing by renting. The rent to mortgage ratio is just also very messed up.

Dead money means it’s not liquid. It’s tied up in an asset that you can’t do anything with until you move and sell your house. There’s opportunity cost there. Does your 4-6% estimate on returns take into account transactional costs of buying/selling the home, maintenance, upgrades, repairs, property taxes, mortgage interest, etc.? Maybe your $3 million dollar house continues to gain $200k in market value every year, but I can almost guarantee you are not seeing 4-6% in returns on a house you live in.

Take 3-5 years and just pile money into a CD or money market fund with safe, guaranteed 5% returns. Once you save 600k-$1million, re-evaluate your desire to buy a $3 million house and if it’s still there then go for it.

 

[DirtDocMD]

Are you sure about this? Over a 15-30 year period real estate does not generally go down. It goes up, typically 4-6%. So that down payment is actually making 4-6% per year. I would not call that dead money at all. Dead money is the $7,000 check I write to our landlord every first of the month. I will never see a return on that. However, that allows me to invest a higher percent of my income in guaranteed 5% savings and likely higher return riskier stocks.

If mortgage rates were 2%, I’d move in a heart beat and buy in an adjacent cheaper neighborhood. At 7%, or heck anything over 4%, I’m feel like I’m throwing money out the window…kinda like I’m doing by renting. The rent to mortgage ratio is just also very messed up.

Look at it this way, on a $1.5 million plus mortgage, at 7% interest, you’d be out over $100k per year on INTEREST, anyway (plus there’s insurance AND taxes). So, you’re right, might as well rent, vs. buying, if you’re gonna stay there. If interest rates get back down around 4%, or the housing market were to tank out there, well, maybe then you buy something.

The real question for folks who live in a VHCOL or “trendy” area, really comes down to, “How often are you taking advantage of what the area offers?”.

When you’re young and single, or married with no kids, you might be doing something there weekly, or a couple times a month. Often, once you have kids, you find out that you’re really only doing something every 2-3 months that you couldn’t do if you lived in a “cheaper” area. At that point, you gotta wonder, “Would it be significantly cheaper/easier to live elsewhere, and simply visit/vacation in the “trendy” area?”.

Safe schools, a bigger home, extra expenses for kids WILL be a consideration in a few years. Sounds boring, and you can hear Rush’s “Subdivisions” playing in the back of your head, but it’s real…

I did the single “downtown” thing for a few years, in a top 10 population area, living in a 3 level 1000sq ft townhouse. It was fun while it lasted, but it certainly wasn’t the place to raise kids or live long-term.

If you would have told me that there were areas that I wouldn’t have been able to afford to live in, making $600k plus a year, 20 years ago when I was training (other than perhaps oceanfront or high-rise), I’d have had a hard time believing it. Unfortunately, that’s just how it is. and I’ve found other activities/places that bring me more joy, rather than feeling like a “slave” to a home or lifestyle.

Good luck, whatever you choose to do.

 

[BLADEMDA]

Are you sure about this? Over a 15-30 year period real estate does not generally go down. It goes up, typically 4-6%. So that down payment is actually making 4-6% per year. I would not call that dead money at all. Dead money is the $7,000 check I write to our landlord every first of the month. I will never see a return on that. However, that allows me to invest a higher percent of my income in guaranteed 5% savings and likely higher return riskier stocks.

If mortgage rates were 2%, I’d move in a heart beat and buy in an adjacent cheaper neighborhood. At 7%, or heck anything over 4%, I’m feel like I’m throwing money out the window…kinda like I’m doing by renting. The rent to mortgage ratio is just also very messed up.

You can rent for 2 years then buy when rates fall below 4%. Of course, that same house may be up 5%-7% in 2 years but that's the real estate market.

 

[nimbus]

This post sounds particularly whiney and self entitled to me. It sounds like the worst thing about being in the Bay Area is the “keeping up with the Joneses” mentality that makes it sad to wear socks older than 3 years old, pay off your cars, shop at Costco, cook your own meals, and use TurboTax. Those sound like normal things to me, but I guess only “the poors” do those things in the Bay Area?

