Will I ever have enough for a condo/house in Cali?

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Exodus
Posts: 42
Joined: Mon Apr 18, 2016 1:59 pm

Will I ever have enough for a condo/house in Cali?

Post by Exodus » Fri May 12, 2017 1:50 pm

Hi Bogleheads,

I want to give you a full breakdown of my assets and maybe someone can give me some advice on how I'm doing. I just want to make sure the assessment that I just need to make more money is correct.

Age: 27, single
Occupation: PPC Analyst
Salary: $60K
Cash: $20.1K
IRA: $28.2K (no 2017 contribution yet)
Taxable Account: $4.3K
401K: $2.8K
HSA: $3k

I am currently living at home and saving around $1.5-2k a month. Will it really take me almost 5 years to have a down payment on a $500k condo? Also, even if I were to have $100K, I don’t want to wipe out all my cash so we are looking at maybe 6-7 years?
Feel free to ask any questions and all criticism is welcome. Thank you!

-B
Last edited by Exodus on Fri May 12, 2017 3:23 pm, edited 2 times in total.
The outcome is the perspective

bloom2708
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Location: Fargo, ND

Re: Will I ever have enough for a condo/house in Cali?

Post by bloom2708 » Fri May 12, 2017 1:58 pm

It will be an uphill battle unless you get your income up.

Let's skip forward and you have $125k or $150k saved. If you are still making $60-$70k, you should not buy a $500k condo.

Even if you went up to 3-4x your salary, you are looking at $300k as a top line number. Even if you could pay cash for a $500k condo, I wouldn't do it on $60k or $70k. It would sponge up all your money.

Property taxes, insurance, maintenance, HOA fees, furniture, utilities. You are in CA, so you already have high state tax to pay.

Turn it around and tackle it from the perspective of 1) you need a place to sleep, eat, wash clothes, watch tv, relax. 2) That can come from renting or owning with a mortgage or owning without a mortgage. You are currently doing number 3) Living with parents

What are your income prospects? Lots can change, marriage can change the picture. Save, look for a reasonable rental unit to "launch from the parents nest". Let the rest happen as it goes. 5 years is too far out to be certain of much. Good luck!
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

mac808
Posts: 465
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Re: Will I ever have enough for a condo/house in Cali?

Post by mac808 » Fri May 12, 2017 2:01 pm

California is not a comfortable place for those who make $60k and don't own a (mortgage free) home. Living at home is very smart. You should laser-focus on getting income up, and forget about buying a home (for now). What do you do for work? You might be underpaid as is.

Exodus
Posts: 42
Joined: Mon Apr 18, 2016 1:59 pm

Re: Will I ever have enough for a condo/house in Cali?

Post by Exodus » Fri May 12, 2017 2:06 pm

bloom2708 wrote:It will be an uphill battle unless you get your income up.

Let's skip forward and you have $125k or $150k saved. If you are still making $60-$70k, you should not buy a $500k condo.

Even if you went up to 3-4x your salary, you are looking at $300k as a top line number. Even if you could pay cash for a $500k condo, I wouldn't do it on $60k or $70k. It would sponge up all your money.

Property taxes, insurance, maintenance, HOA fees, furniture, utilities. You are in CA, so you already have high state tax to pay.

Turn it around and tackle it from the perspective of 1) you need a place to sleep, eat, wash clothes, watch tv, relax. 2) That can come from renting or owning with a mortgage or owning without a mortgage. You are currently doing number 3) Living with parents

What are your income prospects? Lots can change, marriage can change the picture. Save, look for a reasonable rental unit to "launch from the parents nest". Let the rest happen as it goes. 5 years is too far out to be certain of much. Good luck!
Hi Bloom,

Thanks for the input. I love how you gave me another perspective and I appreciate the feedback. My income prospect would reasonably top out at $150K and even at that income level I feel a $500k condo would be a stretch. I'm currently single, but marriage could definitely help with the income stream. I'm starting to entertain the idea of renting for life, but i'm unsure if it would be financial suicide in the long run. Thanks again!
The outcome is the perspective

Carefreeap
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Location: SF Bay Area

Re: Will I ever have enough for a condo/house in Cali?

Post by Carefreeap » Fri May 12, 2017 2:14 pm

Exodus wrote:Hi Bogleheads,

I want to give you a full breakdown of my assets and maybe someone can give me some advice on how I'm doing. I just want to make sure the assessment that I just need to make more money is correct.

Age: 27
Salary: $60K
Cash: $20.1K
IRA: $28.2K (no 2017 contribution yet)
Taxable Account: $4.3K
401K: $2.8K
HSA: $3k

I am currently living at home and saving around $1.5-2k a month. Will it really take me almost 5 years to have a down payment on a $500k condo? Also, even if I were to have $100K, I don’t want to wipe out all my cash so we are looking at maybe 6-7 years?
Feel free to ask any questions and all criticism is welcome. Thank you!

-B
Where do you live and what do you do for a living?

I grew up in San Diego, made a cross country move to the Washington DC area and then back to the SF Bay Area. Even in 1990 we weren't sure we could afford to buy a house in the Bay Area. But we sucked it up, bought a dump, fixed it up and moved up from that.

sailaway
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Joined: Fri May 12, 2017 1:11 pm

Re: Will I ever have enough for a condo/house in Cali?

Post by sailaway » Fri May 12, 2017 2:17 pm

Have you actually priced out condos in your city? Can you find something smaller or in a different neighborhood to bring costs down? We could have found something for around $300k, if it had been our priority.

In the end, we decided to live on a boat. We aren't building equity directly, but we are happier than in the apartment and spending less than a condo or house and are putting the difference into equities. An RV or mobile home or other form of tiny living may provide similar benefits in your area.

Finally, on $60k and living at home, could you be saving more? Even if you made $2k your minimum, instead of your maximum, it could make a difference over time.

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5th_Dimension
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Re: Will I ever have enough for a condo/house in Cali?

