how much money should i spend on a house? I have lots

throwawayjackhunterthrowawayjackhunter Registered User regular
Hey, I was hoping for some perspective.

So here's where I am. I live in Los Angeles, make 60k a year and through some inheritance + my savings I have in excess of 400k. I was thinking I'd buy a house.

Currently I live in an apartment paying 700 a month for my room. I like it there, it's nice enough. Frankly, I don't even feel like I need to move, but I have all this money sitting around, and buying a house seems like a smart thing to do. Right?

The houses that I'd want to live in in LA are all well over 550k and probably closer to 800k, so if I was going to get a house, I'd need to rack up some debt. How expensive a house should someone in my position buy? Is this even a smart move? Should I just keep the money invested in the markets? It seems like if I buy a house my monthly expenses will be going up quite a bit. I could rent out extra rooms to friends to deal with that though. I could even buy a house, and just rent out the whole thing to make extra money, although I'm not sure I'd like the responsibility that comes with that on top of my day job.

I would be very grateful to hear the crowd's thoughts on this. Thanks!

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  • puffycowpuffycow Registered User regular
    It all comes down to what you can afford as a monthly payment. I am sure others can get more specific but at worst it seems (if you use your entire savings) that you will have 50%+ down so you won't have an extra PMI/MIP payment. But still, can you afford a $400k mortgage over 30 years? When figuring out the math don't forget to estimate monthly extras such as utilities and property tax.

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  • SeguerSeguer Registered User regular
    Can you afford the repayments? You have a large lump sump now, but you'll have to factor that in when figuring out if this is feasible for you.

    Also "just because" is probably not a terribly good reason for buying a house. Just sayin' ;).

    Pacificstarcabsy
  • ThundyrkatzThundyrkatz Registered User regular
    are you set in your career and are planning on staying in the same area for 5 to 10 years?

    do you like the idea of being responsible for all the bills and maintenance for your new place?

    do you like the idea of setting your new place up with furniture and yard tools and other assorted things to make it a home?

    do you see a situation in the not too distant future where you could make use of all the new space you would have?

    Do you enjoy cleaning? more space means more stuff to clean.

    Those are just some thoughts to consider before you buy a house "just because".

    There are other options though, you could consider a larger apartment or a condo or a townhouse where you pay the mortgage or rent and let other people do the maintenance.

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  • EncEnc A Fool with Compassion The Land of Flowers (and Dragons)Registered User regular
    Just as a thought, 400k is enough to comfortably live off of for a long time in many places across the country. In Maine you could get a mansion for about 190k and be able to quite easily live off of your remaining 200k for 20 years or more without additional income.

    While relocating may not be a desirable option for you, you should at least keep it in mind as moving to an area with a lower cost of living can make your cash go much, much farther than living in an area with some of the highest costs in the US.

    Essee
  • MayabirdMayabird Pecking at the keyboardRegistered User regular
    Continuing what Enc said, you could save your money now and then retire early, move somewhere much cheaper, and still live very comfortably for the rest of your life. Homeowning is a big responsibility and if you don't have a compelling reason to do it, don't. No one's forcing you. If you need more room, do as Thundyrkatz says. It seems you can afford something a little more so you could get a larger apartment closer to work or near some conveniences or other locations you'd like.

    Enc
  • Dr. FrenchensteinDr. Frenchenstein Registered User regular
    i keep hearing rumors of a 2nd housing bubble forming, especially in the CA area. the article i was reading was mentioning the Silicon Valley area, but i'd assume it would apply to other places in CA where home prices are outrageous. People are bidding over list price, and that will probably blow up in their faces. Real Estate is not a rock solid investment like it was back in the day. Don't buy a house because its "the next step" or whatever.

    if you'd like an income property, that's one thing. but i make more than you do and my house is probably half the price of what yours would be, even after your sizeable up front payment, and it's a big chunk of my income each month. not to mention upkeep etc (my house is a bad example for those kinds of expenses). income properties are less reliant on the market swings, because basically, if rent is coming in, you don't really care how much the house is worth on the market. if you are happy where you are, i'd invest my money elsewhere.

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  • EggyToastEggyToast Registered User regular
    Consider buying a house like a long-term investment. Are you ready to commit to a long-term investment that's based on a location?

