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/biz/ - Business & Finance


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1425101 No.1425101 [Reply] [Original]

My girl and I are sciency fucks making $230k/yr gross together (~$150k/yr net cash in the bank). We don't spend a lot of money and currently live in a shitty one bedroom. We have saved up ~$230k cash in the bank (inb4 retards for not investing before, i know).

Anyway, we've been studying the housing market in our area for like 3 years and recently decided to actually actively look. After much pickiness we found a $600k house that is perfect for us but we may want to put in a pool (~$50k). This is by far the biggest purchase of our lives and we are both nervous as fuck.

We totally googled/stalked the neighbors (pretty much the exact same property) and they are like insanely talented people. Guy is a PhD engineer from MIT working in oil and gas and the wife is a PhD in Biology(?) from Princeton with a MBA from Stanford, don't know what she does though. Also they both seem to be about 10 to 15 years older than us.

So my question is: are we in way over our heads? Is this level of housing really for people with a lot more money?

>> No.1425106

>>1425101
Yea dude, I totally know everything I need to know about your financial situation including credit, debt, and other expenses.

>> No.1425119

>>1425106
>credit: 790
>debt: $0
>expenses: $5k/month

>> No.1425123

>>1425101
what the fuck is wrong with you?

>oh it's b8
but what's the point of this b8?
>there doesn't have to be a point
oh...

>> No.1425124

>>1425101
You'll be fine, with that kind of income.
You might want to say fuck it on the pool, though.
They're real money sinks, and the bitch is that they only add value to your property for the people that want them, which is fewer than you'd expect.

>> No.1425140

>>1425119
What will be the expected cost of upkeep/maintenance? (including the pool if you want)
Have you gotten any mortgage/insurance quotes to see what your expected monthly payments will be?
If you have an HOA will they add any additional things to your recurring costs?

>> No.1425433

Landlord here. I can't tell if you can afford it or not without more information. Assuming minimal/no debt, with that income, the answer should be that you can easily afford it, but if you splurge on stupid shit all the time, or have hundreds of thousands in college debt, you might not be able to.

Just a word of advice from someone who runs financials on houses professionally. You have no fucking clue what you are doing. Seriously. You don't. I don't say this to be disrespectful. Fuck, I've been doing this for going on 2 decades and I still only barely have some semblance of a fucking clue. The point is, you need to hire professionals to run through everything in that house with a fine toothed comb. You want to know this house better than the owner before you commit to buying it. If there's anything fishy, or anyone working with/for the seller gets catty, be ready to walk away.

How you go about making the offer is up to you. Generally you put earnest money into escrow. Get a real estate lawyer to handle your closings, and have them draft up a contract that gives you options to walk away with your earnest money if you find problems with the house. Pay for a comprehensive inspection from a licensed/bonded inspector. Get complete comprehensive title searches. Find out about every easement, every lien, HoAs, and zoning/constrtuction permit. Find out about floodplains, fire hazards, and any other insurance risk. Never cheap out on these things. These are your leverage.

>> No.1425435

>>1425433
Once they are under contract, you both have fixed timelines to work with. The seller wants to get done quickly, and you can compel them to act in your interest with a solid contract. If there's problems, the owner has to address them, or they lose the sale, lose the earnest money, and several months of their house being on the market while being unable to be shown (good contracts have exclusivity clauses). You can even put late fines in the contract so they get less from the sale if they drag their feet on fixing something like a plumbing problem, or an infestation. If they refuse to sell to you after racking up fines, you can sue them and get a court order compelling the sale. Your contract is the piece of paper that binds them to you. It's easily worth spending several thousand on this alone.

There's so much stupid shit to cover. Dumb stuff like if they've recently painted, ask what type of paint, and ask for receipts. If they can't or won't provide receipts, assume they used supremely shitty paint and that you will have to repaint in a few years. Do this for any new work in the building. Make sure any fresh looking pieces on the foundation aren't cheaply patched cracks. See if they have dehumidifiers running to prevent moisture in the basement/attic. See if there's any saggy ceilings, or limited stretches of fresh paint to obscure water damage. Good inspectors will catch most of these in a hurry, but it never hurts to look yourself, and compare notes with your inspector.

Become a Chinese tourist. Go through the house with a good camera and take pictures of asbolutely everything. Do walkthrough inspections with pictures the day you go under contract, and the day you close. If the condition of the house changes from when you go under contract, and when you close, walk away. Don't argue. Don't get guilted into it. Tell them that this must be resolved, or you can and will walk. Put the fire under their ass instead of letting them pressure you.