Post by 5th_Dimension » Fri May 12, 2017 2:21 pm

Like you I thought I would never be able to afford a house in CA. While house prices were skyrocketing I spent my time getting out of debt. In 2005 I was debt free. In 2008 the housing market collapsed. Suddenly there were foreclosures everywhere. Having no underwater house, cash in the bank, and a great credit rating I had my pick of houses in my price range, and the banks were falling all over themselves to get rid of them. Things can change rapidly. Position yourself to be ready for it and you will come out ahead.

Good luck.
"My idea of rich is ordering the most expensive thing at Denny's"

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willthrill81
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Re: Will I ever have enough for a condo/house in Cali?

Post by willthrill81 » Fri May 12, 2017 2:25 pm

Exodus wrote:
bloom2708 wrote:It will be an uphill battle unless you get your income up.

Let's skip forward and you have $125k or $150k saved. If you are still making $60-$70k, you should not buy a $500k condo.

Even if you went up to 3-4x your salary, you are looking at $300k as a top line number. Even if you could pay cash for a $500k condo, I wouldn't do it on $60k or $70k. It would sponge up all your money.

Property taxes, insurance, maintenance, HOA fees, furniture, utilities. You are in CA, so you already have high state tax to pay.

Turn it around and tackle it from the perspective of 1) you need a place to sleep, eat, wash clothes, watch tv, relax. 2) That can come from renting or owning with a mortgage or owning without a mortgage. You are currently doing number 3) Living with parents

What are your income prospects? Lots can change, marriage can change the picture. Save, look for a reasonable rental unit to "launch from the parents nest". Let the rest happen as it goes. 5 years is too far out to be certain of much. Good luck!
Hi Bloom,

Thanks for the input. I love how you gave me another perspective and I appreciate the feedback. My income prospect would reasonably top out at $150K and even at that income level I feel a $500k condo would be a stretch. I'm currently single, but marriage could definitely help with the income stream. I'm starting to entertain the idea of renting for life, but i'm unsure if it would be financial suicide in the long run. Thanks again!
To reiterate Bloom's excellent advice, this reminds me of a situation described by Thomas Stanley in his book "The Millionaire Mind." A friend came to him asking his advice; the friend wanted to buy his son and daughter-in-law a home outright. The home was valued at about $300k, and the son made about $40k gross a year. Stanley asked "Do you think he can afford it?" The friend replied "You don't understand. I would be giving them the home." Stanley replied "I know that. Can they afford it?" By the time that they paid property taxes, HOA dues, utilities (it was a large home), insurance, and maintenance, it was going to cost something like close to half of the son's net pay. He then found out that the DIL was planning on staying at home and playing tennis with her friends in the neighborhood.

His friend changed his mind.

Personally, I don't think it's generally wise to buy a home with a price tag (regardless of downpayment) more than triple your annual income. You might be able to make the numbers work, but it's likely to hold you back over the long-term.

California is one of the most expensive states to live in, and $60k is well below the median household income for state residents.
https://www.usatoday.com/story/money/pe ... /15455129/

Unless you can improve your income, I would seriously consider moving to another state if you want to own a home. Even renting will be expensive.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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willthrill81
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Re: Will I ever have enough for a condo/house in Cali?

Post by willthrill81 » Fri May 12, 2017 2:27 pm

5th_Dimension wrote:Like you I thought I would never be able to afford a house in CA. While house prices were skyrocketing I spent my time getting out of debt. In 2005 I was debt free. In 2008 the housing market collapsed. Suddenly there were foreclosures everywhere. Having no underwater house, cash in the bank, and a great credit rating I had my pick of houses in my price range, and the banks were falling all over themselves to get rid of them. Things can change rapidly. Position yourself to be ready for it and you will come out ahead.

Good luck.
Don't count on another 2008 happening again any time soon. It might, but it might not. And even if that $500k condo the OP is considering dropped to $250k, it would still be a big stretch to afford it with $60k income.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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gunn_show
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Re: Will I ever have enough for a condo/house in Cali?

Post by gunn_show » Fri May 12, 2017 2:52 pm

bloom2708 wrote:It will be an uphill battle unless you get your income up.

Let's skip forward and you have $125k or $150k saved. If you are still making $60-$70k, you should not buy a $500k condo.

Even if you went up to 3-4x your salary, you are looking at $300k as a top line number. Even if you could pay cash for a $500k condo, I wouldn't do it on $60k or $70k. It would sponge up all your money.

Property taxes, insurance, maintenance, HOA fees, furniture, utilities. You are in CA, so you already have high state tax to pay.

Turn it around and tackle it from the perspective of 1) you need a place to sleep, eat, wash clothes, watch tv, relax. 2) That can come from renting or owning with a mortgage or owning without a mortgage. You are currently doing number 3) Living with parents

What are your income prospects? Lots can change, marriage can change the picture. Save, look for a reasonable rental unit to "launch from the parents nest". Let the rest happen as it goes. 5 years is too far out to be certain of much. Good luck!
I think bloom2708 did an excellent job setting the table here, for expectations. I'll add..
1. In CA (locals never call it Cali, by the way, only in rap videos...) it really is about your income. At $60k the house cost is almost irrelevant, you cannot afford to buy anything in CA on that single income, with RE cost, taxes, ins, maint, all the recurring costs associated as bloom pointed out. Fix the income part and your picture opens up.
2. Lot of people (my brother included) forget how much power a spouse and second income add to purchase power. Find a spouse with similar or better income, then half your battle is done, if not all of it.
3. As bloom mentioned, cost of living is required for all humans. Renting is never throwing away money, there is no alternative. Owning a home is not a given right or automatic thing, and frankly, not for everyone. Owning a home is somewhat of a job, and an expensive one at times. If you cannot afford it, then your only alternatives are renting or living at home with mom and dad. Although living at home may impact #2 negatively (finding that spouse...).
4. Jim Collins talks about renting vs owning very well... and his stock series is highly recommended, as is his new book.
http://jlcollinsnh.com/2013/05/29/why-y ... nvestment/

5. You are 26.. relax a little.. ;) .. nobody says you have to own a home, if you get to or want to, by any specific age. Life is a long road.
"I love competition. And I want to win." R. Murdoch

Exodus
Posts: 42
Joined: Mon Apr 18, 2016 1:59 pm

Re: Will I ever have enough for a condo/house in Cali?

