first house- 1 bedroom vs. 2 bedroom

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A Boglehead
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first house- 1 bedroom vs. 2 bedroom

Post by A Boglehead » Sat Sep 21, 2019 12:54 pm

I'm thinking of buying housing in the Bay Area.

One realtor suggested buying a smaller property, in a better location, rather than a bigger one, further away. I think the only thing I can buy for under $1 million in Mountain View, where I work, is a 1 bedroom (BR), 1 bath (BA) condo.

Another realtor recommend buying at least a 2 bedroom/2 bath further away, because it'll be easier to sell than a 1 BR/1 BA. I'll have to deal with traffic, however.

I'd rather spend less and retire early, rather than work longer to support a property.

In comparison, rent is about $3K for a 1 bedroom apartment in Mountain View.

What do you think? Thank you!

cherijoh
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Re: first house- 1 bedroom vs. 2 bedroom

Post by cherijoh » Sat Sep 21, 2019 1:07 pm

A Boglehead wrote:
Sat Sep 21, 2019 12:54 pm
I'm thinking of buying housing in the Bay Area.

One realtor suggested buying a smaller property, in a better location, rather than a bigger one, further away. I think the only thing I can buy for under $1 million in Mountain View, where I work, is a 1 bedroom (BR), 1 bath (BA) condo.

Another realtor recommend buying at least a 2 bedroom/2 bath further away, because it'll be easier to sell than a 1 BR/1 BA. I'll have to deal with traffic, however.

I'd rather spend less and retire early, rather than work longer to support a property.

In comparison, rent is about $3K for a 1 bedroom apartment in Mountain View.

What do you think? Thank you!
Unfortunately, both realtors make valid points. 1 BR/1 BA is harder to sell than 2 BR/1.5 (or 2) BA units. I had a 2 BR/2 BA condo; the 1 BR units in our complex were hard to move and mostly got rented out. Of course, I was not in the Bay Area and my condo was well under $100K when I bought it in 1982. :wink:

The other realtor is correct that location matters.

Are you planning to stay in the Bay Area after you retire? If not I'd rethink buying a place now.
Last edited by cherijoh on Sat Sep 21, 2019 3:05 pm, edited 1 time in total.

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rocket354
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Re: first house- 1 bedroom vs. 2 bedroom

Post by rocket354 » Sat Sep 21, 2019 1:13 pm

I don't have much experience with the bay area, but I have bought a few places in my time. I would say that you should buy what's best for you. 1BR/1BA will be cheaper to purchase and maintain, and it sounds like it is a much better location for you. Your concerns are your commute and total finances. So go with that.

While it's true on average that a 2/2 will have a larger market than a 1/1, as the post above notes location is paramount. As well, I have to imagine there are a lot of single techies with nice salaries who would love to be near their office. So when it comes time to sell, you can just sell (or rent, if that's your thing) to the next version of you a few years down the road.

One thing I've learned about real estate: if it's attractive to you, it will be attractive to someone else. Trust your own judgement. Irrespective of the next buyer, which one do you like better as a place to live for your situation? That's the one you should buy.

retiredjg
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Re: first house- 1 bedroom vs. 2 bedroom

Post by retiredjg » Sat Sep 21, 2019 1:24 pm

From what I've read here, most anything in the Bay area sells. And sells for a lot. So a 1 BR 1B could be quite fine there even if it would not sell quickly in most other locations.

If you can afford it and if you are happy in a 1BR, I'd go for it and not worry about it. It seems to be what you want, so why not?

HomeStretch
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Re: first house- 1 bedroom vs. 2 bedroom

Post by HomeStretch » Sat Sep 21, 2019 1:36 pm

Good points by both realtors. Agree about not spending/commuting more for a larger place.