>> No.1425436

>>1425435
There will be things uncovered. There will be negotiations. Don't be surprised if things drag out for several months. Be reasonable, but don't get taken for a ride. There's a lot of really shitty people in my field. As I like to put it, realtors are used car salesmen selling things that can't even roll of the lot. Cover your ass, and spend money in protecting that ass. If it's a good choice to buy, and it's what you want, it's worth a few thousand dollars. If it's a bad choice to buy, a few thousand dollars save you from hundreds of thousands of dollars.

Good luck.

>> No.1425545

>>1425433
>>1425435
>>1425436
Thanks for this.

>> No.1425591

>>1425435
>Good inspectors will catch most of these in a hurry

I've yet to meet a "good inspector" in over thirty years, the best of which wouldn't notice spotty painting over wet spots on their best day. Do these actually exist? Absolutely useless fucks in collusion with the banks, they are.

>> No.1425593

why are you spending 5k a month?

>> No.1425612

>>1425101
Have you talked to a bank and preapproved for a loan? That should be step 1. Ultimately the bank is the one loaning you money and will decide your price range (you can't buy a 600k house if they're only going to loan you 250k after all).

Go to a few open houses. Talk to the realtor at each one. Get some referals for realtors from your coworkers. Decide which realtor you like and have them be your buyers agent. Don't sign an exclusivity contract or pay them anything but be exclusive none the less as its the proper thing to do. You can still look on your own and all too. If you see one thats promising tell your realtor about it and she will set up the showing and all.

But the most helpful thing about a buyers agent is that they will write the offer and all that. You could hire a lawyer but a buyers agent realtor is still paid by the seller. The sellers agent and buyers agent typically split the commission... so they do have a vested interest in closing the sale. In my case that meant they both took a reduced commission to get the price to an agreeable level. But a scumbag might pressure you into taking a bad offer or something (and that's why your not working with a scumbag).

>> No.1425652

OP here,

>>1425124
I grew up a bit poor and was always jelly of people who had a pool in their house. I've never lived in a house with a pool (or even in an apt with access to one) so it's just one of those things that I just want for myself. It's irrational, I know. But I take it as a cost, not an investment.

>>1425140
I have calculated that my monthly mortgage payment should be around $4,200 including tax and home insurance. We are definitely putting 20% down to avlid the mortgage insurance. We expect that our total expenses monthly, including mortgage and money alloted for maintenance will be around $10,500. We can definitely tighten this down to about $8,000 if necessary.

>>1425433
Thank you so much!! I will be the first to admit that I don't know so many things about this. But I am definitely willing to learn if I just know what it is that I dont know. I have built a crazy excel spreadsheet and matlab code with all my financial info and putting in multiple scenarios (we stay in the apt, we buy, we buy and lose one of our jobs, we buy and tighten our spending) and in all of them we seem to be ok. But the key is the unknown unknowns. I will definitely reaearch everything I can about this house over the weekend and prepare to negotiate. And PLEASE let me know if you think of anything else to keep in mind or if there's some sort of book/guide to this shit! THANK YOU!

>>1425593
Well we included things like vacations we take through the year and divided it by 12, and all sorts of other one-tine stuff just spread out over the year. But in general, it's because we spend too much on dumb shit like eating out. So we can totally tighten up our spending if necessary.

>> No.1425662

OP here

>>1425612
We got prequalified by a lending house thing for $700k. We think that's above what we can comfortably afford, though. We have a realtor who is well recommended, but im a bit nervous that we just have to cross our fingers and hope he knows what he's doing and is working on our behalf.

>> No.1425691 [DELETED] 

>>1425101
You can easily afford it but if I were you I'd put down a large down payment and get a 30 year loan but pay it off 5 - 10. Make sure it's not one of those mortgages that DOESN'T have penalties for early repayment. Why am I telling you to do this? Simple, lower monthly payments so you'll have breathing room for daily life as well as other fees from house ownership: insurance, taxes, etc. You really never know how long your jobs will last.

>> No.1425695

>>1425101
You can easily afford it but if I were you I'd put down a large down payment and get a 30 year loan but pay it off 5 - 10. Make sure it's one of those mortgages that DOESN'T have penalties for early repayment. Why am I telling you to do this? Simple, lower monthly payments so you'll have breathing room for daily life as well as other fees from house ownership: insurance, taxes, etc. You really never know how long your jobs will last.