    Most people acquire some debt to purchase a house. Ideally, the amount you pay on a mortgage is equal to or less than the amount you pay for rent. To calculate that, load up a mortgage calculator, put in the term of the loan (usually 30 years, but you can experiment with 15 years too since you have a lot of money) and the total for the loan, and see what the result is. You can get today's interest rates from bankrate.com (currently about 4%).

    If you get a mortgage for $150k, your mortgage payment would be around 800 or so, so a slight increase from your current rent. Of course, you'd have a house and arguably much more space, but you don't go into those details and they're somewhat unimportant for this thread. Typically, people who are single and young do not buy houses "just because" since it's likely they will move -- both near and far. If you love your area, are extremely stable in your job, and want to spend the next 10+ years there, it's probably not a bad idea.

    But it's also not bad to do the math and realize you're better off just waiting until the math makes more sense.

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  • pirateluigipirateluigi Arr, it be me. Registered User regular
    Houses have a lot more expenses than apartments, including a lot of things you can't plan for. The day I moved into my house, the furnace died. Dishwasher died a few weeks later. Then you have the expenses for landscaping (do you have a lawnmower? Will you pay someone to do it?) And if you're moving out of an apartment you'll need to buy more furniture.

    It adds up really quickly.


    Also, I just read an article yesterday predicting the California housing market bubble will burst sometime soon. It might not, but it's something you need to consider.

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  • hsuhsu Registered User regular
    You are thinking way too big, way too rich for someone with your income. Buy something smaller for less than $400k and bank the rest.

    Like a 900 sq ft, 2 bed, 1 bath, on a 3000 sq ft plot, just enough for a small backyard and 2 car off street parking. A quick look at zillow, and I see a ton of places that fit that description in LA, for about $300k.

    As for real estate vs stocks, you have to live somewhere. Might as well buy your own home outright, if you can.

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  • bsjezzbsjezz Registered User regular
    i'm not sure why you'd opt to retire early. it's not great for your health and happiness - meaningful employment is much more conducive to a long and mentally stable life.

    i think property is a great way to invest. my suggestion is a tiny apartment in a cosmopolitan, central location - old (vintage!) buildings are good meter of this. that way you'll be able to live comfortably with a small (or no) mortgage, and either sell it to upsize down the line or keep it in the family by renting it out for a bit, if you need a bigger place. home ownership isn't scary or dangerous - it's exciting and can give you a real sense of place and achievement

    that said, if you're not excited, hold off. give yourself the luxury of time - find a place that makes perfect sense, or save your cash until you do.

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  • JasconiusJasconius sword criminal mad onlineRegistered User regular
    1) Spending all your savings on a house in LA would not be wise
    2) You CAN become a landlord without having it become "another job". There is something called "property managers" that do this for a living. You can hire one. Most people do.
    3) Don't become a landlord in LA, because it would cost you your entire savings just to get started
    4) You would go into a debt for a half million dollar house+, be prepared to have the money to repair it
    5) Housing prices are just now starting to go up, but I am under the impression that in Cali, prices are still pretty inflated, therefore a house wouldn't necessarily be a great investment


    60k/yr in LA aint that much. It's nice but to take out a 200k mortgage on a 600k house on that salary screams "house poor" to me



    My advice

    1) Lower your tastes or move farther from the city
    2) Experiment with landlording in a suburb where property is cheaper and easier to maintain
    3) Don't spend all your fucking money. Start a 401k or something. You have a lot of money, but you don't have a lot of money for a Californian investment realtor.

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  • CelestialBadgerCelestialBadger Registered User regular
    Sounds like you are quite young without many responsibilities. Why not invest your inheritance safely and buy a house when you are ready to settle down? Buying a house young just ties you down. What if you got an amazing job offer in New Zealand next year, or fell in love with someone on the opposite side of the country? Selling and moving is a pain in the ass. And the California real estate market is pretty heated up at the moment, which makes buying stressful as you will be competing with a lot of people more desperate than you.

  • hsuhsu Registered User regular
    Just a few more tips:

    1. Don't buy in suburbia. It's hell traveling an hour by car all the time. Long commutes screw over everything, but mainly screws over your social life.