Post by Exodus » Fri May 12, 2017 2:55 pm

mac808 wrote:California is not a comfortable place for those who make $60k and don't own a (mortgage free) home. Living at home is very smart. You should laser-focus on getting income up, and forget about buying a home (for now). What do you do for work? You might be underpaid as is.
Currently I work as a PPC Analyst. It's my first year going into this particular field, but it's a great gig!
The outcome is the perspective

Exodus
Posts: 42
Joined: Mon Apr 18, 2016 1:59 pm

Re: Will I ever have enough for a condo/house in Cali?

Post by Exodus » Fri May 12, 2017 2:57 pm

Carefreeap wrote:
Exodus wrote:Hi Bogleheads,

I want to give you a full breakdown of my assets and maybe someone can give me some advice on how I'm doing. I just want to make sure the assessment that I just need to make more money is correct.

Age: 27
Salary: $60K
Cash: $20.1K
IRA: $28.2K (no 2017 contribution yet)
Taxable Account: $4.3K
401K: $2.8K
HSA: $3k

I am currently living at home and saving around $1.5-2k a month. Will it really take me almost 5 years to have a down payment on a $500k condo? Also, even if I were to have $100K, I don’t want to wipe out all my cash so we are looking at maybe 6-7 years?
Feel free to ask any questions and all criticism is welcome. Thank you!

-B
Where do you live and what do you do for a living?

I grew up in San Diego, made a cross country move to the Washington DC area and then back to the SF Bay Area. Even in 1990 we weren't sure we could afford to buy a house in the Bay Area. But we sucked it up, bought a dump, fixed it up and moved up from that.
I currently live in Glendale, but will want to move closer to where I work in LA soon. I currently work as a PPC analyst.
Last edited by Exodus on Fri May 12, 2017 2:59 pm, edited 1 time in total.
The outcome is the perspective

aristotelian
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Re: Will I ever have enough for a condo/house in Cali?

Post by aristotelian » Fri May 12, 2017 2:59 pm

If you acquire a spouse with a second income, that can help. If you don't acquire a spouse with a second income, just rent and enjoy the freedom. Hopefully your income increases over time while your costs remain constant. That can help too. Whatever you do, don't make a bad choice just to "keep up with the Joneses." More important to live within your means. With an IRA and 401K you are off to a good start.

Exodus
Posts: 42
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Re: Will I ever have enough for a condo/house in Cali?

Post by Exodus » Fri May 12, 2017 3:18 pm

gunn_show wrote:
bloom2708 wrote:It will be an uphill battle unless you get your income up.

Let's skip forward and you have $125k or $150k saved. If you are still making $60-$70k, you should not buy a $500k condo.

Even if you went up to 3-4x your salary, you are looking at $300k as a top line number. Even if you could pay cash for a $500k condo, I wouldn't do it on $60k or $70k. It would sponge up all your money.

Property taxes, insurance, maintenance, HOA fees, furniture, utilities. You are in CA, so you already have high state tax to pay.

Turn it around and tackle it from the perspective of 1) you need a place to sleep, eat, wash clothes, watch tv, relax. 2) That can come from renting or owning with a mortgage or owning without a mortgage. You are currently doing number 3) Living with parents

What are your income prospects? Lots can change, marriage can change the picture. Save, look for a reasonable rental unit to "launch from the parents nest". Let the rest happen as it goes. 5 years is too far out to be certain of much. Good luck!
I think bloom2708 did an excellent job setting the table here, for expectations. I'll add..
1. In CA (locals never call it Cali, by the way, only in rap videos...) it really is about your income. At $60k the house cost is almost irrelevant, you cannot afford to buy anything in CA on that single income, with RE cost, taxes, ins, maint, all the recurring costs associated as bloom pointed out. Fix the income part and your picture opens up.
2. Lot of people (my brother included) forget how much power a spouse and second income add to purchase power. Find a spouse with similar or better income, then half your battle is done, if not all of it.
3. As bloom mentioned, cost of living is required for all humans. Renting is never throwing away money, there is no alternative. Owning a home is not a given right or automatic thing, and frankly, not for everyone. Owning a home is somewhat of a job, and an expensive one at times. If you cannot afford it, then your only alternatives are renting or living at home with mom and dad. Although living at home may impact #2 negatively (finding that spouse...).
4. Jim Collins talks about renting vs owning very well... and his stock series is highly recommended, as is his new book.
http://jlcollinsnh.com/2013/05/29/why-y ... nvestment/

5. You are 26.. relax a little.. ;) .. nobody says you have to own a home, if you get to or want to, by any specific age. Life is a long road.
I was going to put CA, but I thought people might get it confused with Canada. I definitely don't see renting throwing away money. I have experienced and read a lot of about owning a house and the associate costs that come with it. I just wanted to make sure that I have the correct mindset as I start my career. Thank you for the link to Jim Collins. I'll take a look into it.

I agree that a house in irrelevant at this point. Right now the focus would be to save, earn more income, and move out. Thank you!

-B
The outcome is the perspective

czr
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Re: Will I ever have enough for a condo/house in Cali?

Post by czr » Fri May 12, 2017 3:30 pm

Focus on maxing out your savings rate and stockpiling cash for the right opportunity. A $400k mortgage is about $2,000, and add property taxes, insurance, maintenance, upkeep and utilities so you are closer to $3,000 just as a monthly ongoing expense so you'll need to save more or grow your income considerably.

Carefreeap
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Re: Will I ever have enough for a condo/house in Cali?