>> No.1425714

>>1425101
>making decent money
>not knowing simple economics
yes you can afford it

>> No.1425752

>>1425101
If you're really uncomfortable, just save the money first. If you're really making $230k, you should be able to save up a few gs pretty quickly.

>> No.1425784

you both have a great income. Why not save up a little more and alleviate some of your worries? How long did it take to save up the 230k?

>> No.1425786

>>1425123
This

>> No.1426050

>>1425652
>always jelly of people who had a pool in their house
I was too, and now I barely use the one I have.

Maybe find a house that has one already, that way you don't have to shell out for the build.

>> No.1426081

>>1425652

you can afford it.

i suspect you'd beat the loan by waiting a year or two, but who gives a shit if that's the home you really want.

you should both have budgets though, or at least a joint one that you update at least once a month.

2.5k isn't bad per person, but you can probably cut it quite a bit without sacrificing any quality of life.

those people have accrued wealth. their baseline isn't huge.

>> No.1426377

>>1425101
How fucking sad. I qualified for a $700,000 loan back when I was earning $105,000 in Australia.

American's earning $230,000 who want to live next to PhD educated people worry if they can afford $600,000, only $450,000 or so being an actual home loan.

How fucking sad.

You know a $450,000 loan is less than $2,500 per month in repayments with 30 years @ 5%?

So your salary combines is almost $20,000 per month and you worry you can't afford $2,500?

How fucking sad.

>> No.1426385

>>1426377
And not to mention how pathetic to be so well educated, "PhD engineer from MIT... PhD in biology from Princeton and MBA Stanford", yet they live in a $600,000 neighbourhood

What is the fucking point of trying in America if that level of job/salary/education gets you just 1 step above trailer?

>> No.1426409

>>1425591
There are different degrees of inspection. A standard home inspection mostly focuses on things being up to code and very obvious flaws. There are upgraded services you can ask for but almost nobody does.

That said I probably just wouldn't sell if the buyer wants too much work done. Different sellers have different time horizons but most sellers are probably going to tell you to fuck off once you start nitpicking $250 repairs. Housing markets also aren't infinite so you may only have a few options to begin with. Alienating a seller because of paint quality would be a stupid reason to miss out on a deal.

>> No.1426425

>>1426409
>There are upgraded services
I should've gone with this.
Instead, my inspector missed half the shady shit the sellers pulled.

>> No.1426451

>>1426425
Honestly unless a home is less than 10 years old you should just expect to spend about 5% of the home's value on repairs and minor upgrades.

>> No.1426501

>>1426451
>repairs and minor upgrades
I'm accomplishing this by multiple renovations.
Fucking expensive.

>> No.1426510

>>1426385
I don't think you realize how nice of a house you can buy for 600K in America.

>> No.1426554

>>1426510
I do. I'm a tri-citizen. Euro, Australia, USA and currently live in USA. Also own a home in Australia. I know a lot.

>> No.1426565

>>1426501
Yeah, upgrading older homes to a more modern "open" design and redoing bathrooms & kitchens are major pains in the ass.

So far I've been lucky enough to get away with having to install radon mitigation, a couple hot water heaters, and some relatively extensive landscaping.

Radon testing is a big one. If you're cruising around the neighborhood/town and you see people have them make sure to get your living areas tested. This thought process can also point you toward problem areas on any house that was built in a development. Typically developments are just a bunch of similar houses so if you see that every other house has upgraded their front entryway to concrete/brick steps and you still have the original wood you might want to take note. I ended up having to do some extensive deck work because the people who built our development didn't use galvanized decking screws.

>> No.1426590

>>1426565
>radon mitigation
Lucky on this, basements are a rarity here.

>extensive deck work
I had a friend who replaced his decking with Trex.
When it collapsed, he found out it was never attached to the house.

>> No.1426624

>>1425591
That's what a fully bonded and insured one is for. It's easier for me because I work with a handful of extremely good ones, who know what I want. For people who aren't doing it professionally, just make sure he has all his documents in order for insurance, licenses, etc. It varies by state, and sometimes even city. The benefits are immense though.