    2. Make sure you want to stay in LA before you buy a place in LA.

    3. Pay for it outright, with cash left over in the bank. Preferably lots of cash left over in the bank. Having extremely low fixed expenses is awesome. It means you can do stuff most people can only dream of.

    4. A small place in the middle of a fun urban area rocks. Especially as a 20 something. Even as a 30 something.

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  • Anon the FelonAnon the Felon In bat country.Registered User regular
    Are you dead set in staying in LA? This is a serious question you need to think about, you obviously have career skills... Maybe you could relocate to a lower cost of living area, and stretch this boon a lot further than it could ever go in CA.

    Where I live (Idaho), you could take that 400k, and buy two move in ready middle-class (maybe middle-class+) houses... With ~100k left over. Outright. No mortgage or anything. You could then turn one into an income property and (possibly) retire.

    Sure, that sounds like a fantasy, but as others have said... That kind of money will go far, far, further in many other parts of the country. Investing in the CA area right now seems like a fools errand. With a windfall like that, if you want to stay in CA, bank it and/or get a money guy.

    JasconiusEncEsseezagdrobKias
  • throwawayjackhunterthrowawayjackhunter Registered User regular
    edited May 2013
    Hey everyone, thanks! This has been exactly the kind of variety of opinions I wanted to hear!

    To answer some questions.

    1. Yes my career is stable.
    2. I don't plan to leave LA anytime soon. For my field, it has a wide variety of work options + I love california.
    3. I'm 28 years old, so yes fairly young.

    I'm obviously still mulling things over in my mind, and have been for a little while now, but waiting on buying a house until I make more money definitely seems smart... At least the kind of overpriced houses I want. And it's not that I'm looking for a mansion. I just know what neighborhoods I like in LA, and finding ones without a homeless population can be difficult.

    And yea, "just because" isn't a great reason to buy a house, but I dunno, I have a lot of options and maybe home ownership is a good choice. I'd certainly enjoy the extra space.

    Edit: It's especially nice to hear lots of opinions because this is the sort of thing I can't bring up with friends because I hate letting people know that I have "money"

    throwawayjackhunter on
  • JasconiusJasconius sword criminal mad onlineRegistered User regular
    Agree with Anon

    If you take that 400k to pretty much anywhere off the coasts in america, you can buy a serious McMansion (3k+ sqft, 4+ b/ba) with straight cash homie, and have change left over

  • Anon the FelonAnon the Felon In bat country.Registered User regular
    Hey everyone, thanks! This has been exactly the kind of variety of opinions I wanted to hear!

    To answer some questions.

    1. Yes my career is stable.
    2. I don't plan to leave LA anytime soon. For my field, it has a wide variety of work options + I love california.
    3. I'm 28 years old, so yes fairly young.

    I'm obviously still mulling things over in my mind, and have been for a little while now, but waiting on buying a house until I make more money definitely seems smart... At least the kind of overpriced houses I want. And it's not that I'm looking for a mansion. I just know what neighborhoods I like in LA, and finding ones without a homeless population can be difficult.

    And yea, "just because" isn't a great reason to buy a house, but I dunno, I have a lot of options and maybe home ownership is a good choice. I'd certainly enjoy the extra space.

    Edit: It's especially nice to hear lots of opinions because this is the sort of thing I can't bring up with friends because I hate letting people know that I have "money"

    Perhaps you might want to re-evaluate your needs as well. A bigger house isn't always better, do you plan on getting Married? Children? do you really need an Office? Library? Workshop?

    It could be, that you're looking at real estate people are telling you that you need, as opposed to what you really need. When my wife and I first started looking at houses, we were looking at these multi-room manors. And really stressing about how we were going to pay for it. After some serious soul searching, we realized that all these amenities we were so "dead set" on getting were just things movies and television had told us we needed. We ended up getting a steal on a small foreclosure, paying only ~40k in cash on a ~125k home (previous value before the crash).

    Bigger sounds better, but perhaps all you need is a cozy studio in a great location to be happy.

    Also remember that you can buy small now, and if you need a larger place later, rent it out to mitigate the costs of a future mortgage.

