Silicon valley struggle is real 😂 Buy primary or continue to rent?

Question

How should I think about purchasing  our primary residence vs using our money to invest somewhere else when living in the Bay area (San Jose area)?

Both my husband and I have w2 jobs. We have 3 rental properties that produce 8k monthly in total on average. We are paying 5k rent for a 4 bedroom single family house. Supposedly we can then use that 8k plus what we are paying for rent today to pay a 13k mortgage house. BUT SHOULD WE DO IT?

Risks aside (e.g., rental income reduces or we got laid off), is it a good move? Yes, we will be able to live in our own house and not throw away our money in rent, but we will lose all the cash flow because we will need it to cover the primary residence mortgage.

Or we can continue renting a 2.5M house and only pay 5k for rent. This also tells us if we buy a 2.5M house now, we will lose money if we move and rent this one in the future. We will likely need to sell.

What do you think?

Chad Hale · Answer

@Hsin-I Hsu  It depends on your long term goals, risk tolerance and earning potential.

A couple of bay area sayings:

Any time you can afford to buy real estate you should.

Buying a home is the bay area retirement plan

Yes, there are a lot details and differences for everyone's particular situation.

Danny Gonzalez · Answer

@Hsin-I Hsu  Owning a $2.5M house can be an expensive commitment, not just because of the upfront down payment but also due to the ongoing expenses for repairs, maintenance, and upgrades that inevitably come with homeownership.

Renting at $5K a month, especially for a 4-bedroom house in the Bay Area, seems like a solid deal. Instead of tying up your capital in a high-cost primary residence, consider taking the would-be down payment and investing it in out-of-state properties.

This strategy allows you to diversify your portfolio across multiple assets, spreading risk while potentially generating cash flow and building equity in appreciating markets. By leveraging real estate in areas with lower entry points and higher returns, you can grow your wealth more effectively without the heavy financial burden of a luxury home.

Allan C. · Answer

@Hsin-I Hsu one other thing to consider is tax shielding. If you buy primary you only exclude $750k loan interest if you itemize deductions instead of taking standard. You also max out property tax deductions.

If you put those same dollars to investment property you get to write it all off.

Jason Wray · Answer

If you purchase a $2.5M home you will have to put 15% down which is $375K.  Then you will have a principal and interest payment of around $13,450.00 plus Taxes and insurance so add in another $2800 for $16,250.00 a month.  Thats over 5X your current rent per month so you have to ask yourself do you want to live in CA for the rest of your life?

If you and your husband can perform the same line of work in another state like Florida, Texas, Nevada I would move out of CA as soon as possible.  You can buy a luxury home in Florida for example for $1M to $1.5M bigger than a $2.5M home in CA.

They make Hurricane Proof homes now so its not that bad if you plan a ahead.

Vicky H. · Answer

Thank you all for sharing your thoughts!!!!! So.... to buy or not to buy? I guess not to buy since I just finished one of the new BP podcast episode - Rent INSTEAD of Buying by Jonathan loll

Keep on renting does make sense at least for now (and maybe a little longer since the housing market is still HOT around here.) We also want to expand our profolio but cannot find anything within 2 hours drive, or in California in general. Anyone still investing in California?

We are beginners so a little shy away from out of state investment. Any advise on how to start/where to look?

Jeet Sangha · Answer

Hello, if you must live in San Jose, I'd say renting makes more sense, especially a 2.5M house for 5K a month. If you were to buy a similar home, the interest and property taxes alone may amount to that much, which, in my opinion, is a waste of money as well. Or, you can try moving out to Morgan Hill or Gilroy, where home prices are more affordable compared to San Jose.

Wilson Lau · Answer

Unfortunately, everyone's needs and situations are very different. If you look at the data for the past 40 years, purchasing a home in the bay area has been a great long-term investment strategy. However, as @Chad Hale mentioned, only if you can afford it - meaning both financially and mentally (e.g. how stable are both of your jobs, how long will it take you or your husband to find a replacement job, how much you have in reserves, and whether you guys are in a position to withstand that mental stress, etc.)

When you mention 8k monthly, I am assuming that's net profit? That's not easy to reproduce in today's market, so Kudos to you both! Perhaps you can save up for a bit longer so you can afford to purchase your own primary and keep the 3 rentals?

Bradley Buxton · Answer

@Hsin-I Hsu

To buy or not to buy that is the question...Do you have to buy a 2.5M house? I understand if that is all that is available in your school district. Maybe there are other solutions for a smaller home with an ADU.  It sounds like if you can keep saving and buying properties in other areas eventually you'll have enough to buy the 2.5M house. If you think you might get kicked out then housing security might be worth upping the payment.

Caleb Brown · Answer

5K rent seems cheap for the area so I would continue with that. Invest and grow your portfolio. You guys make great money so buying a home isn't bad. It's ultimately up to you. Financially renting is smart right now but if you want to buy do it.

Silicon valley struggle is real 😂 Buy primary or continue to rent?

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