If you are undecided, rent for another year.

stan1
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Re: first house- 1 bedroom vs. 2 bedroom

Post by stan1 » Sat Sep 21, 2019 1:45 pm

How long will you live there? If you expect to live there a long time, by yourself, I would go for the 1 bedroom and not worry about resale although there's nothing wrong with the math of renting for $3,000 per month if the HOA dues, property taxes and insurance alone on a condo would be at least $1,500-2000 per month.

I'd try to find a one bedroom condo that doesn't "feel" like an apartment. Has big windows, view, privacy, maybe a private patio, garage, maybe a 1 BR + den for just a little extra space. Well located (walkable). All that helps with resale because it makes your unit stand out from the dozens of others that will be on the market at the same time.

niceguy7376
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Re: first house- 1 bedroom vs. 2 bedroom

Post by niceguy7376 » Sat Sep 21, 2019 1:51 pm

So are the options to rent a 1B/1B for 3k or buy the same for one million?

If so, wouldnt it make more sense to rent?

michaeljc70
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Re: first house- 1 bedroom vs. 2 bedroom

Post by michaeljc70 » Sat Sep 21, 2019 2:23 pm

niceguy7376 wrote:
Sat Sep 21, 2019 1:51 pm
So are the options to rent a 1B/1B for 3k or buy the same for one million?

If so, wouldnt it make more sense to rent?
+1. A million dollar property here would rent for $7k-$9k typically.

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FIREchief
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Re: first house- 1 bedroom vs. 2 bedroom

Post by FIREchief » Sat Sep 21, 2019 2:27 pm

I would certainly rent. It sounds like buying would cost more, and there are no guarantees wrt the investment returns. Also, eventually selling a $1M property would likely generate very hefty commissions.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

Goal33
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Re: first house- 1 bedroom vs. 2 bedroom

Post by Goal33 » Sat Sep 21, 2019 2:30 pm

My preference, though it has cost me plenty in terms of missed housing appreciation, has been to rent in these circumstances.
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DanMahowny
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Re: first house- 1 bedroom vs. 2 bedroom

Post by DanMahowny » Sat Sep 21, 2019 2:34 pm

real estate in SF is textbook example of the "Greater Fool Theory".

People will laugh about this someday.
Funding secured

StealthRabbit
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Re: first house- 1 bedroom vs. 2 bedroom

Post by StealthRabbit » Sat Sep 21, 2019 2:57 pm

$1m in the correct RE investment would bring you $10k / month net INCOME. = $3k for rent and $7K for investing / play...

if you must...(buy) :twisted:
1bd will probably sell OK in Bay area, but it typically NOT the direction for first home.

Your primary error is in starting with a realtor.

34 props transactions for me... only (2) miserable times was a realtor involved (at other party's need of 'hand-holding')
slow, expensive, don't get what YOU want or need, coercion to buy high (more commission!!!), very convoluted and inefficient 'buying' process.

I know what I want, how to evaluate / negotiate, and fund and close (FAST).

Be careful, Be Wise
Don't get HOOKED / stuck with a 'non-performing-asset'.

Lafder
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Re: first house- 1 bedroom vs. 2 bedroom

Post by Lafder » Sat Sep 21, 2019 8:23 pm

A shorter commute will make you smile every day vs what might happen down the road as far as resale values.

Your "for now" home could become your forever home.

I agree the numbers are funny, if it is one million to buy vs 3k to rent. What is the rental price on an equivalent place you would consider buying?

Another variable..........what is your income and what down payment would you put down?

lafder

Bacchus01
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Re: first house- 1 bedroom vs. 2 bedroom

Post by Bacchus01 » Sat Sep 21, 2019 8:51 pm

Buy the 1br unit and enjoy the commute.

When it’s time to go bigger, rent the 1br out and make even more money.

michaeljc70
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Re: first house- 1 bedroom vs. 2 bedroom

Post by michaeljc70 » Sat Sep 21, 2019 9:12 pm

Is the $3000 apartment to rent in the same area and of the same size/quality/condition as the $1M 1br/1ba? A common problem with these comparisons of rent vs. own is the rental and potential property to buy are vastly different.