  • Eggplant WizardEggplant Wizard Registered User regular
    Put away some money for your future. How much is up to you, but very variable depending on your circumstances. Consider the remainder as a potential down payment and talk to a banker. They will tell you what the max is that you can afford based on the debt-to-income ratio. Buy less than the max. You don't want the stress.

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  • DeebaserDeebaser on my way to work in a suit and a tie Ahhhh...come on fucking guyRegistered User regular
    Personally, I wouldn't buy a house until you start to care about the quality of the school districts.
    If you're sufficiently diciplined, max out your 401K for a year or two and keep the after tax equivalent in a "high interest" internet savings account with monthly drawdowns transferred to your checking.

    Put the rest in a regular investment account.

  • DjeetDjeet Registered User regular
    At your age and in this real estate env do not since a buttload of money from a windfall into a house (a highly illiquid asset). Actually that doesn't even need the caveat "At your age and in this real estate env". 1st stick 1 years worth of expenses into savings/separate checking as an emergency fund. 2nd max out your IRA contribution for this year and next.

    if you're content where you are at stay there and cultivate good saving behavior and educate yourself about investing (equities/funds) and real estate (general cost considerations, and the market in which you are interested). No one can predict the future, but my gut tells me it's not the best time to sink your entire nut into ether the stock market (which doesn't mean you shouldn't maybe put a little into a broad market fund, cause if you have no exposure you may get stuck trying to time the market) or in CA real estate.

  • schussschuss Registered User regular
    In CA, save it for the next housing crash. Housing is stupid right now from what I've seen, and the fact that the normal mortgage is more than renting would cost is ridiculous.
    Here's my recommendation:
    1. Put that 400k into relatively safe investments
    2. Make sure you're maxing your 401k (or similar) match from your company and play risky with that
    3. When you get to the "I really want to live HERE for 20 years" feeling, start looking

    Background: I bought a house when I was 24 and didn't make the best choices on it, which cost me a lot of money and complicated some pieces of my life. The money isn't going to go away overnight, and as long as you live pretending you don't have it, it will grow at a crazy rate.
    Sit down, take a breather and see if you have an answer to "Why should I buy a house?" other than "I have a bunch of cash"

  • throwawayjackhunterthrowawayjackhunter Registered User regular
    Yea, I'm definitely starting to think that maybe I just can't afford a house right now. At least the houses in LA...

    Here's another option I'm considering:
    I buy a condo for something between 300-350k. I don't take out any loans to pay for it and remain debt free. I get one roommate that pays me rent. I figure with saved expenses from no longer paying rent and also recieving rent that'll put me in a safe spot even if the housing market does drop. Sound smart?

    If I did that my quality of life would remain about the same, but I'd be saving a lot more money. Really all I have to worry about is a housing market crash that might never come.

    (As a note, 80% of my money IS invested right now. And I am investing in a ROTH IRA and a 401k fairly heavily.)

  • EncEnc A Fool with Compassion The Land of Flowers (and Dragons)Registered User regular
    Maybe a better idea would be to buy two properties in better locations (IE, not extremely expensive) and float between them. With your starting capital, if you could buy an inexpensive, but well placed seaside condo near LA, and a second property in the mountains or somewhere else up north, you could do seasonal rentals in whichever you aren't living in to pay for your living expenses + taxes and upkeep to the properties.

    With the amount of capital you have, there are a LOT of options available to you and you might want to consider speaking to an investment specialist concerning what you can do to ensure that your money is making you more money/retaining upkeep, rather than sinking it all in an impulse home/condo purchase.

    I know If I had 400 grand liquid I would maximize my ability to have that sort of cash grow long term, or at the very least last quite a long time to maintain a higher quality of life. Median US income is about 40k, you have essentially ten years worth of the median income liquid. That's a lot of opportunity to waste on an overpriced condo.

  • schussschuss Registered User regular
    Condo's are the first to crash and the last to recover, not to mention condo fees. Whatever you buy property-wise, plan on being there for 10-15 years.

    EsseeEnccabsy
  • hsuhsu Registered User regular
    edited May 2013
    Nothing wrong with a condo, but seriously, if you look really hard, you'll be able to find a tiny single family, in a safe blue collar neighborhood, that borders a white collar neighborhood.