Say he misses something major like water damage, or a settling/cracking foundation.. Your contract with him makes him liable for his fuckup. You get several general contractors in to give you estimates, and write up notes, then you send him a demand letter. He contacts his insurance, and they will pay you out (meaning you actually get something). If he doesn't contact his insurance, or if he does and his insurance is not cooperating with you, you sue him, and his insurance is required to defend him. If your ducks are in a row, they usually settle before you ever go to court. I've been to court maybe twice in the dozens of times I had to sue over this issue. The demand letter from your lawyer is a warning shot. Most of the time they cave within a day or two once they get served. Court is expensive, and if you and your lawyer have ample proof, they know they will lose.

Not only do you get a high quality inspection, you have an easy time collecting. The only drawback is that sometimes you have to put in 50,000 before you get your money returned, both in repairs, and legal fees. It's not perfect, since you usually have to pay before you get paid back, but it's better than just putting that money in and having no recourse.

Sometimes the inspector gets shit on by his insurance. That's not my problem. He should have done his job correctly in the first place.

TL;DR document document document. Have pieces of paper making it someone else's fault if they are negligent. Have proof, usually lots of pictures, and some professional estimates, proving that they were neglectful. Never get stuck holding the bag.

>> No.1426703

>>1425652
For the pool, if you aren't sure about it, start with an above ground pool. Invest in monstrously overkill pump and filtration equipment, and then you can just reuse that if you decide you want to upgrade to a proper in-ground pool.

I'd personally wait on the pool for a few years, and I'd get an extensive survey done to make absolutely 100% sure that you aren't going to fuck up your water table at all. I've seen so many basements turned into swamps because someone put in an underground pool and didn't account for how drainage would work when they effectively put a schoolbus sized obstruction in the way. It's way easier, and cheaper, to put in a proper french drain while your building the pool instead of after the fact.

> I will definitely reaearch everything I can about this house over the weekend and prepare to negotiate. And PLEASE let me know if you think of anything else to keep in mind or if there's some sort of book/guide to this shit! THANK YOU!

Honestly. If you aren't doing this professionally, it's not worth your time to learn too much. Sure, I can tell you about horror stories involving stuff like Chinese drywall, and all sorts of other things. The problem is that many problems are region specific, and most of them will be caught by even a rudimentary inspection. There are practically zero houses that have nothing wrong with them. Conversely, there aren't many houses that have enormous issues either.

>> No.1426730

>>1426510
>>1426554

All depends on location. If you are anywhere not located in a major city like LA or NYC then 600k is fucking prime real estate and you'll be living at the top of your area. But here in LA, you'd be lucky to find any property at all for 600k in my area, median range is closer to 800k-1.2mil.

All relative. Nobody gives a shit about your tri-citizenship, you obviously don't know what you're talking about.

>> No.1426731

>>1426703
Somethings to look out for is going to be long term operating/ownership costs. Shitty non insulated windows, and crappy insulation are going to costs you hundreds/thousands every year. Is the roof very complex? That's going to be a few extra thousand to have it reroofed. Maybe it's worth the labor costs to buy much higher end shingles so you don't have to think about it again for 30 years. Consider asking if your inspector can take a square out of the sheetrock to see what the insulation is like. That's a cheap and easy repair, for some important information, especially if you wanted to repaint anyways.

Spending a lot up front to rip out the exterior walls and properly insulate your entire house, and putting in high grade windows is worth it.

If it's an old house, you might have knob and tube wiring. Not only is that shit an extreme fire hazard, but replacing any of it means you have to replace everything due to outlets being hooked up to lights and other shit. It involves ripping out walls half the time. That's an annoyance, but its reasonable. Most electrical systems have at least something funky with them. It's worth seeing how the kitchen is hooked up because you don't want to trip a breaker when you run the microwave and the mixer at the same time.

>> No.1426734

>>1426730
Exactly this.

>> No.1426765

>>1426730
>here in LA
Valley or Basin?

>> No.1426782

>>1426730
>you obviously don't know what you're talking about
Elaborate on how I know nothing.

Fuck knows why "b..b..but $600k gets a nice home" came up when the income to home value ration is the actual topic being discussed.

Your entire premise is misguided.

Nice or shit is irrelevant. The fact is someone earning $200k+ should not have to slum it in a $600k house unless they were deliberately living well below their means.

The fact is also that a couple who have PhD's from prestigious universities and seemingly fantastic careers should not have a $600k house, they should be rewarded for their achievement.

Laughable, really.

>> No.1426787

Damn OP, you're in /biz/

Disregard the house, and buy a multi-family unit for that amount. Some units can bring in another 40-60k in income after expenses

>> No.1426793

Hey while We're at it, what kind of house can I afford on a 40-50k income?

I was thinking around 200-300k.

