Should I buy a personal house first in Silicon Valley?

Question

Hi,

Background : I work in one of the tech companies in the bay area. I currently live in a rental unit 10 mins away from work which costs about $1600 per month including utilities. Pre-pandemic this was $2000. So it should soon go up I feel.

Coming to my finances, I have about $180,000 spread across stocks and cash. I also have about $30,000 in stocks vesting in October. Assuming my performance at work remains consistent I should be realizing about $70,000 in stocks every year. I am not accounting for the cash bonus in this. My pre-tax salary is $150,000. Im single and have been working for 4 years now.

I came across a mountain house which I really like. It has a great view and is listed just short of $1Mil.

I am confused if I should buy this as my personal residence first or should I buy out of state houses, build my passive income and then come back to buying a house for personal use later in life. Since I am an engineer and in tech most of my opportunities are in Silicon Valley and I dont want to move out of here.

If I do decide to purchase this house, I would be completely out of money for atleast a year after I make the 20% down. The property has an out house and a self sufficient basement that I could potentially rent out. But its secluded in the mountains and the chance of finding a renter is lower as compared to finding a renter in the city(Santa Clara). But I dont see myself investing in out of state rental properties for the foreseeable future unless I jump jobs for a better salary and a hefty signing bonus.

What path would you choose?

Thanks for any help I can get!

Joe Facenda · Answer

I think you should but the personal residence first.   Get your self settled and them embark on your investing career.

So do you need to do 20% down on the personal residence?  Maybe a lower down payment will not impact your payment dramatically but will help you preserve funding for the next project.

Jodi Roberts · Answer

You could buy a primary residence and rent out rooms month to month or yearly to co-workers etc. That’s how I got started, and I was able to save cash to buy another property. You could also look for a home that needs some work, make improvements to improve equity and take out a HELOC to fund the next deal.

Roy Puli · Answer

Sounds like a great idea. Since I have the basement and the outhouse both, I can hopefully find someone to rent them out to. With most of the tech companies going permanently remote and/ or hybrid work models, I think the chances of finding renters improves. Thank you!

Andrew Freed · Answer

@Roy Puli - Definitely house hack first and eliminate your largest expense, housing. At that point, your savings rate will increase exponentially and allow you to scale your portfolio that much quicker, especially since you are a high income earner.

In addition, do you have any family or friends in India and what sort of rentals can you get out there? One of my friends parents own a couple of rentals in India and they do quite well. I was just curious what network you can leverage in regards to long distance investing. It's always better to have trusted "feet on the ground".

Roy Puli · Answer

Thats true. I will look through ways of doing a lower down payment. Thanks for the advice!

Roy Puli · Answer

I would also like to add that I am on a work visa and will not be able to rent it out on AirBnb for short term rentals. Added to that, the wait for a Green Card is very long since I have an Indian passport. The risk of having your visa cancelled always looms large. But I guess that risk is the same if I buy a house for personal use or an out of state property to rent out.

Should I buy a personal house first in Silicon Valley?

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