Have a question and would like some boglehead advice on how to value RSUs in the determination to buy a house in the bay area.
About us: Trying to figure out how to buy a house in the bay area, an astronomically high COL area. Our decisions are whether to buy now what we can afford, wait, or continue to rent.
- we both work for a tech companies in the bay area (highly stable), both software engineers
- income around 190k and 120k, plus around 15% bonus (~30k and 10k respectively). All in is approximately $350k before tax
- 401k in various accounts - ~$200k total
- Student loans, ~$150k total (paying off at approximately $2000/month)
- Savings: ~$400k in cash
- RSUs: At current valuation, ~$200k/year (after tax is ~$120k)
- No kids, cars paid off, no other expenses or debts
- Both husband/wife in early 30s
- Both frugal
$1.7m sounds like a lot of money, and would definitely lock us into this lifestyle. There are a few things going on here - we have been renting in an area below our means for the past several years. We're tired of having to go to the laundromat to do laundry, find street parking, sweating it out in the heat of summer without A/C. We'd like to upgrade our quality of life, and we plan on staying in the bay area for the long term.
My question to the boglehead community is how to value RSUs with respect to our mortgage preapproval and buying power. If we consider only our salaries, the amount of house we can buy is probably in the low $1m range (max). Conservatively, this buys us jack in the Bay Area. Anything that would be a lifestyle upgrade is at least a million. Maybe it can get us a townhome, but we are unwilling to go there (I don't think we'd be happy in a townhome with HOAs and sharing a wall with neighbors), especially if we are close enough to buying a SFH.
If we value our RSUs, our buying power increases significantly, but obviously, RSU income is uncertain (though our company's are highly stable). What do most people do with respect to RSUs? Seems like in the bay area, it is a necessity to count some of this towards one's buying power given the price of housing. If we play it too conservatively, we won't really be able to buy. It will probably be 10 years before our base salaries reach the level of our current base salaries + RSUs. I don't want to be in our 40s by the time we buy our first starter home. If we value our RSUs now in the equation, we can buy something decent, but perhaps we're taking on too much risk in this boom time.
Any advice bogleheads? What have others in our situation done in the past?