Cycle
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Re: first house- 1 bedroom vs. 2 bedroom

Post by Cycle » Sat Sep 21, 2019 9:29 pm

Always prioritize a short commute.

The best commute is a 15 minute walk, after that it's a bike ride, after that it's a bike/walk to transit, after that it's driving yourself. People who do active commutes are the happiest (walk/bike).

You could hack this tho and drive 15 minutes and walk or bike the last 15 minutes. Put a Brompton in the trunk.

Even when it's snowing and cold here with the roads rutted glaciers, the bike ride to work is usually my favorite part of the day
Never look back unless you are planning to go that way

MathIsMyWayr
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Re: first house- 1 bedroom vs. 2 bedroom

Post by MathIsMyWayr » Sat Sep 21, 2019 11:32 pm

Any housing with only 1 bedroom should be considered as a short term solution. If you are comfortable with that concept, a 1 bedroom condo will be fine. But buying a property is a serious business and costs a serious expense when selling soon. Why don't you keep renting for a while?

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Watty
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Re: first house- 1 bedroom vs. 2 bedroom

Post by Watty » Sat Sep 21, 2019 11:41 pm

A Boglehead wrote:
Sat Sep 21, 2019 12:54 pm
In comparison, rent is about $3K for a 1 bedroom apartment in Mountain View.

What do you think? Thank you!
I did not try to crunch the numbers but here is a "rent vs buy" calculator.

https://www.nytimes.com/interactive/201 ... lator.html

I would be amazed if renting was not by far a better choice.

One huge factors to also consider is that if you change jobs you could end up with a worse commute from any place you might buy.

runner540
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Re: first house- 1 bedroom vs. 2 bedroom

Post by runner540 » Sun Sep 22, 2019 7:49 am

Watty wrote:
Sat Sep 21, 2019 11:41 pm
A Boglehead wrote:
Sat Sep 21, 2019 12:54 pm
In comparison, rent is about $3K for a 1 bedroom apartment in Mountain View.

What do you think? Thank you!
I did not try to crunch the numbers but here is a "rent vs buy" calculator.

https://www.nytimes.com/interactive/201 ... lator.html

I would be amazed if renting was not by far a better choice.

One huge factors to also consider is that if you change jobs you could end up with a worse commute from any place you might buy.
(assuming the rent and buy 1 BR options are comparable in quality, location) If you can rent something for $3k or buy it for $1MM, RENT RENT RENT. The only way to make the math even close is to assume continued insane appreciation levels. Read this thread viewtopic.php?f=2&t=290989&p=4760794#p4760794

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galving
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Re: first house- 1 bedroom vs. 2 bedroom

Post by galving » Sun Sep 22, 2019 7:53 am

Rent.

fortunefavored
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Re: first house- 1 bedroom vs. 2 bedroom

Post by fortunefavored » Sun Sep 22, 2019 8:15 am

A decade ago I had to make this decision in VHCOL California - I went with the short commute and 1 bedroom. It is paid off and I'm in one-more-year mode.

Commutes have only gotten worse. No regrets. Other variables are more important: how long do you plan to live there, any kids in the future, your future career trajectory, etc etc

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Stinky
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Re: first house- 1 bedroom vs. 2 bedroom

Post by Stinky » Sun Sep 22, 2019 8:24 am

DanMahowny wrote:
Sat Sep 21, 2019 2:34 pm
real estate in SF is textbook example of the "Greater Fool Theory".

People will laugh about this someday.
+1

The prices mentioned here are insane!

I'd definitely rent. I wouldn't be surprised if the next recession (when it comes) will knock such high-priced real estate pretty hard.
It's a GREAT day to be alive - Travis Tritt

Topic Author
A Boglehead
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Re: first house- 1 bedroom vs. 2 bedroom

Post by A Boglehead » Tue Sep 24, 2019 6:39 pm

Lafder wrote:
Sat Sep 21, 2019 8:23 pm
A shorter commute will make you smile every day vs what might happen down the road as far as resale values.

