patrick.net

I should also say that living here would be about 100K more for 7 years than our current 900 sqft apartment. So, that isn't thrilling me out of the gate.

What is your current rent? Do you like your place and the neighborhood? Do you have , or are planning, on having kids that will attend public or private schools and if so, how good are the schools? How steady is your income, and do you have a cash cushion after paying the down payment and fixing up the place before move in?

The average price per sq foot of a house sold in 94080 is $364, whereas this is being sold at $312. I would bet if you could make an offer that is at $300/sq foot or less, you might be protected against a 20% drop in price.

At 4.25% for a 30 yr mortgage, could be a decent deal.

Our current rent is 1350. It is about 100K more to buy this place over 7 years rather than rent out current place We have one child and are planning a second. The added space would be nice, but not really as much as we would want. East Bay would probably be a better place to find a home of 2000 sq ft. Pacifica schools are pretty good. My next move will probably be to look at the schools in this area. My partner and I are federal employees and are pretty secure in our positions. I have an 8 month emergency fund. The question will be how much down payment we could come up with while keeping the emergency fund in place.

Patrick's calculator suggested 360 was a "green" buying point, but I doubt they would go that low. That would be about 257 per sq ft. I am probably less appealing to them than they are hoping for if I set 360 as my high point!

I'm not sure how you get these numbers, assuming you put 20% down, if you get the price down to $420,000. Total loan amount is $336,000, and at 4.25% 30 yr mortgage (could be lower on a 7 yr) is $1652/month. Also assuming a property tax rate of 1.25% off the initial price, which is $437.50/month, and then with tax deduction of 25% (federal, state, and property tax deduction, not knowing your income), you would get $275/month off, enough to pay for your insurance and minor maintenance. Monthly nut is about $2100, fixed, for 7 years, or $175000 total.

On the other hand, your rent, not going up at all over 7 years (yeah, right) is $113,400. That is a $62K difference, not including any equity built in from the mortgage (roughly $45K). If you build that in, you get a $17K difference, which is not much.

Of course, if you want more space for two kids, then a 2000 sq foot home sounds right, if you can afford it.

Im just saying that the difference isn't that big on your current place vs this place.

This may be a misuse of Patrick's calculator, but I put in the price of 360,000 and compared it my apartment rent of 1350. I used 360000 as the price as this seems to be the tipping point in the Patrick's calculator. That is where I got the 100K difference between the two options. FWIW we have had the same rent for 5 years. Maybe it will go up in the next 7 years, maybe not. We are the most responsible, quiet tenants ever.
I have tried to edit the info pasted in below to stay in rows, but it just isn't working.

Renting Buying
Estimated monthly rent 1350 /Price 36000
Rent paid -121,580 /Mortgage interest -90,720
Return on downpayment 16,551 /Property tax -31,500
Return on saved principal 10,080 /Tax deduction 10,605
/Maintenance -25,200
/Insurance -12,600
/House price change -24,456
/Purchase costs -3,600
/Sale costs -23,488

Renter after 7 years: -94,949 Owner after 7 years: -200,960

BG How do you feel about buying this property and renting it back out in order to become a millionaire before you are 30 and to show the world that you got rocks?

bg says

Renting Buying
Estimated monthly rent 1350 /Price 36000
Rent paid -121,580 /Mortgage interest -90,720
Return on downpayment 16,551 /Property tax -31,500
Return on saved principal 10,080 /Tax deduction 10,605
/Maintenance -25,200
/Insurance -12,600
/House price change -24,456
/Purchase costs -3,600
/Sale costs -23,488

The numbers look good. (I forgot to add in sales costs (I would negotiate it down to 5%), as well as return on saved principal. I think though that 2.5% is aggressive; CDs are paying less).

Why is the home price change -24,456? Are you betting on losing another 8-9% off the 360K? Remember, you have built something like $40K in equity payments over the next 7 years. Also, tax deduction of 10,605 is small over 7 years. It is $90K in interest. Maybe that is the number you get over and above the standard deduction?

Anyway, if you have doubts about it being too small, I might pass if you can afford something at 2000 sq feet. Look for something you can grow into that you can afford.

Waitingtobuy says

Why is the home price change -24,456? Are you betting on losing another 8-9% off the 360K? Remember, you have built something like $40K in equity payments over the next 7 years. Also, tax deduction of 10,605 is small over 7 years. It is $90K in interest. Maybe that is the number you get over and above the standard deduction?

I really just used Patick's calculator I think the reduction in value of is built into the assumptions.