I get new socks for Christmas every year. Nice ones too.

 

[sloh]

Sitting in a case, reading Reddit. Came by this quote. I think this fully exemplifies young doctors in the Bay Area. Note - no idea if this was written by a physician, but sure sounds like it:

“My household is in the top 1% by income nationwide.

After a decade of working and saving, we were able to buy a modest two bedroom condo in the area of the bay we want to be in, and minimally renovated it to reduce our energy bill. We have a small backyard; I do all the maintenance on it. We don’t buy luxury cars, brands, or jewelry. The socks I’m wearing are over 3 years old. We have two cars, both new, hybrids, and paid off; we’ll drive them for about 10 years; we drive 15 minutes to Costco for gas; I change my own oil. We try to cook and eat at home as much as possible; we get groceries delivered. We should be set to retire on time, and although we can probably afford to pay for our kids’ college, we’ll encourage them to take loans to make the financial pressure real. We can afford to help our less fortunate family when they need it, but paying for long term care would be a challenge. Our jobs are demanding and we work a lot; we don’t have time for hobbies, watching sports, self-care, etc., but we do watch 20-60 minutes of TV per night. Only one of us owns a computer, and it aged out of software updates last year. We try to avoid flying; we’ve never flown business class or first class. I file taxes using TurboTax; the government takes over half and I feel that’s fair. We still have $300k of student debt. We don’t stress about money (this is the true luxury, right?), but it still feels precarious”

Haha no hobbies or self-care. Depression in the making baby!

 

[DoctwoB]

Are you sure about this? Over a 15-30 year period real estate does not generally go down. It goes up, typically 4-6%. So that down payment is actually making 4-6% per year. I would not call that dead money at all. Dead money is the $7,000 check I write to our landlord every first of the month. I will never see a return on that. However, that allows me to invest a higher percent of my income in guaranteed 5% savings and likely higher return riskier stocks.

If mortgage rates were 2%, I’d move in a heart beat and buy in an adjacent cheaper neighborhood. At 7%, or heck anything over 4%, I’m feel like I’m throwing money out the window…kinda like I’m doing by renting. The rent to mortgage ratio is just also very messed up.

Not to pile on, but when real estate goes up 4-6%, you are not making 4-6%. with a 20% down mortgage you are levered 4-1, meaning your ROI is actually more like 20-30%. Of course the inverse is also true: if prices go down 20%, you've "lost" 100% of your invested value. In reality, your ROI is lower then the 20-30% due to associated costs (interest, property taxes, etc). This is why even though on average S&P 500 grows at a much faster rate then real estate prices, real estate can outperform due to leverage.

So the fact is that buying real estate is just making a heavily leveraged investment. That means, whether it is a good financial decision or not depends heavily on future appreciation. If you look at the New york times excellent rent vs. buy calculator, you'll find by fare the most important input is housing appreciation (and assumed rate of return on down payment funds if you put them in the market). . If housing prices increase by 5% a year (less then historical average in the bay area), even if you could rent very cheaply and get a guaranteed 7% in the market you are better off buying. If housing prices stay flat, you are better off renting. Going by historical trends, buying is going to have the better expected return, but with the caveat that a large chunk of your net work will be tied into a single asset which increases risk relative to having your money more diversified.

 

[prinzmetal7]

Overrated: living near beach/mountains. Especially as a doc with kids, unless you are a diehard skier or surfer, it's not worth building your life around. Travel to these places if/when desired.

Underrated: Living somewhere where it is pleasant to be outside most/all of the year. I might not go to the beach or mountains often, but i go run outside in the sunshine almost every day. Or grill or read a book on my deck while watching the kids. This is hard to put a price on, but it is worth a hell of a lot to me.