Post by Carefreeap » Fri May 12, 2017 3:30 pm

Exodus wrote:
mac808 wrote:California is not a comfortable place for those who make $60k and don't own a (mortgage free) home. Living at home is very smart. You should laser-focus on getting income up, and forget about buying a home (for now). What do you do for work? You might be underpaid as is.
Currently I work as a PPC Analyst. It's my first year going into this particular field, but it's a great gig!
What is a PPC Analyst?

MinimalJ
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Re: Will I ever have enough for a condo/house in Cali?

Post by MinimalJ » Fri May 12, 2017 3:31 pm

Don't feel bad about renting. Live on the cheap and adopt minimalism. You can find "cheap" studios and 1 bedrooms to rent. Or you can find cool places to live if you rent a room in a cool area, plus it's already furnished so you don't have to buy anything. What I'm doing is investing the extra money that would normally go to a house (ex. VTSAX). In the long run I'm good with renting. I'm lazy so I hardly ever do any kind of house work, I'd rather be out enjoying life than "working on the house" every weekend!

Exodus
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Re: Will I ever have enough for a condo/house in Cali?

Post by Exodus » Fri May 12, 2017 3:39 pm

Carefreeap wrote:
Exodus wrote:
mac808 wrote:California is not a comfortable place for those who make $60k and don't own a (mortgage free) home. Living at home is very smart. You should laser-focus on getting income up, and forget about buying a home (for now). What do you do for work? You might be underpaid as is.
Currently I work as a PPC Analyst. It's my first year going into this particular field, but it's a great gig!
What is a PPC Analyst?
I basically work with SEM. When you google something and an ad pops up in your search results, that's me targeting you! :)

-B
The outcome is the perspective

Exodus
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Re: Will I ever have enough for a condo/house in Cali?

Post by Exodus » Fri May 12, 2017 3:43 pm

MinimalJ wrote:Don't feel bad about renting. Live on the cheap and adopt minimalism. You can find "cheap" studios and 1 bedrooms to rent. Or you can find cool places to live if you rent a room in a cool area, plus it's already furnished so you don't have to buy anything. What I'm doing is investing the extra money that would normally go to a house (ex. VTSAX). In the long run I'm good with renting. I'm lazy so I hardly ever do any kind of house work, I'd rather be out enjoying life than "working on the house" every weekend!
Let's say my rent is $1000 for a single room, but if I bought a house my mortgage would $2000. Would that extra $1000 invested beat rent over the long run or would there be diminishing returns at some point? Are you currently renting in CA?

-B
The outcome is the perspective

MinimalJ
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Re: Will I ever have enough for a condo/house in Cali?

Post by MinimalJ » Fri May 12, 2017 3:54 pm

Exodus wrote:
MinimalJ wrote:Don't feel bad about renting. Live on the cheap and adopt minimalism. You can find "cheap" studios and 1 bedrooms to rent. Or you can find cool places to live if you rent a room in a cool area, plus it's already furnished so you don't have to buy anything. What I'm doing is investing the extra money that would normally go to a house (ex. VTSAX). In the long run I'm good with renting. I'm lazy so I hardly ever do any kind of house work, I'd rather be out enjoying life than "working on the house" every weekend!
Let's say my rent is $1000 for a single room, but if I bought a house my mortgage would $2000. Would that extra $1000 invested beat rent over the long run or would there be diminishing returns at some point? Are you currently renting in CA?

-B
I wondered the same thing and remember seeing some studies that say it's wash, or meaning it's about the same. So for me it's also largely on lifestyle, I don't like to be committed to things so I like have a large balance and the flexibility to move if I want to. Also if it comes out to the same, I also consider all the extra time I didn't use towards the upkeep of owning a home. As you get older you'll value your time more. But that's me. Yah, I'm renting a studio in Long Beach, living a block from the beach and enjoying my free weekends while my co-workers are working on their houses!

Carefreeap
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Re: Will I ever have enough for a condo/house in Cali?

Post by Carefreeap » Fri May 12, 2017 4:21 pm

Exodus wrote:
MinimalJ wrote:Don't feel bad about renting. Live on the cheap and adopt minimalism. You can find "cheap" studios and 1 bedrooms to rent. Or you can find cool places to live if you rent a room in a cool area, plus it's already furnished so you don't have to buy anything. What I'm doing is investing the extra money that would normally go to a house (ex. VTSAX). In the long run I'm good with renting. I'm lazy so I hardly ever do any kind of house work, I'd rather be out enjoying life than "working on the house" every weekend!
Let's say my rent is $1000 for a single room, but if I bought a house my mortgage would $2000. Would that extra $1000 invested beat rent over the long run or would there be diminishing returns at some point? Are you currently renting in CA?

-B
But it's more complicated than that. As an earlier poster pointed out, you will also have property taxes, insurance and maintenance costs (even with a condo). Plus you are tying up your down payment in an illiquid asset. Meaning, that if you lost your job and had to relocate somewhere else it could be very expensive and slow to sell especially during a down market. And we do have down markets (even in Coastal CA :wink: ). You were probably too young to remember it but 10 years ago everything was going up, up, up and then we hit a peak. Property values in the I.E. dropped in some places by 50%. Even "top" areas saw price corrections in the 10% to 20% range. Plug those %s using a $500k price and you can see that a 50k or $100k drop means real money.

Exodus
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Re: Will I ever have enough for a condo/house in Cali?

Post by Exodus » Fri May 12, 2017 4:27 pm

Carefreeap wrote:
Exodus wrote:
MinimalJ wrote:Don't feel bad about renting. Live on the cheap and adopt minimalism. You can find "cheap" studios and 1 bedrooms to rent. Or you can find cool places to live if you rent a room in a cool area, plus it's already furnished so you don't have to buy anything. What I'm doing is investing the extra money that would normally go to a house (ex. VTSAX). In the long run I'm good with renting. I'm lazy so I hardly ever do any kind of house work, I'd rather be out enjoying life than "working on the house" every weekend!
Let's say my rent is $1000 for a single room, but if I bought a house my mortgage would $2000. Would that extra $1000 invested beat rent over the long run or would there be diminishing returns at some point? Are you currently renting in CA?