Your "for now" home could become your forever home.

I agree the numbers are funny, if it is one million to buy vs 3k to rent. What is the rental price on an equivalent place you would consider buying?

Another variable..........what is your income and what down payment would you put down?

lafder
The rental price for a $1M 2 BR/2 BA townhouse is $3,575/mo.

My income is $160.5K and I'd put 20% down. I've been at my current job since June, and will have 2 years of employment in the same line of work as of 11/2019.

I could put more down, but want a cushion in case anything happens to my job. I'm thinking of a 30 y mortgage for the same reason; I might end up prepaying some of the mortgage if I can afford it, but want the cushion just in case.

Topic Author
A Boglehead
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Re: first house- 1 bedroom vs. 2 bedroom

Post by A Boglehead » Tue Sep 24, 2019 6:43 pm

michaeljc70 wrote:
Sat Sep 21, 2019 9:12 pm
Is the $3000 apartment to rent in the same area and of the same size/quality/condition as the $1M 1br/1ba? A common problem with these comparisons of rent vs. own is the rental and potential property to buy are vastly different.
Thanks!

The $3K apartment is not as nice as the $1M 1 BR/1 BA.

I feel bad paying $3K in rent; for that much, I want to own.

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A Boglehead
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Re: first house- 1 bedroom vs. 2 bedroom

Post by A Boglehead » Tue Sep 24, 2019 6:47 pm

MathIsMyWayr wrote:
Sat Sep 21, 2019 11:32 pm
Any housing with only 1 bedroom should be considered as a short term solution. If you are comfortable with that concept, a 1 bedroom condo will be fine. But buying a property is a serious business and costs a serious expense when selling soon. Why don't you keep renting for a while?
Thx!

I can continue renting, I just feel bad about spending $3K/mo. on rent. Housing in the Bay Area has doubled in cost in the last 10-15 y, so I'm afraid I won't be able to buy if I don't buy now. However, I realize renting gives more flexibility, as I can move if necessary.

I know there's no easy answer. I really appreciate everyone's input!

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Hector
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Re: first house- 1 bedroom vs. 2 bedroom

Post by Hector » Tue Sep 24, 2019 7:18 pm

What if housing market crashes and wont recover for a decade or two or more?
Would your first house become your forever house then?

mountains
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Re: first house- 1 bedroom vs. 2 bedroom

Post by mountains » Tue Sep 24, 2019 8:32 pm

A Boglehead wrote:
Tue Sep 24, 2019 6:43 pm
michaeljc70 wrote:
Sat Sep 21, 2019 9:12 pm
Is the $3000 apartment to rent in the same area and of the same size/quality/condition as the $1M 1br/1ba? A common problem with these comparisons of rent vs. own is the rental and potential property to buy are vastly different.
Thanks!

The $3K apartment is not as nice as the $1M 1 BR/1 BA.

I feel bad paying $3K in rent; for that much, I want to own.
Run the numbers. The monthly interest(!) on a 800k mortgate at 4% (30year) is about $2666. In addition you'll have property taxes of about 1.1% per year. So that comes out to over $42k per year in money you just pay others for the privilege to own your house. And that doesn't include the additional cost of regular maintenance, repairs, and home owners insurance.

Also, if a short commute is important to you, renting is more flexible. If you change jobs, you can simply rent another place closer to your new place of work.

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A Boglehead
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Re: first house- 1 bedroom vs. 2 bedroom

Post by A Boglehead » Wed Sep 25, 2019 7:15 pm

Hector wrote:
Tue Sep 24, 2019 7:18 pm
What if housing market crashes and wont recover for a decade or two or more?
Would your first house become your forever house then?
Yes, I'm fine with my first house being my forever house. I'm thinking of moving to senior housing when I'm eligible, which should be more affordable.