I somewhat agree, but more that it is overrated to live in trendy cities. However, for someone who needs to stay in the West for family reasons what cities are good options? Unlike the East Coast, there aren't a lot of small states to choose from. The Pacific Northwest (Washington & Oregon) is cold and rainy half the year, so not necessarily conducive to being outside most of the year. Nevada and Arizona are blistering hot in summer and I'm not sure how feasible it is to have a yard with grass for the kids to play. Utah seems nice, but maybe difficult if not from the community. Perhaps Colorado or New Mexico?

After considering all this, California seems like a reasonable place with a lot of job opportunities, mild weather, and year-round access to the outdoors. Perhaps in a cheaper locale in California. Would people still prefer to move out of state rather than living somewhere like Temecula CA, Redlands CA, or Sacramento area?

 

[HemeOncHopeful19]

I somewhat agree, but more that it is overrated to live in trendy cities. However, for someone who needs to stay in the West for family reasons what cities are good options? Unlike the East Coast, there aren't a lot of small states to choose from. The Pacific Northwest (Washington & Oregon) is cold and rainy half the year, so not necessarily conducive to being outside most of the year. Nevada and Arizona are blistering hot in summer and I'm not sure how feasible it is to have a yard with grass for the kids to play. Utah seems nice, but maybe difficult if not from the community. Perhaps Colorado or New Mexico?

After considering all this, California seems like a reasonable place with a lot of job opportunities, mild weather, and year-round access to the outdoors. Perhaps in a cheaper locale in California. Would people still prefer to move out of state rather than living somewhere like Temecula CA, Redlands CA, or Sacramento area?

Washington & Oregon not a good fit for people who like the outdoors? Is this what this thread is coming to?!

 

[UnoMas]

I somewhat agree, but more that it is overrated to live in trendy cities. However, for someone who needs to stay in the West for family reasons what cities are good options? Unlike the East Coast, there aren't a lot of small states to choose from. The Pacific Northwest (Washington & Oregon) is cold and rainy half the year, so not necessarily conducive to being outside most of the year. Nevada and Arizona are blistering hot in summer and I'm not sure how feasible it is to have a yard with grass for the kids to play. Utah seems nice, but maybe difficult if not from the community. Perhaps Colorado or New Mexico?

After considering all this, California seems like a reasonable place with a lot of job opportunities, mild weather, and year-round access to the outdoors. Perhaps in a cheaper locale in California. Would people still prefer to move out of state rather than living somewhere like Temecula CA, Redlands CA, or Sacramento area?

There is no point living in California if you live in Redlands or Temecula in my opinion. 1 way drive to LA is easily 1.5-2 hours, OC is 1-1.5 hours. More than a few days in the summer, the weather is almost just as hot as Nevada. You pay outrageous CA state income tax without any of the nearby amenities. Food is terrible in those areas

 

[prinzmetal7]

Washington & Oregon not a good fit for people who like the outdoors? Is this what this thread is coming to?!

You are taking things out of perspective. Washington & Oregon have beautiful outdoor opportunities, however, with the constant rain/overcast skies, it is not a climate where it is pleasant to be outdoors year-round. Seasonal affective disorder is very real in the Northwest as well.

 

[gaspusher]

Not to pile on, but when real estate goes up 4-6%, you are not making 4-6%. with a 20% down mortgage you are levered 4-1, meaning your ROI is actually more like 20-30%. Of course the inverse is also true: if prices go down 20%, you've "lost" 100% of your invested value. In reality, your ROI is lower then the 20-30% due to associated costs (interest, property taxes, etc). This is why even though on average S&P 500 grows at a much faster rate then real estate prices, real estate can outperform due to leverage.

So the fact is that buying real estate is just making a heavily leveraged investment. That means, whether it is a good financial decision or not depends heavily on future appreciation. If you look at the New york times excellent rent vs. buy calculator, you'll find by fare the most important input is housing appreciation (and assumed rate of return on down payment funds if you put them in the market). . If housing prices increase by 5% a year (less then historical average in the bay area), even if you could rent very cheaply and get a guaranteed 7% in the market you are better off buying. If housing prices stay flat, you are better off renting. Going by historical trends, buying is going to have the better expected return, but with the caveat that a large chunk of your net work will be tied into a single asset which increases risk relative to having your money more diversified.

