Quote from @Siddhanth Maheshwari:
Hi,
My wife and I have been living in the bay area for 5 years and till now we have mostly invested in stocks and lived on rent. We are tired of having the rents increase on us so we wanted to buy our own house.
Given how extreme the ratio of price to rent ratio is in the bay area, does it even make sense to buy our own house? If yes, which areas are good and how do we understand how much we can afford comfortably? We have visibility that we will be staying in this area for at least the next 7 years.
Background:
We both work in tech
We have about 500k invested in stock (not including 401k)
We have about 100k in cash equivalents
We earn a combined income of 550k annually include cash and RSUs
We have no kids and don't have plans for any for the next three years at least. We can work from home.
Are you trying to stay in the City or open to other areas like the east bay ?
This is way oversimplified, but the way I look at things like this is to break it out and see what's the best value for my situation.
The biggest upside to renting is freedom. You don't have to be stuck somewhere, you don't have maintenance to tackle.
The biggest downside is like you said, you lack stability. You're trading that for the freedom. You're at the mercy of the landlord, but again you're free to find a better landlord if you can't make things work with the current one. Rent increases are to be expected though and can be minimized but unlikely to be avoided. Landlords have costs that continue to rise (inflation and age of property).
Buying should really only be considered if it's an upgrade. Now, what that means can be tought to put into something that fits a spreadsheet. But some people (like you) do place a value on stability. Buying can and will do that, but you're potentially giving up some freedom.
If you're going to buy, I'd do with something that fits now, but more importantly can fit in the future that you might not have plans for yet. If you have a short timeline of ownership, I'd pass right now unless you got a smoking deal or had unique exit plan. I'd also be picky, don't settle just to get out of rent increases, find something that really provides significant value to you.
I rented for a long time, I was a landlord (out of state) while renting, then things fell into place and I was able to buy something that would of never been available as rental. I say this because there's a million ways to do it right, take time to understand your needs/wants.
Happy to help share my experience more if you want, just message me.