CnC
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Re: first house- 1 bedroom vs. 2 bedroom

Post by CnC » Wed Sep 25, 2019 7:25 pm

Wow 1 million for a 1 bed 1 bath condo.


Where I live you can buy a 5500 sf home on 10 acres with a few out buildings for that amount.

LittleMaggieMae
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Re: first house- 1 bedroom vs. 2 bedroom

Post by LittleMaggieMae » Wed Sep 25, 2019 9:32 pm

If you go with the 1b/1b - pay attention to it's floor plan, the size of the rooms, and it's location -- does it have some intangible good stuff - like does it have a view? or good light? is it in a quieter area of the building or complex? Sometimes a 1b/1b with good sized rooms, good floor plan, with a nice look out the windows will make a difference in re-sale value. (I personally abhor open floor plans or lofts for 1b/1b - with so little space you want SOME privacy (aka walls) when there's more than just you and your cat/bird/reptile/exotic insects enjoying your home.)

Big Dog
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Re: first house- 1 bedroom vs. 2 bedroom

Post by Big Dog » Wed Sep 25, 2019 10:40 pm

Traffic in the BA is abysmal.

There is only one rule for real estate purchases: Location, Location, Location. (Yeah, I know, that is 3 rules)

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jabberwockOG
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Re: first house- 1 bedroom vs. 2 bedroom

Post by jabberwockOG » Wed Sep 25, 2019 10:49 pm

Renting makes a lot of sense when prices are stupidly high. Being stuck with a 1 million dollar tiny 1 bedroom condo would be pretty bad.

Rent and wait for the next real estate crash. There will most definitely be one, and when it happens buy a 2 bedroom for 40-50% off or more of current prices.

Starfish
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Re: first house- 1 bedroom vs. 2 bedroom

Post by Starfish » Thu Sep 26, 2019 2:04 am

I would disregard opinions of people who don't understand much about real estate market and job market in Bay Area.
It is hard to say what is going to happen but if future is anything like the past earlier you get in the market, better it is. Due to appreciation and Prop 13 all calculations of rent vs buy do not apply.
About the size of the house, while it is great to have a short commute you might be stuck with the house for a while, which makes the larger house a better option.

Starfish
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Re: first house- 1 bedroom vs. 2 bedroom

Post by Starfish » Thu Sep 26, 2019 2:11 am

CnC wrote:
Wed Sep 25, 2019 7:25 pm
Wow 1 million for a 1 bed 1 bath condo.


Where I live you can buy a 5500 sf home on 10 acres with a few out buildings for that amount.
How much does a job pay within walking distance from that house?

runner540
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Re: first house- 1 bedroom vs. 2 bedroom

Post by runner540 » Thu Sep 26, 2019 6:23 am

Starfish wrote:
Thu Sep 26, 2019 2:04 am
I would disregard opinions of people who don't understand much about real estate market and job market in Bay Area.
It is hard to say what is going to happen but if future is anything like the past earlier you get in the market, better it is. Due to appreciation and Prop 13 all calculations of rent vs buy do not apply.
About the size of the house, while it is great to have a short commute you might be stuck with the house for a while, which makes the larger house a better option.
When people start saying that fundamental valuation or economic analysis just "do not apply" to a category of assets, that's a flag for speculation (dot come bubble, bitcoin, etc.)

BogleMelon
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Re: first house- 1 bedroom vs. 2 bedroom

Post by BogleMelon » Thu Sep 26, 2019 8:49 am

A Boglehead wrote:
Sat Sep 21, 2019 12:54 pm
I'm thinking of buying housing in the Bay Area.

One realtor suggested buying a smaller property, in a better location, rather than a bigger one, further away. I think the only thing I can buy for under $1 million in Mountain View, where I work, is a 1 bedroom (BR), 1 bath (BA) condo.

Another realtor recommend buying at least a 2 bedroom/2 bath further away, because it'll be easier to sell than a 1 BR/1 BA. I'll have to deal with traffic, however.