-B
But it's more complicated than that. As an earlier poster pointed out, you will also have property taxes, insurance and maintenance costs (even with a condo). Plus you are tying up your down payment in an illiquid asset. Meaning, that if you lost your job and had to relocate somewhere else it could be very expensive and slow to sell especially during a down market. And we do have down markets (even in Coastal CA :wink: ). You were probably too young to remember it but 10 years ago everything was going up, up, up and then we hit a peak. Property values in the I.E. dropped in some places by 50%. Even "top" areas saw price corrections in the 10% to 20% range. Plug those %s using a $500k price and you can see that a 50k or $100k drop means real money.
Oh definitely it's a lot more complicated, but I guess for simplicity sake I was curious if you could come out ahead renting for life. It's interesting because as I'm reading these Jim Collin's articles it seems that renting for life is definitely a possibility.

-B
The outcome is the perspective

Exodus
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Joined: Mon Apr 18, 2016 1:59 pm

Re: Will I ever have enough for a condo/house in Cali?

Post by Exodus » Fri May 12, 2017 4:32 pm

MinimalJ wrote:
Exodus wrote:
MinimalJ wrote:Don't feel bad about renting. Live on the cheap and adopt minimalism. You can find "cheap" studios and 1 bedrooms to rent. Or you can find cool places to live if you rent a room in a cool area, plus it's already furnished so you don't have to buy anything. What I'm doing is investing the extra money that would normally go to a house (ex. VTSAX). In the long run I'm good with renting. I'm lazy so I hardly ever do any kind of house work, I'd rather be out enjoying life than "working on the house" every weekend!
Let's say my rent is $1000 for a single room, but if I bought a house my mortgage would $2000. Would that extra $1000 invested beat rent over the long run or would there be diminishing returns at some point? Are you currently renting in CA?

-B
I wondered the same thing and remember seeing some studies that say it's wash, or meaning it's about the same. So for me it's also largely on lifestyle, I don't like to be committed to things so I like have a large balance and the flexibility to move if I want to. Also if it comes out to the same, I also consider all the extra time I didn't use towards the upkeep of owning a home. As you get older you'll value your time more. But that's me. Yah, I'm renting a studio in Long Beach, living a block from the beach and enjoying my free weekends while my co-workers are working on their houses!
I can't say for sure that I will be living in a house long enough to build enough equity vs renting because life happens. Renting is something that fits my lifestyle currently, but I wanted any advice for the long-term financial goals. I guess it's too early to tell. That studio must be expensive. I saw rent prices for a studio in Marina Del Ray going for $4,500! OUCH!

-B
The outcome is the perspective

RoadHouseFan
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Re: Will I ever have enough for a condo/house in Cali?

Post by RoadHouseFan » Fri May 12, 2017 4:50 pm

Wouldn't even consider buying property in California.

bloom2708
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Re: Will I ever have enough for a condo/house in Cali?

Post by bloom2708 » Fri May 12, 2017 4:54 pm

You could always look at the newest fad...tiny house...down the road.

http://tinyhouseblog.com/
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

Carefreeap
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Re: Will I ever have enough for a condo/house in Cali?

Post by Carefreeap » Fri May 12, 2017 4:59 pm

Exodus wrote:
Carefreeap wrote:
Exodus wrote:
MinimalJ wrote:Don't feel bad about renting. Live on the cheap and adopt minimalism. You can find "cheap" studios and 1 bedrooms to rent. Or you can find cool places to live if you rent a room in a cool area, plus it's already furnished so you don't have to buy anything. What I'm doing is investing the extra money that would normally go to a house (ex. VTSAX). In the long run I'm good with renting. I'm lazy so I hardly ever do any kind of house work, I'd rather be out enjoying life than "working on the house" every weekend!
Let's say my rent is $1000 for a single room, but if I bought a house my mortgage would $2000. Would that extra $1000 invested beat rent over the long run or would there be diminishing returns at some point? Are you currently renting in CA?

-B
But it's more complicated than that. As an earlier poster pointed out, you will also have property taxes, insurance and maintenance costs (even with a condo). Plus you are tying up your down payment in an illiquid asset. Meaning, that if you lost your job and had to relocate somewhere else it could be very expensive and slow to sell especially during a down market. And we do have down markets (even in Coastal CA :wink: ). You were probably too young to remember it but 10 years ago everything was going up, up, up and then we hit a peak. Property values in the I.E. dropped in some places by 50%. Even "top" areas saw price corrections in the 10% to 20% range. Plug those %s using a $500k price and you can see that a 50k or $100k drop means real money.
Oh definitely it's a lot more complicated, but I guess for simplicity sake I was curious if you could come out ahead renting for life. It's interesting because as I'm reading these Jim Collin's articles it seems that renting for life is definitely a possibility.

-B
It's also a lifestyle decision. You can probably do great financially in a rent-controlled one bedroom or studio apartment if you have the discipline to invest the difference. But most people don't want to live that way their entire lives.

My husband and I did very well with our CA properties so it can be done. But my parents were in real estate and came close to being foreclosed on several times when the market cycle hit.

hookemhorns
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Re: Will I ever have enough for a condo/house in Cali?

Post by hookemhorns » Fri May 12, 2017 5:00 pm

As others have mentioned it will be difficult to do on your income. You need to look into how to advance your career. The people I know that are good in marketing analytics make a lot more than any of the income numbers you mentioned. Obviously you're still early career, but should be thinking a lot bigger than "topping out at 150k." That may involve learning more than just search engine marketing.

Exodus
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Re: Will I ever have enough for a condo/house in Cali?