So am I thinking about this correctly then? Say this is the house in questions (note I feel that I am getting a better deal on my current place which a lot nicer, but this suffices haha). Two scenarios.

16300 Azalea Way, Los Gatos, CA 95032 | Zillow

16300 Azalea Way, Los Gatos CA, is a Single Family home that contains 2337 sq ft and was built in 1959.It contains 3 bedrooms and 2.5 bathrooms.This home last sold for $960,000 in April 2002. The Zestimate for this Single Family is $3,446,300, which has increased by $133,660 in the last 30...

www.zillow.com

Scenario 1 - Rent the house:
-I rent the house for $6850 a month for 15 years. With utilities I pay $7500. Cost of living adjustment 3% a year. I spend $1,4000,000 to rent this house for 15 years.
-We take that $600,000 down payment and put it in VTI/VOO. Each month, I take the rest of the money I would have been paying the mortgage with ($21,000 - $7500 = $13,500) and just invest that too. In an ideal world I get 8% ROI in the market. That is $6,500,000 after 15 years.

=>So we netted $6,500,000 - $1,400,000 = $5,100,000.

Scenario 2 - Buy the house:
-I take every call shift possible, 1099 side gigs, wife inherits money and somehow we piecemeal our way to buying this house for $3,000,000. We put 20% or $600,000 down and take out a $2,400,000 mortgage at 7.2%.
-After $600,000 down, I am paying $21,000 a month for mortgage, utiliteis, property tax, and insurance. We live extremely uncomfortably paycheck to paycheck.
-If we sell in 15 years with a 5% return on investment each year the house should net $6,200,000.
-We will owe the bank $1,800,000 to pay off the rest of the mortgage and the realtor 5% ($300,000) for selling the house.

=>So we netted $4,100,000 (not including any maintenance, repairs, renovations during that 15 years).

So the difference is $1,000,000 over 15 years (probably closer to $1,500,000 once you factor in repairs/renovations).

There are million and a half confounding factors that can alter each situation: interest rates, natural disaster, market crashes, etc, ect.

HOWEVER, it seems that renting is actually the financially prudent thing to do. Having a home to call your own, of course, has benefits well beyond finances and creates a sense of nurturing that a rental never will. Is it work 7 figures more though?

 

[pgg]

You can rent for 2 years then buy when rates fall below 4%. Of course, that same house may be up 5%-7% in 2 years but that's the real estate market.

Why do you think rates will be below 4% in two years?

 

[sloh]

There is no point living in California if you live in Redlands or Temecula in my opinion. 1 way drive to LA is easily 1.5-2 hours, OC is 1-1.5 hours. More than a few days in the summer, the weather is almost just as hot as Nevada. You pay outrageous CA state income tax without any of the nearby amenities. Food is terrible in those areas

And while we are at it, throw central cali like Fresno and Bakersfield in there as well.

 

[prinzmetal7]

Curious where you guys would recommend young, graduating residents and fellows to move, especially if they are single? Dating can be much more difficult in small cities. I imagine major cities in the South or Midwest would be the recommended spots - anything in the west?

 

[DoctwoB]

So am I thinking about this correctly then? Say this is the house in questions (note I feel that I am getting a better deal on my current place which a lot nicer, but this suffices haha). Two scenarios.

16300 Azalea Way, Los Gatos, CA 95032 | Zillow

16300 Azalea Way, Los Gatos CA, is a Single Family home that contains 2337 sq ft and was built in 1959.It contains 3 bedrooms and 2.5 bathrooms.This home last sold for $960,000 in April 2002. The Zestimate for this Single Family is $3,446,300, which has increased by $133,660 in the last 30...

www.zillow.com

Scenario 1 - Rent the house:
-I rent the house for $6850 a month for 15 years. With utilities I pay $7500. Cost of living adjustment 3% a year. I spend $1,4000,000 to rent this house for 15 years.
-We take that $600,000 down payment and put it in VTI/VOO. Each month, I take the rest of the money I would have been paying the mortgage with ($21,000 - $7500 = $13,500) and just invest that too. In an ideal world I get 8% ROI in the market. That is $6,500,000 after 15 years.