I'd rather spend less and retire early, rather than work longer to support a property.

In comparison, rent is about $3K for a 1 bedroom apartment in Mountain View.

What do you think? Thank you!
Where I live (NJ), decent house rent is almost the same as your area. However, the price of that house is between $350-$400K. In your case, if the house you would pay in rent is only $3000 vs around $750K to buy, I would vote for rent.
Much better financial option: rent a condo or a townhouse. However, sometimes lifestyle could be compromised with these options (noisy neighbors, less privacy...etc)
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

BogleMelon
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Re: first house- 1 bedroom vs. 2 bedroom

Post by BogleMelon » Thu Sep 26, 2019 8:52 am

jabberwockOG wrote:
Wed Sep 25, 2019 10:49 pm
Renting makes a lot of sense when prices are stupidly high. Being stuck with a 1 million dollar tiny 1 bedroom condo would be pretty bad.

Rent and wait for the next real estate crash. There will most definitely be one, and when it happens buy a 2 bedroom for 40-50% off or more of current prices.
Wouldn't that be some kind of market timing? What if the crash happened not during his life? Also what if the prices continue to increase (say 50% more) over the next 5 years, only to crash 30% during the next crash?
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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tc101
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Re: first house- 1 bedroom vs. 2 bedroom

Post by tc101 » Thu Sep 26, 2019 8:55 am

One realtor suggested buying a smaller property,
Another realtor recommend buying at least a 2 bedroom/2 bath
Do not trust realtors any more than you would trust car salesmen. My experience with realtors is that they always tell you what is most profitable to them. Many of them seem to be compulsively dishonest, lying even when there is no advantage to them in telling the particular lie.

The big difference between realtors and car salesmen is that the realtors are more skilled at deception.

Apologies to any honest car or real estate people out there. I am sure there are some totally honest people in these professions, but I think that is rare
. | The most important thing you should know about me is that I am not an expert.

CnC
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Re: first house- 1 bedroom vs. 2 bedroom

Post by CnC » Thu Sep 26, 2019 10:01 am

Starfish wrote:
Thu Sep 26, 2019 2:11 am
CnC wrote:
Wed Sep 25, 2019 7:25 pm
Wow 1 million for a 1 bed 1 bath condo.


Where I live you can buy a 5500 sf home on 10 acres with a few out buildings for that amount.
How much does a job pay within walking distance from that house?
Well considering that house would be in the country being on 10 acres you can't walk to many jobs from it.

But my wife me and I make over 200k combined within 30 min of our house.

CnC
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Re: first house- 1 bedroom vs. 2 bedroom

Post by CnC » Thu Sep 26, 2019 10:43 am

A Boglehead wrote:
Sat Sep 21, 2019 12:54 pm
I'm thinking of buying housing in the Bay Area.

One realtor suggested buying a smaller property, in a better location, rather than a bigger one, further away. I think the only thing I can buy for under $1 million in Mountain View, where I work, is a 1 bedroom (BR), 1 bath (BA) condo.

Another realtor recommend buying at least a 2 bedroom/2 bath further away, because it'll be easier to sell than a 1 BR/1 BA. I'll have to deal with traffic, however.

I'd rather spend less and retire early, rather than work longer to support a property.

In comparison, rent is about $3K for a 1 bedroom apartment in Mountain View.

What do you think? Thank you!

Regardless of the apartment, rent is much smarter. If you put $200,000 down you are likely paying over 5k a month for this house.
You will be out $200,000 right off the bat and pay another $2.2 million over the course of the 30 year loan.

Add in maintenance and repair fees and you will be paying well over 2.5 million for this home.

Unless you have some reason to believe house prices are riding to infinity I can't see this being financially practical.

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sk2101
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Re: first house- 1 bedroom vs. 2 bedroom

Post by sk2101 » Thu Sep 26, 2019 11:26 am

$3K rent vs. $1M buy I'd be renting. Here $1M properties rent for $6-7K.

