Hey Guys/Ladies

[firehawkocean]

Hi guys,

So, as I mentioned a couple weeks ago, I made the move from CA to TX. I am loving it here in Austin and I am ready for the warm weather (bring it on). LOL. We had a hard time finding a rental that wasn't way overpriced (rental market is competitive over here). So, we short leased an apartment. The wife is feeling unsettled (don't blame her...2900 sq ft home to 1450 sq ft apartment).

Our financial portfolio looks like this:

$239640.16 in liquid funds in local banks
$407772 between owning outright our home in CA and two cars (no loans on these).
$370985 in vanguard investment accounts some in municipal bond funds and some in total stock market funds, a bit in international funds.
AND zero debt

we are looking to just buy a home here in Austin so we can grow some roots. we would like to simply pay cash for it, by taking some $ from our total stock market fund and our bank accounts. the house would probably cost around $245-255k. we figure that it we live here for 2 years and don't like Austin more than SoCal, we can keep that property for investment. we are already renting out our CA home that is paid in full.

anyways, what do you guys think? i really respect this forums opinion and you guys have saved my a$$ before. thanks for any help.

[disneysteve]

I think we need more info.

How old are you?
What is your household income?
What do you have in retirement savings and what percentage of income are you contributing to that?
What are your monthly expenses, and what do you estimate they would be if you bought a house?
You mention the possibility of moving after 2 years if you aren't happy there. Personally, I wouldn't buy a house until I was settled and planned to stay for the long term. If you think you might leave in 2 years, I'd keep renting until you're sure you are staying.

[Redraidernurse]

Wihout any additional information, I would never buy a home in a location if I knew I was only going to possibly be living there a couple of years. Paying in full or not, it doesn't really make sense.

[firehawkocean]

How old are you?

29

What is your household income?

15500k/month after taxes

You mention the possibility of moving after 2 years if you aren't happy there. Personally, I wouldn't buy a house until I was settled and planned to stay for the long term. If you think you might leave in 2 years, I'd keep renting until you're sure you are staying.

Its up to the wife!

[scfr]

Hi guys,

So, as I mentioned a couple weeks ago, I made the move from CA to TX. I am loving it here in Austin and I am ready for the warm weather (bring it on). LOL. We had a hard time finding a rental that wasn't way overpriced (rental market is competitive over here). So, we short leased an apartment. The wife is feeling unsettled (don't blame her...2900 sq ft home to 1450 sq ft apartment).

Our financial portfolio looks like this:

$239640.16 in liquid funds in local banks
$407772 between owning outright our home in CA and two cars (no loans on these).
$370985 in vanguard investment accounts some in municipal bond funds and some in total stock market funds, a bit in international funds.
AND zero debt

we are looking to just buy a home here in Austin so we can grow some roots. we would like to simply pay cash for it, by taking some $ from our total stock market fund and our bank accounts. the house would probably cost around $245-255k. we figure that it we live here for 2 years and don't like Austin more than SoCal, we can keep that property for investment. we are already renting out our CA home that is paid in full.

anyways, what do you guys think? i really respect this forums opinion and you guys have saved my a$$ before. thanks for any help.

Interesting. We moved from Seattle to Austin 5-1/2 years ago so I can relate. (Although our situation was quite different in that we sold our house before we moved. We rented for 1-1/2 years and bought a house 4 years ago.)

Regarding putting down roots, that can be done from a rental. It happened for me when I started working and found a great organization to volunteer with.

Re feeling unsettled in a smaller space, remind your wife that it's temporary. I don't know if you are sharing the space with children or not, but my husband, the dog & I survived in a 900 sq ft apt and that was with him running his business from home and needing space for that. A large corner of the apartment was stacked with boxes waiting to be unpacked until we bought a house. Ideal? No. Manageable? Definitely.

I understand why you may want to go ahead and buy in Austin. Rental prices have gone crazy and home prices are climbing. It feels like the train is pulling out of / has left the station when it comes to the housing market here. Anyone who plans to stay and wants to own a house probably wants to "grab hold of a strap (buy a house) and hold on" or be prepared to pay significantly more if they wait.

Re the California house, when does the lease expire? Could you go ahead and sell it now???
Owning 2 homes outright seems like a bit of a stretch. You'd have around 60% of your net worth in residences.