Post by Exodus » Fri May 12, 2017 5:11 pm

hookemhorns wrote:As others have mentioned it will be difficult to do on your income. You need to look into how to advance your career. The people I know that are good in marketing analytics make a lot more than any of the income numbers you mentioned. Obviously you're still early career, but should be thinking a lot bigger than "topping out at 150k." That may involve learning more than just search engine marketing.
That is definitely good to hear. I already know most of the social marketing aspects (FB, IG, Snap, Twitter), but wanted to get more SEM and SEO experience. You make a good point about focusing on my career rather than buying a house. Thank you for the advice!
The outcome is the perspective

rolandtorres
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Re: Will I ever have enough for a condo/house in Cali?

Post by rolandtorres » Fri May 12, 2017 5:37 pm

LA is not an easy place to buy as a first time homeowner assuming you don't want a super commute. Your best options are:

1. Improve income by moonlighting a 2nd gig while advancing at your current company. Plenty of people with SEM skill can get side gigs managing local businesses that don't understand search or social media marketing.

2. See if those gigs can eventually lead to your own full time SEM biz. You only need a few decent clients to exceed your current income and you can offshore the work if you need to scale.

3. If you own your own SEM co, you can probably live wherever you want, whether in SoCal at a lower cost of living area like Santa Clarita or outside the Southland.

3a. If you'd like to stay in prime LA you can look for a new development that sets aside condos for lower income individuals.

MinimalJ
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Re: Will I ever have enough for a condo/house in Cali?

Post by MinimalJ » Fri May 12, 2017 5:49 pm

Exodus wrote:
MinimalJ wrote:
Exodus wrote:
MinimalJ wrote:Don't feel bad about renting. Live on the cheap and adopt minimalism. You can find "cheap" studios and 1 bedrooms to rent. Or you can find cool places to live if you rent a room in a cool area, plus it's already furnished so you don't have to buy anything. What I'm doing is investing the extra money that would normally go to a house (ex. VTSAX). In the long run I'm good with renting. I'm lazy so I hardly ever do any kind of house work, I'd rather be out enjoying life than "working on the house" every weekend!
Let's say my rent is $1000 for a single room, but if I bought a house my mortgage would $2000. Would that extra $1000 invested beat rent over the long run or would there be diminishing returns at some point? Are you currently renting in CA?

-B
I wondered the same thing and remember seeing some studies that say it's wash, or meaning it's about the same. So for me it's also largely on lifestyle, I don't like to be committed to things so I like have a large balance and the flexibility to move if I want to. Also if it comes out to the same, I also consider all the extra time I didn't use towards the upkeep of owning a home. As you get older you'll value your time more. But that's me. Yah, I'm renting a studio in Long Beach, living a block from the beach and enjoying my free weekends while my co-workers are working on their houses!
I can't say for sure that I will be living in a house long enough to build enough equity vs renting because life happens. Renting is something that fits my lifestyle currently, but I wanted any advice for the long-term financial goals. I guess it's too early to tell. That studio must be expensive. I saw rent prices for a studio in Marina Del Ray going for $4,500! OUCH!

-B
Yah. No, LB is the cheaper of the beach cities. I'm paying $1150 right now all utilities included. I moved here last year.

djscal
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Re: Will I ever have enough for a condo/house in Cali?

Post by djscal » Fri May 12, 2017 6:14 pm

Here is what I did to break in to the incredibly expensive SoCal market (some call it house hacking).

I had just turned 28 when I purchased my 1st Southern California property (paid $500k - put down 100k). Today's valuation of the property is roughly 750-800k.

This was a 3 bedroom 2 1/2 bath townhome in West L.A. I believe my income at the time was about $75k/yr.

My parents loaned me $50k and I put down the other $50k so that my mortgage was 400k - I took out a 5 yr arm to keep the initial payments low as I knew that my income would increase significantly five years later (and it did). The PITI plus HOA worked out to about 2.5k/month.

I then rented a bedroom for $1k/month which greatly aided my ability to afford the property and pay back my parents within 3 years.

I lived in the property for about seven years before getting married and we moved to a single family home in the South Bay. I kept that property when we purchased the single family home and we now rent that out the townhome for $3500/month. It's a few hundred a month cash flow positive which is nice - but mostly because I do the property management myself.

Bottom line: you can afford a 500k condo at your income level - IF you are willing to rent a room out. If you want to live by yourself you will need a lot more income or a very large down payment to be able to afford a property in SoCal.

boglerdude
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Re: Will I ever have enough for a condo/house in Cali?

Post by boglerdude » Sat May 13, 2017 12:34 am

Homes are cheap in gentrifying areas like downtown, East and Northeast LA

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celia
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Re: Will I ever have enough for a condo/house in Cali?

Post by celia » Sat May 13, 2017 1:04 am

Exodus, I assume you are living with your parents. If your income is $60K, do you know how it is spent? Do you keep a budget? (Just the act of keeping a budget makes you more aware of what you spend!)

If you aren't paying your parents any rent, you should easily be able to save half of your income.

If you have a budget and can post your categories and the amount allocated to each, we can give you feedback on how to cut back.

IMO
Posts: 267
Joined: Fri May 05, 2017 6:01 pm

Re: Will I ever have enough for a condo/house in Cali?

Post by IMO » Sat May 13, 2017 1:05 am

Exodus wrote:Hi Bogleheads,

Age: 27, single
Occupation: PPC Analyst
Salary: $60K
Cash: $20.1K
IRA: $28.2K (no 2017 contribution yet)
Taxable Account: $4.3K
401K: $2.8K
HSA: $3k

-B
At your age in California, I was in graduate school and for comparison: No salary, No cash, No IRA, No taxable account, No 401K, No HSA and had school debt and wasn't going to have a paying career until 1 yr later. Don't be surprised if that $60K salary situation goes up considerably with some time. Don't be surprised if you find a significant other that doesn't have an income similar or above that in the near future (although I suspect living at home probably isn't in your favor :happy ). Dual incomes make a huge deal. Don't worry about being in a hurry to buy a house, and honestly, you may be surprised where you end up in the future for career reasons. Hopefully housing costs will be more reasonable in that locale.

