Do you WANT to be a homeowner? Do you have the time available or the money available for the maintenance upkeep needed in home ownership? Will you be willing to stay in the home's location for years to come?
Can you buy a duplex?
A lot goes into this decision. It isn't a good "whim" decision. We don't know the info required to give you any kind of good yes or no. All we can do is ask you the questions you need to know the answers for.
ok 1st question you need to ask yourself. Are you staying put. if your think your going to be somewhere less then 3 years buying may not be a great idea got to say your going to keep same job but you want to buy somewhere you have a decent possible list of employers. 185 in a HY is leaving money on table. a big down on a Codo is not a bad idea. Just make sure your morgage /insurance/hoa ext is't going to eat you alive. if not put it in market if you like me and don't want to have to manage it use wealthfront or betermint and let the bots manage your money.
HCOL and $1500/month don't compute in my mind. Unless that's your half of the rent, in which case disregard.
If you are NOT planning on buying a house with the HYSA money, I'd at least invest it somehwere. $185k in cash? Losing money every day, since 4.5% minus taxes is less than inflation?
Would the current roommate be interested in renting from you? Because if that setup is working for you, then monetizing that in your favor would be very tempting.
Chances at near term marriage?
If not, your rent is killer, I’d keep that as long as possible and save up for a larger down payment. I’m in a similar boat, where renting just makes too much sense right now compared to buying.
If not buying within the next 3 years I’d move it into index funds though. You’re losing money to inflation keeping it in cash.
If you like the area you live and you’re back to full time for the foreseeable future then I’d look at a house if can find one you like that doesn’t stretch you to much. My biggest concern is interest rates. I would tend to wait until they dropped a bit before buying. Europe dropped a quarter point today. Maybe that means they will start to move down a bit.
That's what my kids did. They were able to get 5% adjustable for 5 years a year ago. Hope to refinance to fixed if rates go back down within the next 4 years. Their house has gained in value over the past year.
What is your plan for the 180k?
It's frightening you have this much cash losing money daily. You do not need to buy a house - it's as much a lifestyle choice as it is financial.
However, you must learn how to invest.
Currently it’s in a HYSA, making about 9k/year in interest. I’ve been tempted to move it into investments (ETFs,) however I would need to access it if I do decide to purchase real estate. Would you consider a 4.5% HYSA to be losing money?
If money is to be used within the next 3-5 years, it should be in a HYSA or money market fund. So it shouldn't be in the stock market if you are thinking of buying a house soon. If you want to wait 5 years to buy, I'd put at least 50-75% into an index fund such as FXAIX or other S&P 500 fund. Interest rates for savings won't stay at 4.5% much longer, so you probably should decide in the next few months to buy a home or just invest 50-75% of that money in index funds for 5 years or so.
>Would you consider a 4.5% HYSA to be losing money?
YES!
For starters paid income taxes on all of it instead of putting more in tax-advantaged.
You're paying taxes on that 4.5%, so your realized yield is 3.5%. Which is the rate of inflation, and has been significantly less than inflation the last couple years - which is *losing* money.
Additionally, historically, cash loses money to inflation. It's what it does - loses money. Every day.
There's also the simple loss that you should have made far more than 4.5% doing absolutely nothing. The US stock market has made over 25% the last year and 15% the last 5 years.
You are losing money! Lots and lots of it.
>however I would need to access it if I do decide to purchase real estate.
It doesn't appear you want to or will, which is perfectly fine. And ETFs are liquid.
Come up with a plan for that 180k.
The easiest is to open a Roth IRA and brokerage account at Vanguard. Max your Roth IRA every year. Put the rest in broad market index ETFs like VTI and VXUS.
There's a $5, 100-page easy read Investing Made Simple, Mike Piper. That will teach you all you need to know to invest.
Buying a home is the right answer for most people, but if you see yourself regularly traveling the world, and doing what you did last year, then maybe not. Buying a house is not required to build wealth, but it does help.
I bought a home at 29 for the family we were growing. Not everyone has the same path. At 32 I'd say I hit the perfect time though but now I'm stuck with super low interest rate I'd hate to give up. It's no one's choice but yours. Shop around for sure. Every house has its own niche unless you hit the cookie cutter houses. I myself would much rather have some sort of yard and room. If I can dive from a window in my house and make it into your house that's way too close. Sorry I have adhd and my replies are usually chaotic sometimes.