Re buying a house and possibly renting it out later, would it make a good VACATION rental? Would it be a condo or small house that would appeal to vacationers? Is it located where folks who come to town for SXSW, ACL, Formula One, etc would want to stay? Does being a long-distance vacation rental owner appeal to you? Are you wiling to hire housekeepers, have a handyman on call, do the bookings, etc? The vacation rental market in Austin feels like a pretty good place to be.

[Goldy]

Why not put a downpayment of about 150k from your bank funds and take a small loan for the rest? A 5yr arm has interest rates of ~2.5% and can be found with no closing costs. surely your stocks are out performing that rate. With your monthly income so high and no other debt you could hammer out that loan within a year or two without a problem so by the time you are ready to potentially move the house is paid for and it can turn into a nice rental.

[firehawkocean]

Why not put a downpayment of about 150k from your bank funds and take a small loan for the rest? A 5yr arm has interest rates of ~2.5% and can be found with no closing costs. surely your stocks are out performing that rate. With your monthly income so high and no other debt you could hammer out that loan within a year or two without a problem so by the time you are ready to potentially move the house is paid for and it can turn into a nice rental.

But won't the closing fees (loan fees) outweigh the good if I pay it off so soon?

[Goldy]

I would suggest you look at a website like zillow and review small mortgages and their fees if you want to buy this house. On paper yes you have enough money to write a check for the house but you will be losing out on the time value of your money in the investments they are in. Your money in the bank is earning you nothing so there is no great loss to using that but you do need to keep some for an emergency fund.

I did a quick search on zillow and found a 15yr fixed loan at 3% with closing fees of $380. After 2 years of ~4k/mo payments the loan will be paid off and you will still have your investments intact plus a sizable bank account too.

This is assuming you have room in your monthly budget to swing a 4k payment but with monthly income of 15k and no posted debt you should be able to do that unless you live a high end lifestyle.

[firehawkocean]

Interesting. We moved from Seattle to Austin 5-1/2 years ago so I can relate. (Although our situation was quite different in that we sold our house before we moved. We rented for 1-1/2 years and bought a house 4 years ago.)

Regarding putting down roots, that can be done from a rental. It happened for me when I started working and found a great organization to volunteer with.

Re feeling unsettled in a smaller space, remind your wife that it's temporary. I don't know if you are sharing the space with children or not, but my husband, the dog & I survived in a 900 sq ft apt and that was with him running his business from home and needing space for that. A large corner of the apartment was stacked with boxes waiting to be unpacked until we bought a house. Ideal? No. Manageable? Definitely.

I understand why you may want to go ahead and buy in Austin. Rental prices have gone crazy and home prices are climbing. It feels like the train is pulling out of / has left the station when it comes to the housing market here. Anyone who plans to stay and wants to own a house probably wants to "grab hold of a strap (buy a house) and hold on" or be prepared to pay significantly more if they wait.

Re the California house, when does the lease expire? Could you go ahead and sell it now???
Owning 2 homes outright seems like a bit of a stretch. You'd have around 60% of your net worth in residences.

Re buying a house and possibly renting it out later, would it make a good VACATION rental? Would it be a condo or small house that would appeal to vacationers? Is it located where folks who come to town for SXSW, ACL, Formula One, etc would want to stay? Does being a long-distance vacation rental owner appeal to you? Are you wiling to hire housekeepers, have a handyman on call, do the bookings, etc? The vacation rental market in Austin feels like a pretty good place to be.

I would rather keep the California home because, even though it is paid off, we are about 200k from what we paid for it and the market has been improving.

Yes, the home would make a good vacation rental and, since it is relatively close to the city, it could be rented for festivals.

[snafu]

You've mention that Austin needs to meet wife's enjoyment of life. If she has no family or friends to support her, I suggest she find a job of interest, volunteer in community or service organizations where she can meet/make friends to make life in Austin fulfilling or take some courses of interest. You may need to help the process, research areas you know she likes, encourage her efforts and support any way you can.

I wouldn't buy until wife give a thumbs up approval. Meanwhile, where is your stuff? They can be safe and out of the way in inexpensive monthly storage. It's important to learn about the various communities, what they offer in support services, those with schools with the best reputations [if you don't have kids it is an important feature on future resale] scfr may be able to help. What services do you use regularly [bank, food stores, trendy restaurants, medical/dental clinic, church, gas stn., tailor, mall etc]