California real estate seems to be "going crazy" again and it's no one's guess if it will keep going, level off, or even drop some. I remember the run up in the late 80's while living in CA, the panic to not get in on the rise up (kind of like now), and then the housing correction that lasted for years in CA in the early 90's. Of course there is also the more recent crash that everyone is familiar. Overall CA real estate has continued to appreciate over time though.

It could happen again, lots of 20/20 hindsight when these things happen.

Be patient, even back then, I didn't know too many people before their mid 30's who could afford a house in CA.

552BB
Posts: 154
Joined: Wed Mar 31, 2010 9:15 pm

Re: Will I ever have enough for a condo/house in Cali?

Post by 552BB » Sat May 13, 2017 12:23 pm

Good morning BH,



Hello Exodus.


Exodus wrote:Hi Bogleheads,

I want to give you a full breakdown of my assets and maybe someone can give me some advice on how I'm doing. I just want to make sure the assessment that I just need to make more money is correct.

Age: 27, single
Occupation: PPC Analyst
Salary: $60K
Cash: $20.1K
IRA: $28.2K (no 2017 contribution yet)
Taxable Account: $4.3K
401K: $2.8K
HSA: $3k

I am currently living at home and saving around $1.5-2k a month. Will it really take me almost 5 years to have a down payment on a $500k condo? Also, even if I were to have $100K, I don’t want to wipe out all my cash so we are looking at maybe 6-7 years?
Feel free to ask any questions and all criticism is welcome. Thank you!

-B


I like your question.

Although I won't answer your question, I will give you a bit of worldly wisdom from a 49 year old that very much remembers being 27.

Only you can make that assessment!!!



As a point of reference, I will give you my breakdown when I was your age back in 1995.

Age: 27
Occupation: Pilot
Salary: Less than $20K
Cash: 0
IRA: 0
Taxable Account: 0
401K: 0
HSA: 0

At that time I was not at my parents home. I still had $40K worth of debt lingering from my college days. It would take years to pay off.



Today I live in San Diego in a beautiful home. I own other properties in a couple other states and in Mexico. Most of those are paid off, but I still have 3 loans outstanding (mortgages). I have more than enough to pay my debts and retire on in both taxed and tax defered accounts if I chose to do so. I should add that I never inherited any money or assistance to pay off my debts.

Some may say I was lucky. To them I would say absolutly!!! We all occasionally find some luck in life. Both good luck and bad.

To you I would say, I hope you take the opportunity to capitalize on any good luck that may come your way, and hope that you look to learn from any bad luck that may find you. And know that in life, good luck and bad luck are sometimes indistinguishable at the time. Only with the passage of time does some of you worst luck come into focus as maybe some of you best fortune.



Will you ever have enough for a house in California?

Only you can make that assessment!!!



I hope this helps.



:sharebeer

squirm
Posts: 1305
Joined: Sat Mar 19, 2011 11:53 am

Re: Will I ever have enough for a condo/house in Cali?

Post by squirm » Sat May 13, 2017 3:01 pm

Just wait for the next housing bust. We did just that. Bought in 2012. This can't keep going on. When I read pay like this, I figure a bust is coming soon.

randomguy
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Joined: Wed Sep 17, 2014 9:00 am

Re: Will I ever have enough for a condo/house in Cali?

Post by randomguy » Sat May 13, 2017 3:19 pm

bloom2708 wrote:It will be an uphill battle unless you get your income up.

Let's skip forward and you have $125k or $150k saved. If you are still making $60-$70k, you should not buy a $500k condo.

Even if you went up to 3-4x your salary, you are looking at $300k as a top line number. Even if you could pay cash for a $500k condo, I wouldn't do it on $60k or $70k. It would sponge up all your money.
You wouldn't. A lot of people will. A lot depends on your other spending and goals. Most people would consider making 180-240k and only buying 300k house to be very conservative. As income goes up (you need 1-2k/month to pay for food, clothes, cars and the like. You can blow the rest however you like) paying more for housing becomes possible. It is up to you to decide if you want to. I know plenty of people that did the 4-6x of salary in those HCOL and they all turned out fine through a couple of stock market crashes, housing bubble bursts, lay offs and so on. You just have to accept that is where your money is going for the next 5-10 years until raises and inflation make the payments mangeable.

The problem the OP is going to find is that he is going to make little progress if properties keep appreciating. That 500k condo could very well be 650k in 5-7 years. Now he has picked up another 150k in debt and 1.6k/year in property taxes and isn't really much closer to being able to buy in. You can wait for housing market decline but they don't happen very often.

randomguy
Posts: 5641
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Re: Will I ever have enough for a condo/house in Cali?

Post by randomguy » Sat May 13, 2017 3:21 pm

mac808 wrote:California is not a comfortable place for those who make $60k and don't own a (mortgage free) home. Living at home is very smart. You should laser-focus on getting income up, and forget about buying a home (for now). What do you do for work? You might be underpaid as is.

California is very comfortable for people making 60k year who don't own a house. They just can't choose to live in SD, LA, or SF and the other high priced enclaves. You need to go to the LCOL sections.

Exodus
Posts: 42
Joined: Mon Apr 18, 2016 1:59 pm

Re: Will I ever have enough for a condo/house in Cali?

Post by Exodus » Sat May 13, 2017 5:41 pm

celia wrote:Exodus, I assume you are living with your parents. If your income is $60K, do you know how it is spent? Do you keep a budget? (Just the act of keeping a budget makes you more aware of what you spend!)

If you aren't paying your parents any rent, you should easily be able to save half of your income.

If you have a budget and can post your categories and the amount allocated to each, we can give you feedback on how to cut back.
I don't have an actual budget for things, but I do track everything. I can post my current monthly expenses for ya. I don't think there will be much cutback though, but I'm open to suggestions.

Net Monthly: $2,714

Gas: $250
Haircut: $20
Entertainment: $200
Restaurants: $200

That's pretty much all I have per month for expenses. Let me know what you think!
The outcome is the perspective

Exodus
Posts: 42
Joined: Mon Apr 18, 2016 1:59 pm

Re: Will I ever have enough for a condo/house in Cali?