>> No.1426833

>>1426793
City?

>> No.1426851

>>1426782
How do you know that's the only house they own? Why do you assume they care? Who's to say they don't spend 8 months of the year on vacation? You sound like the typical middle class idiot buying shit at the limits of their means.

Just because you are a good goy doesn't mean the rest of the world thinks the way you do.

>> No.1426852

>>1425101
You can easily afford it with your combined salaries. One thing to consider though would be how tough it would be to make the payments if one of you was out of work for awhile for whatever reason (injury, baby, economy, etc.). You could certainly afford the payment on 50% of your current combined income, but it would greatly reduce your ability to save.

>> No.1426861

>>1426782
600k can buy a pretty nice place in most suburbs and small towns. There's also significant diminishing returns as a couple upgrades their living arrangements. A 600k house is not going to be twice as good as a 300k house. . . likely it will have the same features with a little more square footage, a better floor plan, better materials, and a slightly better neighborhood. The benefits are likely to be very marginal. Justifying spending even more requires the buyer to have very specific criteria because 1 million+ dollar homes are often custom built.

Also, this might shock you to find this out but here it is: Most places don't have a glut of $600k+ houses on the market. In some areas that couple would represent the top 1% of earners in the area and their income bracket is simply not catered to in the housing market. I'm in this situation currently. If I wanted a nicer house I would have to build one and I'm not willing to build a house to live in it for the 3 years I'm at this position.

>> No.1426884

>>1426861
>A 600k house is not going to be twice as good as a 300k house
It might even be the same, just in a better area.
The homes here are whacked out expensive, but not really impressive to see.

>> No.1426926

OP here, sorry switching from laptop, to phone, to laptop

>>1425695
Well, we are pretty good savers. It's not like if we don't put it in the house up front we're going to spend it on stupid shit. We'll probably keep it either in cash or think of something slightly better to do with it (ira?)

>>1425752
>>1425784
I don't think I'm uncomfortable, I'm just nervous. Based on my calculations, this should not be a big deal, but my fear is that I'm not considering something major either with this purchase or with the consequences of making this purchase.

>>1426050
I live in a really hot city. I will use the absolute shit out of this pool.

>>1426081
We do have budgets and very aware about where our money goes. We typically go through it every 3 or so months. We are pretty consistent. Can you explain this a bit more: "those people have accrued wealth. their baseline isn't huge."?

>>1426377
It's a nice house in a nice city. I understand that we could buy a fucking mansion if we moved to idaho or whatever, but that's not the point. Also, every number in your calculation is wrong in the same direction.

>>1426409
Right now, we are at a rare point where, for our price range, it is a buyers market. So we intend to be a bit aggressive with the negotiation. Thanks for the heads up on the inspections, I'll definintely look into this!

>>1426624
Interesting! Thanks!

>>1426703
Yeah, I think we'll wait a year or so on the pool just to be sure that everything with the house is in order before going through our cash. Also, no basements here so that shouldn't be a problem. Regardless, one of our neighbors (in the current apt) builds pools for rich people in the area so I'm definitely going to ask him for advice, budgets, and what to look out for. And you're right, I may not need to learn about all these issues, but I should at least get myself a good inspector. Thanks again!

>>1426731
This is really good advice. I will definitely take stuff like this into consideration.

>> No.1427055

>>1426851
>You sound like the typical middle class idiot buying shit at the limits of their means.
Your assumptions are wrong m8 and it's pathetic how fiercely you're defending the great American dream. You're still fixating on "bawww $600k is a nice house!" what that's not even what I'm disputing. I'm disputing the fact that someone earning over $200k is 'worried' they can't afford a $600,000 house when the repayments are only going to be about 15% of their income.

>> No.1427109
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1427109

>>1427055
>You're still fixating on "bawww $600k is a nice house!" what that's not even what I'm disputing.

>And not to mention how pathetic to be so well educated, "PhD engineer from MIT... PhD in biology from Princeton and MBA Stanford", yet they live in a $600,000 neighbourhood
>What is the fucking point of trying in America if that level of job/salary/education gets you just 1 step above trailer?

>> No.1427296

>buying a house with a whore you're not married to

lel have fun splitting things up after you break up

>> No.1427321

>>1427296
Create a contract, and keep track of how much who's paid. You can even include provisions for how to handle buyouts, down to having mutually agreed upon payment plans.

Really simple to untangle if you get it sorted out ahead of time. The problem is that most people don't.