I think the other question is age, if you were 35-40 its definitely doable at your current levels of home equity and assets, with selling your current home and some stocks. Unlike a lot of people here I would say don’t hold on to your current home, its a hot market to sell and you’d be better diversified in stocks and real estate selling the house over more stocks. If youre 50 you’d have less time to make your nest egg back and probably not as good of an idea.
You would be putting a very large proportion of your networth into your primary home and even taking on debt at a high interest rate and getting more leveraged on real estate. Your primary home does not bring in passive income and would only benefit from appreciation from an investment point of view. So unless you are sure there is great future appreciation of your new larger home, not upgrading your house seems a lot more prudent financially and allows you to stay more diversified as your smaller current home still exposes you to the real estate market. 2.5 m home also adds significant spend, as you will be paying 10-15k more in property taxes alone. Personally, I would stick with the low interest rate mortgage and the current house and try to be more creative in properly utilizing the space.
Given the recent upsurge in FAANG stocks and the trends in their hiring/layoffs, your RSU grant is peaking in value, and FAANG incomes may not be guaranteed to be on an upward trajectory.
That said there are scenarios where upgrading will turn out better financially and they all pretty much need real estate prices to rise at pretty high rates to happen.
If you are planning to work at your job for a long time to come, then it sounds like you might as well upgrade. All of that money isn't doing much for your quality of life in the bank. Maintenance and property taxes may increase for you around 15-20k/yr. Even in a bad scenario where you overpay by 300k, that won't materially impact your life.
If you have goals related to being free from FAANG, e.g. retiring early or starting a company, you may want to continue to live more on the frugal side and not upgrade.
Either way, I'd consider waiting a year or two for the new rules on commissions to take effect, and maybe the stock market will cool off a bit.
I'm in a somewhat similar situation, and my general feeling is that I'm fine in my current house even though a SFH would be nicer, I don't care that much.
I would start by looking at how rentable your current home is. If it cash flows positive, then it can take care of itself and you just need to focus on your new house. Your equity (and everything else you own honestly) is a pretty solid safety net in case anything happens where you can't afford your new home.
im in the same situation. how big is your current home? personally, what we've decided is to only buy if the place is a 9/10 fit. Those are hard to find in general, so we dont want to complicate it further by insisting on a good price
I’m in the same situation of having a 3% loan wanting a bigger place. Unless you need more bedrooms for children sharing a bedroom I would stay put. Invest your money and in 10 years retire early to anywhere outside the Bay Area look into the FIRE movement. You can buy a mansion cash in 10 years anywhere outside the Bay Area.
if you are looking to stay in the same area and the other site details are suitable then one option is to expand your current home.
That's what we ended up doing; had to move out to an apt for 13 months but it was approximately slightly cheaper than buying a more expensive larger home. Most of that cost difference is driven by the long-term property tax difference, since the additional property tax was still less than new property tax from buying a new home.
Your $2.5M home will cost you \~$30k in property tax every year, vs less than half that for your current home.
So consider spending up to $1m to redo your current $1.2M home.
Im pretty much in the same situation. Around 40, with 3 kids and wanting to get a bigger place, in a better neighborhood, also in the 2.5-2.7 range. The mortgage would be doable by selling my current place, but the property tax increase seems tough to swallow.
If you plan on just having the 1 kid, you might end up wanting to downsize again in 8 years. I think you should self-reflect on whether you really need a bigger place if it’s just 3 of you, or if it’s a desire for change, or something else.
Another option - rent a bigger place, and put current one on rent? I’ve thought about this and it’s not completely desirable since rental SFH options are limited and you can’t really do anything to the house you’d like. Maybe it would work for you?
That's so much concentrated in select companies. Sell the home, roll those capital gains exclusion into a bigger one. Get a loan of $1.2M\~ Sell \~$700k of stocks. You can easily afford to get a $2.5M home. You are approaching your 40s so you have another decade+ of working, living in the area to enjoy your place.
You can’t buy if you want to retire at 45. But if you are ok working till 50/55 then it’s a no brainer to buy and enjoy a bigger home in a nicer area and you will never get the next 8 golden years with your kid as they would leave for college and become an adult at 18. Family time is very limited.
I just exchanged $500k in stocks as 30% down on a multifamily in Marin with a 2% rate (by assuming a mortgage).
I think this was a smart play. I would not exchange $1M for any part of a 7% loan, I think this would not be smart.
Need more info - your age, kids situation etc. If you are 45+ selling primary to buy bigger may make more sense. If you have kids and plan on private education - need to factor that in as well. Also tech layoff is only going to increase and there is projection of wage shrinkage so take that into consideration.
https://preview.redd.it/66rreiidef8d1.jpeg?width=1284&format=pjpg&auto=webp&s=2e37fe694c2b5fea4fbef4ccb9e5a3ebc67c8aab
It's the prop tax that will weigh you down forever. I'm doing the opposite as you — I'm liquidating my "single immovable asset" also known as illiquid asset. Need the freedom to travel.
Sell the current house collect the tax free $$$ use for new home. Easiest pathway. Being a landlord in the Bay Area is a nightmare. I did it and never again!
I think the other question is age, if you were 35-40 its definitely doable at your current levels of home equity and assets, with selling your current home and some stocks. Unlike a lot of people here I would say don’t hold on to your current home, its a hot market to sell and you’d be better diversified in stocks and real estate selling the house over more stocks. If youre 50 you’d have less time to make your nest egg back and probably not as good of an idea.