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Re: first house- 1 bedroom vs. 2 bedroom

Post by bertilak » Thu Sep 26, 2019 11:34 am

FIREchief wrote:
Sat Sep 21, 2019 2:27 pm
I would certainly rent. It sounds like buying would cost more, and there are no guarantees wrt the investment returns. Also, eventually selling a $1M property would likely generate very hefty commissions.
MANY years ago I moved to the Bay Area and had to make the rent/buy decision. As they are today, prices seemed outrageous so I decided to rent. Three years later I had to move back to where I came from.

In those three years Bay Area housing prices doubled. Housing prices in my returned-to area had hardly changed. I could have bought a house outright with profits from a Bay Area resale! Instead I had a new mortgage that followed me around from place to place for years. If I had a "leg up" from a Bay Area resale I'm sure I could have stayed out from under a big mortgages all that time. I paid off my final mortgage just a few years ago.
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Re: first house- 1 bedroom vs. 2 bedroom

Post by randomguy » Thu Sep 26, 2019 11:42 am

Watty wrote:
Sat Sep 21, 2019 11:41 pm
A Boglehead wrote:
Sat Sep 21, 2019 12:54 pm
In comparison, rent is about $3K for a 1 bedroom apartment in Mountain View.

What do you think? Thank you!
I did not try to crunch the numbers but here is a "rent vs buy" calculator.

https://www.nytimes.com/interactive/201 ... lator.html

I would be amazed if renting was not by far a better choice.

One huge factors to also consider is that if you change jobs you could end up with a worse commute from any place you might buy.
I bet over the last 30 years, everyone who picked the buy option has done better than the people who picked the rent option:) Today renting is obviously better. In 10 years when the rent is 6k/month and the apartment sells for 2 million, buying looks brilliant. Obviously the trend will end someday. But people have been saying that for 20 years. :)

I am always hesitant to recommend 1 bedrooms. Way too many peoples personal life situation change over 7-10 years which make living in a 1 bedroom undesirable.

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greg24
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Re: first house- 1 bedroom vs. 2 bedroom

Post by greg24 » Thu Sep 26, 2019 12:32 pm

CnC wrote:
Thu Sep 26, 2019 10:43 am
Regardless of the apartment, rent is much smarter. If you put $200,000 down you are likely paying over 5k a month for this house.

You will be out $200,000 right off the bat and pay another $2.2 million over the course of the 30 year loan.
If renting, they'd pay $1.08M in the same span. Only IF their rent never went up. More likely they're paying $1.5M+ in rent.

CnC
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Re: first house- 1 bedroom vs. 2 bedroom

Post by CnC » Thu Sep 26, 2019 2:26 pm

greg24 wrote:
Thu Sep 26, 2019 12:32 pm
CnC wrote:
Thu Sep 26, 2019 10:43 am
Regardless of the apartment, rent is much smarter. If you put $200,000 down you are likely paying over 5k a month for this house.

You will be out $200,000 right off the bat and pay another $2.2 million over the course of the 30 year loan.
If renting, they'd pay $1.08M in the same span. Only IF their rent never went up. More likely they're paying $1.5M+ in rent.
Yep and they would have ±1mil extra that they could invest over that time period. They 1 mil should be 3-4 by the time 30 years are done.

CnC
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Re: first house- 1 bedroom vs. 2 bedroom

Post by CnC » Thu Sep 26, 2019 2:43 pm

bertilak wrote:
Thu Sep 26, 2019 11:34 am
FIREchief wrote:
Sat Sep 21, 2019 2:27 pm
I would certainly rent. It sounds like buying would cost more, and there are no guarantees wrt the investment returns. Also, eventually selling a $1M property would likely generate very hefty commissions.
MANY years ago I moved to the Bay Area and had to make the rent/buy decision. As they are today, prices seemed outrageous so I decided to rent. Three years later I had to move back to where I came from.