    That's what I did in Boston. I'm in a blue collar neighborhood, about half a mile from the white collar neighborhoods. While the average 2 bed house price drops $50-75k during that half mile (because it crosses an invisible school boundary), the quality of life barely changes.

    I had a bigger suburban condo (townhouse really), traded for a smaller urban house (1050 sq ft), and I'll say, it's very nice to have that backyard. Friends basically invite themselves over for cookouts (bringing food!) from late spring through mid fall.

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  • CelestialBadgerCelestialBadger Registered User regular
    hsu wrote: »
    Nothing wrong with a condo, but seriously, if you look really hard, you'll be able to find a tiny single family, in a safe blue collar neighborhood, that borders a white collar neighborhood.

    Maybe, maybe not. The market is pretty inflated right now in LA. There aren't really bargains to be had, from what I hear (though I don't live there so take with some salt)

  • bsjezzbsjezz Registered User regular
    the reason property is expensive in la is that it's a major global city, a huge economic centre, and therefore accomodation thereabouts is always in big demand. that's also the reason that it's a much more reliable - and safe - place to invest, even if the barrier to entry is higher. it's still not impervious to risk, but la is never going to be the next detroit. if you buy a cheap mcmansion with no personal practical use for it, your investment could ultimately end up written off

    i think buying an apartment in an area that works for your life is a fine idea. if you get a roommate - in tandem with your own rent savings - chances are you'll have negated even a worse-case scenario loss within a couple of years.

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  • PacificstarPacificstar Registered User regular
    If I had that much money I'd do the following (none of which include buying a house):

    1) Max out matched 401k and your IRA contributions (if you haven't already)
    2) Put like 50-75k into accounts to pay for your (one day) kid's college. I.e. Child A, university account. You can talk with your bank/an accountant to figure out the best way to do this.
    3) Spend some on the trip of a lifetime. Not saying blow 10k, but if you've never been to Asia, or Australia, etc etc. There are a lot of amazing things to do and see in the world, many of which won't exist in 10 or 15 years. It will become much more difficult to do these things once you decide to settle down, especially if you decide to have kids.

    I would not buy a house unless it's someplace you want to live for a long period of time. This might be a different decision point if you're looking for an income property.

    Unlike many people, I would not recommend buying a large purchase totally with cash. If you have good credit (and since you have $$$ in the bank) you can probably get a very reasonable mortgage rate. I would much rather pay some mortgage payment (which can be deducted when you do your taxes) than get rid of my ability to be liquid and agile. Agile in both the ability to make a large purchase when needed, and agile as in not tied to living in a particular area.

    Just because the money is there doesn't mean you need to rush out to spend it. If you manage this money correctly now it can save you SO MUCH in the future. When I went to NYU the cost was 40k a year (in 2000-2004) and I got scholarship to pay for roughly half of it. Right now I understand that tuition is something on the order of 62k a year.

    Future you will thank past you for not burdening him with college payments.

  • zepherinzepherin Registered User regular
    My financial advisor says to take care of yourself before paying your kids college, but unless the op is trying for children investing in their college account is silly. So the real question. Should you buy a house? You seem happy where you are at and there is a huge opportunity cost to spending the money on a house. I would keep an eye open, but unless you find an amazing deal or fall in love with a house I'd avoid putting money there.

  • HorusHorus Los AngelesRegistered User regular
    Being someone who bought his house at age 28 by himself, I think you really need to take other measures first:
    1. Do you have a career plan? I am not saying job security since that doesn't exist anymore and how flexible are you able to jump form one job to another. I work in advertisement, so its easy to be let go but fast to get another job.
    2. Researching neighborhoods and what you want in a house will take minimum 2 years to understand
    3. if your under 25, wait it out as your still formulating your plans for your future. Basically younger you are the more your impulsive to do things than say older when you have a better idea what you want in life
    4. It takes time to find reliable real estate agent and mortgage broker, hell I went through 4 cause they just wanted to rip me off. Also they will know you have money and take advantage of you. Educate yourself how real estate and mortgage brokers work so you can show them you know your stuff, always question them at everything
    5. If you do get a house, don't go crazy furnishing it your first year, learn to budget and live frugal as your not use to the responsibility. Reach out to your utilities providers for discounts or ways to cut your bills.
    6. Take care of your retirement and investments before buying a house. Its never wise to put so much money in a house when your not sure how long your staying. If you decide to buy duplex or rental property then those types of purchases while expensive pay themselves off since they are rented, just have to deal with tenants. There are services for that and no matter what that is income coming back to you.