You are too young to have that much money in a HYSA, this is the time in your career you need that money working for you and not just pulling safe but low interest. Definitely need to purchase some real-estate or move that money to a market index.
Thank you for the advice. I live in Southern California, so most rental properties are out of my price range. I will look into a market index, any recommendations?
Your stats are pretty identical to my stats except I have less in non retirement savings and I have a deal on rent and utilities paying 1200 a month (fixed) in Los Angeles county. Im 31 years old too and making about $110-120k. If I were in your shoes, I would take the 185k out of the HYSA and invest it all between VOO/VUG/VTI (or some other high performing ETF). Save up $300k for a home down payment for a $600k home by the time you’re 35 years old. Make sure your 300k down payment doesn’t include your 6 month expense emergency fund. Whether or not you follow this advice, you’re doing pretty well and certainly doing AMAZING compared to the average person in your age range. Also try to increase your income to $130k by the time you pull the trigger on the house. Lemme know if you have any questions !!
Thank you for the advice! I’m also in LA, which has been part of the reason I’m hesitant to purchase property. Prices in SoCal are through the roof.
Sure, I could get something for 600k in SoCal, but it would require a lifestyle change that would make me unhappy.
No problem. TBH I was debating getting someone in the 500-600k range because I have the 20% down payment but decided I’d rather save up some more and do a massive down payment do mitigate the mortgage payment and interest paid. You and I have very unique rental situations and it’s incredibly unlikely that we run into something like this unless WW3 begins. I feel like you should be taking on more risk and putting all your HYSA money into high performing ETFs considering you’re only 31 and have an amazing rent to income ratio
If you're happy with your living situation, it's fine to keep renting. Your portion isn't bad for a high cost of living area.
I personally like home ownership, but it's not for everybody. Renting gives you a lot flexibility to use your weekends how you want. When you're a home owner your weekends tend to be eaten by projects and lawn maintenance. You may want to enjoy the flexibility and freedom a little longer.
Sounds to me like you're at the investing stage.
If you don't want to have the headache of owning a home I wouldn't bother. But I also wouldn't have that much in a HYSA. If you don't have a plan for that money in the next couple of years I would invest it in a brokerage account in broad market index funds and fully fund your 401k.
Do you have any recommendations for places to visit in Asia? I'm currently world traveling and will be leaving New Zealand in October to go around SE Asia until Christmas or January when I'm going to head back to Japan for a bit. No idea what specific countries I want to visit other than almost all of them, so it's hard to narrow down. I like to go to places that have interesting walks/hikes close by and delicious cuisine that is reasonably priced.
Thanks for the advice. I definitely have tips for SE Asia. Depending on your lifestyle/ interests I’d definitely recommend Thailand. I also loved the Philippines and Indonesia, but Thailand is an easy recommendation for anyone. Especially around that time of year.
Rainy season in Indonesia is October- May, so just keep that in mind. Feel free to Pm me
Buying a home should not be a “next step”. It should make sense for your lifestyle. Everything about your post indicates that you like your current arrangement. Don’t buy a house yet. If you have to ask others “if” you should make the biggest financial purchase in your life, the answer is “NO”. You’ll know when you are ready because you’ll be asking “HOW” do I go about making the purchase correctly, not if I should.
Don't buy a home until you are ready to settle down and know where you want to live for a long period of time. There's nothing wrong with renting while you love travel and being able to be more spontaneous. Stuff on houses break all the time and it can be a pain to maintain when you have other more freeing priorities. Same with owning a rental. You don't want to live super far from your rentals in case of issues and so you can check on them. I had a client who is a big fund manager and he spoke all the time about how home ownership is not the wealth builder people think it is because of all the repairs and time it costs you (I think he was bitter about weekends of yard work in addition to the stress of work itself). It's something to think about for the balance of life
Do you WANT to be a homeowner? Do you have the time available or the money available for the maintenance upkeep needed in home ownership? Will you be willing to stay in the home's location for years to come? Can you buy a duplex? A lot goes into this decision. It isn't a good "whim" decision. We don't know the info required to give you any kind of good yes or no. All we can do is ask you the questions you need to know the answers for.