=>So we netted $6,500,000 - $1,400,000 = $5,100,000.

Scenario 2 - Buy the house:
-I take every call shift possible, 1099 side gigs, wife inherits money and somehow we piecemeal our way to buying this house for $3,000,000. We put 20% or $600,000 down and take out a $2,400,000 mortgage at 7.2%.
-After $600,000 down, I am paying $21,000 a month for mortgage, utiliteis, property tax, and insurance. We live extremely uncomfortably paycheck to paycheck.
-If we sell in 15 years with a 5% return on investment each year the house should net $6,200,000.
-We will owe the bank $1,800,000 to pay off the rest of the mortgage and the realtor 5% ($300,000) for selling the house.

=>So we netted $4,100,000 (not including any maintenance, repairs, renovations during that 15 years).

So the difference is $1,000,000 over 15 years (probably closer to $1,500,000 once you factor in repairs/renovations).

There are million and a half confounding factors that can alter each situation: interest rates, natural disaster, market crashes, etc, ect.

HOWEVER, it seems that renting is actually the financially prudent thing to do. Having a home to call your own, of course, has benefits well beyond finances and creates a sense of nurturing that a rental never will. Is it work 7 figures more though?

As you say, there are a million confounding factors, but a few big ones:

You didn't factor in rent increases. Nice thing about a fixed rate mortgage is it is fixed. Your rent will likely be double in 15 years from what it is now if not more.

Interest rate changes: If rates go down you can refinance. For every point rates go down you save 24k/year + future earnings on it. Hard to calculate this as it's not known if or when rates will go down, but with the fixed rate mortgage you have an upper bound on what you will pay, with refinancing to 3% probably as the lower bound.

Moving: Your landlord may sell the house out from under you a few times, especially when prices are rising. Plan on costs for moving every few years.

 

[sloh]

Curious where you guys would recommend young, graduating residents and fellows to move, especially if they are single? Dating can be much more difficult in small cities. I imagine major cities in the South or Midwest would be the recommended spots - anything in the west?

Rent in a metro. Dating market will be more in your favor bc there will be more single, intelligent, hard-working people your age. Find the one, get married, then move to the suburbs with good schools and have kids. I pretty much did this in LA. Met an anesthesiologist. Will be buying a house in the OC the next 1-2 years.

 

[HemeOncHopeful19]

Curious where you guys would recommend young, graduating residents and fellows to move, especially if they are single? Dating can be much more difficult in small cities. I imagine major cities in the South or Midwest would be the recommended spots - anything in the west?

Why more women live in major East Coast counties while men outnumber them in the West

There are more women than men in some of the largest urban U.S. counties east of the Mississippi River, on the Eastern Seaboard and in the Deep South.

apnews.com

 

[BLADEMDA]

Why do you think rates will be below 4% in two years?

MORTGAGE RATES PREDICTIONS 2024, 2025, 2026, 2027 AND 2028

Mortgage rate predictions for this month, 2024, 2025, 2026, 2027 and 2028: 30-year mortgage rate predictions and 15-year mortgage rate predictions. The current mortgage rates. Long-term mortgage interest rates forecast. Mortgage rates trend.

longforecast.com

 

[pgg]

MORTGAGE RATES PREDICTIONS 2024, 2025, 2026, 2027 AND 2028

Mortgage rate predictions for this month, 2024, 2025, 2026, 2027 and 2028: 30-year mortgage rate predictions and 15-year mortgage rate predictions. The current mortgage rates. Long-term mortgage interest rates forecast. Mortgage rates trend.

longforecast.com

Somewhere on the internet you can find a prediction for anything.

The big picture is that 6% is already low by historical standards. 4% is exceptionally low.

There's a lot of risk associated with ARM'ing yourself into a large mortgage if refinancing lower in two years is the way you make the numbers work.