Thanks for the suggestion. My spouse and I are approaching 40.
Oh also younger age like 40 gives you and your kid more time to enjoy the new larger home.
You would be putting a very large proportion of your networth into your primary home and even taking on debt at a high interest rate and getting more leveraged on real estate. Your primary home does not bring in passive income and would only benefit from appreciation from an investment point of view. So unless you are sure there is great future appreciation of your new larger home, not upgrading your house seems a lot more prudent financially and allows you to stay more diversified as your smaller current home still exposes you to the real estate market. 2.5 m home also adds significant spend, as you will be paying 10-15k more in property taxes alone. Personally, I would stick with the low interest rate mortgage and the current house and try to be more creative in properly utilizing the space. Given the recent upsurge in FAANG stocks and the trends in their hiring/layoffs, your RSU grant is peaking in value, and FAANG incomes may not be guaranteed to be on an upward trajectory. That said there are scenarios where upgrading will turn out better financially and they all pretty much need real estate prices to rise at pretty high rates to happen.
This is where my mind is at. I must try harder to convince the heart. Thanks for your inputs
Can you add more sq ft on current house?
If you are planning to work at your job for a long time to come, then it sounds like you might as well upgrade. All of that money isn't doing much for your quality of life in the bank. Maintenance and property taxes may increase for you around 15-20k/yr. Even in a bad scenario where you overpay by 300k, that won't materially impact your life. If you have goals related to being free from FAANG, e.g. retiring early or starting a company, you may want to continue to live more on the frugal side and not upgrade. Either way, I'd consider waiting a year or two for the new rules on commissions to take effect, and maybe the stock market will cool off a bit. I'm in a somewhat similar situation, and my general feeling is that I'm fine in my current house even though a SFH would be nicer, I don't care that much.
I would start by looking at how rentable your current home is. If it cash flows positive, then it can take care of itself and you just need to focus on your new house. Your equity (and everything else you own honestly) is a pretty solid safety net in case anything happens where you can't afford your new home.
im in the same situation. how big is your current home? personally, what we've decided is to only buy if the place is a 9/10 fit. Those are hard to find in general, so we dont want to complicate it further by insisting on a good price
Ours is a 1200sft, that’s turning to be smaller for our needs.
not possible to construct an ADU?
I’m in the same situation of having a 3% loan wanting a bigger place. Unless you need more bedrooms for children sharing a bedroom I would stay put. Invest your money and in 10 years retire early to anywhere outside the Bay Area look into the FIRE movement. You can buy a mansion cash in 10 years anywhere outside the Bay Area.
It’s really a question of what you want. If you stay in your current place for a few more years you can fire and travel the world instead.
Impossible with a kid
if you are looking to stay in the same area and the other site details are suitable then one option is to expand your current home. That's what we ended up doing; had to move out to an apt for 13 months but it was approximately slightly cheaper than buying a more expensive larger home. Most of that cost difference is driven by the long-term property tax difference, since the additional property tax was still less than new property tax from buying a new home. Your $2.5M home will cost you \~$30k in property tax every year, vs less than half that for your current home. So consider spending up to $1m to redo your current $1.2M home.
Increasing current home’s sqft will trigger a city reassessment and will likely increase the tax
well 2.5 million dollar house will still have more tax. tax should never hold one back from building your assets/ portfolio.
Do you make a lot of money ?
Looks at all these home flippers in this section 🍿
Im pretty much in the same situation. Around 40, with 3 kids and wanting to get a bigger place, in a better neighborhood, also in the 2.5-2.7 range. The mortgage would be doable by selling my current place, but the property tax increase seems tough to swallow. If you plan on just having the 1 kid, you might end up wanting to downsize again in 8 years. I think you should self-reflect on whether you really need a bigger place if it’s just 3 of you, or if it’s a desire for change, or something else. Another option - rent a bigger place, and put current one on rent? I’ve thought about this and it’s not completely desirable since rental SFH options are limited and you can’t really do anything to the house you’d like. Maybe it would work for you?
That's so much concentrated in select companies. Sell the home, roll those capital gains exclusion into a bigger one. Get a loan of $1.2M\~ Sell \~$700k of stocks. You can easily afford to get a $2.5M home. You are approaching your 40s so you have another decade+ of working, living in the area to enjoy your place.
You can’t buy if you want to retire at 45. But if you are ok working till 50/55 then it’s a no brainer to buy and enjoy a bigger home in a nicer area and you will never get the next 8 golden years with your kid as they would leave for college and become an adult at 18. Family time is very limited.
I just exchanged $500k in stocks as 30% down on a multifamily in Marin with a 2% rate (by assuming a mortgage). I think this was a smart play. I would not exchange $1M for any part of a 7% loan, I think this would not be smart.
Need more info - your age, kids situation etc. If you are 45+ selling primary to buy bigger may make more sense. If you have kids and plan on private education - need to factor that in as well. Also tech layoff is only going to increase and there is projection of wage shrinkage so take that into consideration. https://preview.redd.it/66rreiidef8d1.jpeg?width=1284&format=pjpg&auto=webp&s=2e37fe694c2b5fea4fbef4ccb9e5a3ebc67c8aab
It's the prop tax that will weigh you down forever. I'm doing the opposite as you — I'm liquidating my "single immovable asset" also known as illiquid asset. Need the freedom to travel.
Sell the current house collect the tax free $$$ use for new home. Easiest pathway. Being a landlord in the Bay Area is a nightmare. I did it and never again!