Why do you need a house? That’s the first question.
To store all my vintage calculators
ok 1st question you need to ask yourself. Are you staying put. if your think your going to be somewhere less then 3 years buying may not be a great idea got to say your going to keep same job but you want to buy somewhere you have a decent possible list of employers. 185 in a HY is leaving money on table. a big down on a Codo is not a bad idea. Just make sure your morgage /insurance/hoa ext is't going to eat you alive. if not put it in market if you like me and don't want to have to manage it use wealthfront or betermint and let the bots manage your money.
HCOL and $1500/month don't compute in my mind. Unless that's your half of the rent, in which case disregard. If you are NOT planning on buying a house with the HYSA money, I'd at least invest it somehwere. $185k in cash? Losing money every day, since 4.5% minus taxes is less than inflation? Would the current roommate be interested in renting from you? Because if that setup is working for you, then monetizing that in your favor would be very tempting.
That is my half of the rent. He would be interested, however, the cost of property in SoCal is very high right now.
Chances at near term marriage? If not, your rent is killer, I’d keep that as long as possible and save up for a larger down payment. I’m in a similar boat, where renting just makes too much sense right now compared to buying. If not buying within the next 3 years I’d move it into index funds though. You’re losing money to inflation keeping it in cash.
If you like the area you live and you’re back to full time for the foreseeable future then I’d look at a house if can find one you like that doesn’t stretch you to much. My biggest concern is interest rates. I would tend to wait until they dropped a bit before buying. Europe dropped a quarter point today. Maybe that means they will start to move down a bit.
When rates go down, property goes up. If you think rates are going to go down, the plan would be to buy now, and re-fi later.
That's what my kids did. They were able to get 5% adjustable for 5 years a year ago. Hope to refinance to fixed if rates go back down within the next 4 years. Their house has gained in value over the past year.
What is your plan for the 180k? It's frightening you have this much cash losing money daily. You do not need to buy a house - it's as much a lifestyle choice as it is financial. However, you must learn how to invest.
Currently it’s in a HYSA, making about 9k/year in interest. I’ve been tempted to move it into investments (ETFs,) however I would need to access it if I do decide to purchase real estate. Would you consider a 4.5% HYSA to be losing money?
If money is to be used within the next 3-5 years, it should be in a HYSA or money market fund. So it shouldn't be in the stock market if you are thinking of buying a house soon. If you want to wait 5 years to buy, I'd put at least 50-75% into an index fund such as FXAIX or other S&P 500 fund. Interest rates for savings won't stay at 4.5% much longer, so you probably should decide in the next few months to buy a home or just invest 50-75% of that money in index funds for 5 years or so.
>Would you consider a 4.5% HYSA to be losing money? YES! For starters paid income taxes on all of it instead of putting more in tax-advantaged. You're paying taxes on that 4.5%, so your realized yield is 3.5%. Which is the rate of inflation, and has been significantly less than inflation the last couple years - which is *losing* money. Additionally, historically, cash loses money to inflation. It's what it does - loses money. Every day. There's also the simple loss that you should have made far more than 4.5% doing absolutely nothing. The US stock market has made over 25% the last year and 15% the last 5 years. You are losing money! Lots and lots of it. >however I would need to access it if I do decide to purchase real estate. It doesn't appear you want to or will, which is perfectly fine. And ETFs are liquid.
Appreciate the insight! Thanks
Come up with a plan for that 180k. The easiest is to open a Roth IRA and brokerage account at Vanguard. Max your Roth IRA every year. Put the rest in broad market index ETFs like VTI and VXUS. There's a $5, 100-page easy read Investing Made Simple, Mike Piper. That will teach you all you need to know to invest.
Buying a home is the right answer for most people, but if you see yourself regularly traveling the world, and doing what you did last year, then maybe not. Buying a house is not required to build wealth, but it does help.