In those three years Bay Area housing prices doubled. Housing prices in my returned-to area had hardly changed. I could have bought a house outright with profits from a Bay Area resale! Instead I had a new mortgage that followed me around from place to place for years. If I had a "leg up" from a Bay Area resale I'm sure I could have stayed out from under a big mortgages all that time. I paid off my final mortgage just a few years ago.
And if you spent 1 months rent on Bitcoin in 2015 you could retire and never work another day in your life.

If you assume that since prices have went parabolic they will continue to do so for ever good luck.

Real example here:
It's like me saying Amazon tripled in price since I bought it. So the smart money is on putting all your money in it because it will clearly triple again.

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AerialWombat
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Re: first house- 1 bedroom vs. 2 bedroom

Post by AerialWombat » Thu Sep 26, 2019 3:04 pm

I think it's patently ridiculous to even think about spending that kind of dough on a condo.

For now, rent.

Then, eventually, move away. Get the heck out of the Bay Area and go someplace where real estate prices aren't insane.
“Life doesn’t come with a warranty.” -Michael LeBoeuf

surfstar
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Re: first house- 1 bedroom vs. 2 bedroom

Post by surfstar » Thu Sep 26, 2019 3:19 pm

A Boglehead wrote:
Tue Sep 24, 2019 6:39 pm
Lafder wrote:
Sat Sep 21, 2019 8:23 pm
A shorter commute will make you smile every day vs what might happen down the road as far as resale values.

Your "for now" home could become your forever home.

I agree the numbers are funny, if it is one million to buy vs 3k to rent. What is the rental price on an equivalent place you would consider buying?

Another variable..........what is your income and what down payment would you put down?

lafder
The rental price for a $1M 2 BR/2 BA townhouse is $3,575/mo.
Get a roommate - $1800/mo each. Save/invest the difference. Revisit buying after next housing crash. If that never happens, retire earlier to a lower COL area. Win, win, win. (partial loose if you hate roommates)

Starfish
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Re: first house- 1 bedroom vs. 2 bedroom

Post by Starfish » Thu Sep 26, 2019 4:34 pm

runner540 wrote:
Thu Sep 26, 2019 6:23 am
Starfish wrote:
Thu Sep 26, 2019 2:04 am
I would disregard opinions of people who don't understand much about real estate market and job market in Bay Area.
It is hard to say what is going to happen but if future is anything like the past earlier you get in the market, better it is. Due to appreciation and Prop 13 all calculations of rent vs buy do not apply.
About the size of the house, while it is great to have a short commute you might be stuck with the house for a while, which makes the larger house a better option.
When people start saying that fundamental valuation or economic analysis just "do not apply" to a category of assets, that's a flag for speculation (dot come bubble, bitcoin, etc.)
Of course they apply, but one has to consider all the facts.

Unfortunately housing market in BA has this problem, it's risky either way, if you do it or not. Chose your poison.
Until now renting instead of buying have had very large costs.
The optimum way to buy a house here until now was to buy your final house as early as possible.
Last edited by Starfish on Thu Sep 26, 2019 5:22 pm, edited 1 time in total.

Starfish
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Re: first house- 1 bedroom vs. 2 bedroom

Post by Starfish » Thu Sep 26, 2019 5:19 pm

CnC wrote:
Thu Sep 26, 2019 10:01 am
Starfish wrote:
Thu Sep 26, 2019 2:11 am
CnC wrote:
Wed Sep 25, 2019 7:25 pm
Wow 1 million for a 1 bed 1 bath condo.


Where I live you can buy a 5500 sf home on 10 acres with a few out buildings for that amount.
How much does a job pay within walking distance from that house?
Well considering that house would be in the country being on 10 acres you can't walk to many jobs from it.

But my wife me and I make over 200k combined within 30 min of our house.
Then that house has much less value than a condo in a walkable area next to 3-500k jobs.

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