Post by Exodus » Sat May 13, 2017 5:47 pm

552BB wrote:Good morning BH,



Hello Exodus.


Exodus wrote:Hi Bogleheads,

I want to give you a full breakdown of my assets and maybe someone can give me some advice on how I'm doing. I just want to make sure the assessment that I just need to make more money is correct.

Age: 27, single
Occupation: PPC Analyst
Salary: $60K
Cash: $20.1K
IRA: $28.2K (no 2017 contribution yet)
Taxable Account: $4.3K
401K: $2.8K
HSA: $3k

I am currently living at home and saving around $1.5-2k a month. Will it really take me almost 5 years to have a down payment on a $500k condo? Also, even if I were to have $100K, I don’t want to wipe out all my cash so we are looking at maybe 6-7 years?
Feel free to ask any questions and all criticism is welcome. Thank you!

-B


I like your question.

Although I won't answer your question, I will give you a bit of worldly wisdom from a 49 year old that very much remembers being 27.

Only you can make that assessment!!!



As a point of reference, I will give you my breakdown when I was your age back in 1995.

Age: 27
Occupation: Pilot
Salary: Less than $20K
Cash: 0
IRA: 0
Taxable Account: 0
401K: 0
HSA: 0

At that time I was not at my parents home. I still had $40K worth of debt lingering from my college days. It would take years to pay off.



Today I live in San Diego in a beautiful home. I own other properties in a couple other states and in Mexico. Most of those are paid off, but I still have 3 loans outstanding (mortgages). I have more than enough to pay my debts and retire on in both taxed and tax defered accounts if I chose to do so. I should add that I never inherited any money or assistance to pay off my debts.

Some may say I was lucky. To them I would say absolutly!!! We all occasionally find some luck in life. Both good luck and bad.

To you I would say, I hope you take the opportunity to capitalize on any good luck that may come your way, and hope that you look to learn from any bad luck that may find you. And know that in life, good luck and bad luck are sometimes indistinguishable at the time. Only with the passage of time does some of you worst luck come into focus as maybe some of you best fortune.



Will you ever have enough for a house in California?

Only you can make that assessment!!!



I hope this helps.



:sharebeer
Hi ya!

Thank you for the words of wisdom. Everyone says there is light at the end of tunnel, but sometimes a train comes! If I may ask, what is your current income now? I'm assuming that you are either being paid quite handsomely OR have paid your due diligence savings over the years.
The outcome is the perspective

Exodus
Posts: 42
Joined: Mon Apr 18, 2016 1:59 pm

Re: Will I ever have enough for a condo/house in Cali?

Post by Exodus » Sat May 13, 2017 5:51 pm

randomguy wrote:
bloom2708 wrote:It will be an uphill battle unless you get your income up.

Let's skip forward and you have $125k or $150k saved. If you are still making $60-$70k, you should not buy a $500k condo.

Even if you went up to 3-4x your salary, you are looking at $300k as a top line number. Even if you could pay cash for a $500k condo, I wouldn't do it on $60k or $70k. It would sponge up all your money.
You wouldn't. A lot of people will. A lot depends on your other spending and goals. Most people would consider making 180-240k and only buying 300k house to be very conservative. As income goes up (you need 1-2k/month to pay for food, clothes, cars and the like. You can blow the rest however you like) paying more for housing becomes possible. It is up to you to decide if you want to. I know plenty of people that did the 4-6x of salary in those HCOL and they all turned out fine through a couple of stock market crashes, housing bubble bursts, lay offs and so on. You just have to accept that is where your money is going for the next 5-10 years until raises and inflation make the payments mangeable.

The problem the OP is going to find is that he is going to make little progress if properties keep appreciating. That 500k condo could very well be 650k in 5-7 years. Now he has picked up another 150k in debt and 1.6k/year in property taxes and isn't really much closer to being able to buy in. You can wait for housing market decline but they don't happen very often.
Great point! It feels like it's quite a long road ahead and I just won't be able to get there without a significant increase to my income. For now, I'll be staying the course and saving up. Thanks for your feedback!
The outcome is the perspective

552BB
Posts: 154
Joined: Wed Mar 31, 2010 9:15 pm

Re: Will I ever have enough for a condo/house in Cali?

Post by 552BB » Sat May 13, 2017 8:14 pm

Good evening Exodus,


Exodus wrote:
Hi ya!

Thank you for the words of wisdom. Everyone says there is light at the end of tunnel, but sometimes a train comes! If I may ask, what is your current income now? I'm assuming that you are either being paid quite handsomely OR have paid your due diligence savings over the years.


I am a Captain for SWA now. Our base pay is about $300K to $350K per year. This is highly variable on the up side for those who choose to work extra.

And yes, increasing your income over the years is important. But more important is the due diligence in savings over the years. I did both.

I could not really start to save until into my 30s. Most careers that require unique skills or training will by there very nature leave you poorer for a longer period of time because of more time spent in school, and then more time moving up the ladder into a more lucrative position within the industry.



I would add that at the age of 27, earning less than $20k, the best I could hope to earn would have been maybe north of $200K at that time in 1995.

I put that in for perspective.

Time and inflation will take there toll on all those figures, both for good and bad.



There are many roads to Demaskus, as they say.



I hope this helps.



:sharebeer

552BB
Posts: 154
Joined: Wed Mar 31, 2010 9:15 pm

Re: Will I ever have enough for a condo/house in Cali?

Post by 552BB » Tue May 16, 2017 1:13 pm

Good morning BH,

I hope this thread has helped you Exodus.



I wanted to add an additional comment that may help.

You say you are single.

When I bought my first house I was about 32.

I also got myself a roommate. This helped me immensely.

I would venture to say that a roommate in California would be easy to get.

Not sure if this is an option for you, but I thought I would throw this out there.



:sharebeer

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