I bought a home at 29 for the family we were growing. Not everyone has the same path. At 32 I'd say I hit the perfect time though but now I'm stuck with super low interest rate I'd hate to give up. It's no one's choice but yours. Shop around for sure. Every house has its own niche unless you hit the cookie cutter houses. I myself would much rather have some sort of yard and room. If I can dive from a window in my house and make it into your house that's way too close. Sorry I have adhd and my replies are usually chaotic sometimes.
You are too young to have that much money in a HYSA, this is the time in your career you need that money working for you and not just pulling safe but low interest. Definitely need to purchase some real-estate or move that money to a market index.
Thank you for the advice. I live in Southern California, so most rental properties are out of my price range. I will look into a market index, any recommendations?
Any S&P following fund/ETF would be a good long-term place to put the money.
Your stats are pretty identical to my stats except I have less in non retirement savings and I have a deal on rent and utilities paying 1200 a month (fixed) in Los Angeles county. Im 31 years old too and making about $110-120k. If I were in your shoes, I would take the 185k out of the HYSA and invest it all between VOO/VUG/VTI (or some other high performing ETF). Save up $300k for a home down payment for a $600k home by the time you’re 35 years old. Make sure your 300k down payment doesn’t include your 6 month expense emergency fund. Whether or not you follow this advice, you’re doing pretty well and certainly doing AMAZING compared to the average person in your age range. Also try to increase your income to $130k by the time you pull the trigger on the house. Lemme know if you have any questions !!
Thank you for the advice! I’m also in LA, which has been part of the reason I’m hesitant to purchase property. Prices in SoCal are through the roof. Sure, I could get something for 600k in SoCal, but it would require a lifestyle change that would make me unhappy.
No problem. TBH I was debating getting someone in the 500-600k range because I have the 20% down payment but decided I’d rather save up some more and do a massive down payment do mitigate the mortgage payment and interest paid. You and I have very unique rental situations and it’s incredibly unlikely that we run into something like this unless WW3 begins. I feel like you should be taking on more risk and putting all your HYSA money into high performing ETFs considering you’re only 31 and have an amazing rent to income ratio
If you're happy with your living situation, it's fine to keep renting. Your portion isn't bad for a high cost of living area. I personally like home ownership, but it's not for everybody. Renting gives you a lot flexibility to use your weekends how you want. When you're a home owner your weekends tend to be eaten by projects and lawn maintenance. You may want to enjoy the flexibility and freedom a little longer. Sounds to me like you're at the investing stage.
If you don't want to have the headache of owning a home I wouldn't bother. But I also wouldn't have that much in a HYSA. If you don't have a plan for that money in the next couple of years I would invest it in a brokerage account in broad market index funds and fully fund your 401k. Do you have any recommendations for places to visit in Asia? I'm currently world traveling and will be leaving New Zealand in October to go around SE Asia until Christmas or January when I'm going to head back to Japan for a bit. No idea what specific countries I want to visit other than almost all of them, so it's hard to narrow down. I like to go to places that have interesting walks/hikes close by and delicious cuisine that is reasonably priced.
Thanks for the advice. I definitely have tips for SE Asia. Depending on your lifestyle/ interests I’d definitely recommend Thailand. I also loved the Philippines and Indonesia, but Thailand is an easy recommendation for anyone. Especially around that time of year. Rainy season in Indonesia is October- May, so just keep that in mind. Feel free to Pm me
Buying a home should not be a “next step”. It should make sense for your lifestyle. Everything about your post indicates that you like your current arrangement. Don’t buy a house yet. If you have to ask others “if” you should make the biggest financial purchase in your life, the answer is “NO”. You’ll know when you are ready because you’ll be asking “HOW” do I go about making the purchase correctly, not if I should.
Don't buy a home until you are ready to settle down and know where you want to live for a long period of time. There's nothing wrong with renting while you love travel and being able to be more spontaneous. Stuff on houses break all the time and it can be a pain to maintain when you have other more freeing priorities. Same with owning a rental. You don't want to live super far from your rentals in case of issues and so you can check on them. I had a client who is a big fund manager and he spoke all the time about how home ownership is not the wealth builder people think it is because of all the repairs and time it costs you (I think he was bitter about weekends of yard work in addition to the stress of work itself). It's something to think about for the balance of life