    I have way more info since I bought my own house and I was in your shoes also so hit me up if you want any more details

    Thank you
    Rene

    “You have brains in your head. You have feet in your shoes. You can steer yourself any direction you choose. You're on your own. And you know what you know. And YOU are the one who'll decide where to go...”
    ― Dr. Seuss, Oh, the Places You'll Go!
  • MichaelLCMichaelLC In what furnace was thy brain? ChicagoRegistered User regular
    edited June 2013
    Sounds like you're set on LA, and that's fine but just to give you some comparison:

    Evanston IL is a nicer, older community near the lake and downtown Chicago. $250k will get you about 1,200 sq ft living on a 4,000 sq ft lot. Move out to close to the WI border, and $250k will get you 3,000 sq ft and more on a 8,000sf lot, and a much newer house.

    If you like where you live, there's nothing wrong with renting and holding off moving until you're sure. If there's a neighborhood you like and have done research into growth potential, buying at 28 isn't that strange either.

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  • kaliyamakaliyama Left to find less-moderated fora Registered User regular
    edited June 2013
    I can't believe people are trying to tell you to leave LA. It is one of the top 3 American cities hands down and trading it for bumfuck middle America or somewhere with snow and uglier people is a silly suggestion.

    In any event, what neighborhood were you looking to buy in LA? My opinions on where bubbles are vary zip code by zip code. Ditto in terms of what condos make sense. But generally i think LA is only going to get more expensive. If you could get a 2br for 600k(all-in), get a 300-350k mortgage, save the balance, and rent out the second bedroom, it could make sense but you'd have no margin of error.

    It could also make sense to use the $ to buy income properties in cheaper places, but that require a level of investment sophistication we can't offer via message board and you'd want to rope in a professional if you went that route.

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  • CelestialBadgerCelestialBadger Registered User regular
    kaliyama wrote: »
    I can't believe people are trying to tell you to leave LA. It is one of the top 3 American cities hands down and trading it for bumfuck middle America or somewhere with snow and uglier people is a silly suggestion.

    Yes, his career is in LA. Leaving his job to get a bargain on a house would make zero sense.

  • EncEnc A Fool with Compassion The Land of Flowers (and Dragons)Registered User regular
    kaliyama wrote: »
    I can't believe people are trying to tell you to leave LA. It is one of the top 3 American cities hands down and trading it for bumfuck middle America or somewhere with snow and uglier people is a silly suggestion.

    Yes, his career is in LA. Leaving his job to get a bargain on a house would make zero sense.

    I don't think anyone here is suggesting moving to the middle of nowhere for buying a bargain home insomuch as being able to retire at age 28 with the amount he has almost everywhere but those top 3 American cities. A 60k a year job in LA is not a particularly luxurious income with a family, and certainly not enough to cover the taxes, payments, and upkeep for some of the places he is looking at (his salary would likely prequalify him for payments for a $250k home (at most) without his windfall in LA, even after dropping all $400k on an $800k house he would be paying almost his entirely salary to the mortgage).

    If your heart is set on LA, I wouldn't use more than a fraction of the money on a house and use the rest to make you money via investments. Using 100k to pay down half of what you would normally qualify for will ensure you can live quite well with a tiny mortgage payment relative to your job while having the rest of the money to use throughout your lifetime.

    Essee
  • LadyDustBunnyLadyDustBunny Registered User regular
    I'd buy a house for at most $180,000, pay for it in cash and then put away enough money for 6 months worth of expenses as an emergency fund (if you lose your job, you'll have six months to find a new one), and then I'd start investing the rest of it into mutual funds. Just some things to think about.

    Also, I realize that when I gave you what I'd spend the most on a house, that number doesn't really apply in all places as I'm sure where you work it is quite expensive. What I'm saying is to not spend all of it on a house and make sure you just pay for the house in full with cash.

    And yes, my family and I are Dave Ramsey weirdos, haha.