I should also say that they probably have no interest in selling this house of less than 420. 360 is just what came out of Patrick's calculator based on rents. I just wanted to go into it knowing a price that made sense to me, before the tax accountant and the realtor got a hold of me.

JodyChunder says

BG How do you feel about buying this property and renting it back out in order to become a millionaire before you are 30 and to show the world that you got rocks?

I can show the world I "got rocks" with my 8 month emergency fund. I am way over 30 already.

Eight months is not enough unless that is eight months of living high on the hog.

It is eight months of high on the hog. In reality, it would probably last me much longer than that. I lived on 20K a year in BA in grad school for two years with no debt.

Then you are good to go. Tho your lady friend if you got one is not gonna be so cool about living like a grad student! If it gets to that just move on out here to the desert with me and I'll fix you up. I can also put you on window tinting at one of my shops.

bg says

I should also say that living here would be about 100K more for 7 years than our current 900 sqft apartment. So, that isn't thrilling me out of the gate.

A calculator is a function of the input. If you tell me rent is flat, house is down and selling cost is 10%, you don't need a calculator to figure out the output. Here's my major contentions about the calculator anyway:

* Rent expectation is an if input. It's really not that important anyway.

* Appreciation is an if input and a major IF. In seven years, there may be depreciation or appreciation, who knows. You model in a linear result with the expection of -1% for seven years as of today!, mathematicians model in expected results. In other words, if there is a 25% chance of 5% annual appreciation 50% of 2% appreciation and 25% of -1% appreication, you'll find the expected result is whole lot different and more comprenhensive. In other words like everything else, I weigh the upside with the downside. For example, if a 4/5 biotech discovery stocks are expected to go bust but the one that doesn't is a 10 bagger, it is still an awesome investment.

* Selling cost is realized when it is an actual transaction which may be 7 years or never.

* MID and property tax deduction is flawed as it doesn't consider other itemized deduction everyone has anyway, state income taxes, property taxes and SDI taxes. MID applies to both federal and state.

* Insurance is way too high, P&C to replace 500K cost about 1K a year. You bundle it with other insurance and it is even less.

* The analysis compares current rental, a smaller apartment to a SFH. An ugpgrade is a value with cost. May or may not be worth it.

The calculator should be a tool, but it is nowhere near helpful in the real world as it would tell you to buy in the slums of Oakland and never buy in the Fortress of Palo Alto. It is exactly the opposite of what people who buys a home to live are doing.

Having said that, the most imporant thing is finding the right place for your family first. East Bay does have tremendous deals for the bucks and would be solid green on Patrick's calculator.

SFace, thank you for your thoughtful post.

You are right. I am comparing apples to oranges. It turns out I like my apples. What I mean by that is that I like our 900 sq ft apartment and the money I can put away each month. I have made this work. I am not sure that a crappy little house would feel like an improvement. At least I can see the silver lining in my current situation. Not sure I will see a l silver lining to house I don't love. That said, this discussion has helped me think it through and helped me get clear on this picture before I get the hard sell from the agent.

JodyChunder says

If it gets to that just move on out here to the desert with me and I'll fix you up. I can also put you on window tinting at one of my shops.

where in the desert? I used to live in New Mexico.

Turns out I am the lady in the house, so I think we will be OK.

I actually like putting on window tinting. I did the windows in my office a couple of years ago. The trick was to use enough water. I had a wall of windows looking into a courtyard. I hated people peering in all day.

BG I have several residences here in Victorville,and aim to buy a few more. I have a parcel of land near Salton Sea a small condo in Palm Springs, two 5 acre parcels in Joshua Tree (with water) and a tear down in Yucca Valley I haven't gotten around to working on. It's near the old country club.

Window tinting and HVAC are a big deal in these parts and also snake and critter removal. I have a hand in all three as well as Yoghurt. I make good money with little overhead. It is not hard work and is actually very peaceful. Baby shampoo is my secret ingredient for a perfect tint job!

JodyChunder says

Window tinting and HVAC are a big deal in these parts

All three of those seem like good businesses for the dessert. Especially the tinting. Holy crap the sun can be crazy intense.

You like the swamp cooling? I used to love that in when I lived in New Mexico. The cool breeze through the house was always so nice.

bg says

ou like the swamp cooling? I used to love that in when I lived in New Mexico. The cool breeze through the house was always so nice.

BG I do. I use a little of both depending on the seasons. We had some 120+ days out here last year, which is when the swamp cooler really helps. Cheaper, too. 120 is not as bad as it sounds. Bad yes, but beautiful.

I didn't move to the desert until the late eighties, but I love it as much as any coastal area.