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  • CelestialBadgerCelestialBadger Registered User regular
    In California, $180k might buy you a ruin in a slum.

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  • DarkewolfeDarkewolfe Registered User regular
    Biggest question:

    If you lose your job, are you confident you could quickly and easily find another that pays in the same region? Seriously think on that exact question for awhile and evaluate your monthly expenses to determine what mortgage you can afford.

    What is this I don't even.
  • schussschuss Registered User regular
    In California, $180k might buy you a ruin in a slum.

    Ha! Probably not even that (in the cities, anyhow).

    Essee
  • zagdrobzagdrob Registered User regular
    I'm curious what OP's long term plans are beyond a stable career and staying in LA.

    Yes, I know things change but at 28 he should have a pretty good idea if he's looking to settle down and get married / have kids, or if that's something that he's not interested in (or doesn't fit with his lifestyle choices). I'd say overall, that would be the #1 determining factor of what choices are the most sensible.

    So, assuming that OP is looking to get married / settle down / have kids, and maybe even has a special SO or tentative timeline in his head...this is what I'd do / recommend:

    1. Max out your 401k / IRA deductions and savings. Every year without fail.
    2. Start shopping schools and commutes, find neighborhoods you would be interested in living in. Going from 'single' to 'married with kids approaching kindergarten' is a surprisingly fast transition once the wheels get rolling.
    3. Keep an eye on the Real Estate market in general, maybe even have a realtor keeping an eye on those neighborhoods / areas for really good deals for you.
    4. Possibly move into a somewhat bigger but not too expensive apartment that scratches your itch for space.
    5. Live your life (off your income - leave the bulk of your money in investments and try to keep saving) until you either find a steal of a house, the bottom falls out of the market, or you are married / have kids on the way and your apartment isn't cutting it. You'll appreciate this later when 'life happens'.

    Assuming OP isn't looking to get married / settle down / have kids.

    1. Max out your 401k / IRA deductions and savings. Every year without fail.
    2. Evaluate where you want to be in 5, 10, 20 years. Do you want to retire early? Do you want to have a family / kids (if so, see above)? Travel / work overseas? Go into politics? Go back to school? Don't think you are deciding exactly what you want to do, but know what it is you want and don't want.
    3. Continue renting (again, bigger apartment if you have an itch for space) but keep an eye on the Real Estate market in general, and if you find a steal / the bottom falls out of the market, take a closer look.
    4. Live off your income while saving the bulk of your money in standard investments.

    If you do find a good deal on a home - a nice one that you want to live in, with decent schools and a decent commut - and according to your income I would recommend ~$400k as a cap, purchase it with a smaller (20-30%) down payment. You don't need a mansion, something like 1200-1500 square feet will be very nice. Definitely keep at least half of your $400k savings, don't put all your liquidity into your home.

    Either way, make sure you know what you want to do before you go and buy a house. A house is a big freaking purchase, and it shouldn't be something you do just because you don't know what else to do with your money or think it's the natural 'next step'. Having a home is a lot of work, it's a lot of money; when you look at the money, don't forget to consider property taxes, homeowners insurance, home-owners fees, lawn / maid service, repair fees, seasonal maintenance, even utilities that your apartment might pay for now in your costs. If you want to spend less money, you have to spend more time - mowing, repairing stuff, painting, etc...if you are in LA, consider also the amount of time it may add to your commute. If you're commuting an hour each way every day, you not only lose that time from your day, but you also have to pay for your car, a lot of extra wear and tear and gas, etc.

    Also, since you have the windfall, set aside at least a year's worth of money in a stable emergency fund. It's a good recommendation most people don't get to do, so if you have the option do it. If it ever gets to the point you are tapping into it, look very hard at your choices and where you are, and what you can do to stop tapping into it - don't wait until it starts running out.

    PantshandshakeEncEssee
  • EncEnc A Fool with Compassion The Land of Flowers (and Dragons)Registered User regular
    In California, $180k might buy you a ruin in a slum.

    If that is the case, and the OP is only bringing in $60k a year, then he probably can't support home ownership in that region with his current income unless he payed off the entire property cash in one blow (which would likely eat up his entire savings).

    zagdrobEssee
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