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24 year old, sanity check, housing questions, etc
Old 11-11-2015, 10:45 AM   #1
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24 year old, sanity check, housing questions, etc

Hello,

I live and work in West Los Angeles doing IT work.

Income:
Base: 80k
Bonuses: 18k
Project based bonuses: ~0k to ~20k depending on as of yet unknown factors. Will see what happens.

Income is expected to continue to rise. I could likely go and make ~110k base + bonuses if I left this current company (which I might..)

Expenses: (monthly)
Rent: 1950 (includes garage and utilities)
Food: ~600 (this includes eating out, alcohol, etc)
Insurance: 75
Gas: ~50
Cell phone: 0 (paid for by company)
Health insurance: 0 (paid for by company)
Travel (pleasure and holiday traveling): ~200
Misc: ~100

Savings:
401k: 18,000 year
Roth: 5,500 a year (but am waiting to see what bonuses will be this year before I contribute, otherwise it's earmarked for taxable savings)
Typically will shuffle any 'extra' money (bonuses etc) into savings or investing.

Assets: (no debt, paid off ~35k of student loans in a couple years after graduation)
Emergency / slush fund: ~9k
401k: 21k 90/10 between VTI and BND
Roth: 16k in VFIFX
Rollover IRA: 14k in VFIFX

Since I have a significant bonus coming at the end of the year (expect anywhere from 10k to 20k after taxes), I was contemplating what to do with the 'windfall'

Options:
1. Down payment on a condo here via FHA loan (or traditional 5% down) (but is buying real estate worthwhile?)
2. Invest the windfall in a taxable account in my normal allocation. Likely would just put it into VTSAX
3. ?? Anything I'm missing?

Upcoming expenses:
N/A unless I move jobs and suddenly need to use my car for transit to work. But it probably has another couple years of heavy use of life left in it. I don't mind buying another cheap car when this one dies.
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Old 11-11-2015, 11:53 AM   #2
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Welcome, Jon6!

First of all, congratulations on being debt-free and already having significant savings towards retirement.

And congratulations on such a nice bonus so early in your career. I would personally not go the condo route unless absolutely sure you won't be moving in the next 5 years. (I owned two condos in my 20s, broke even on the first and lost a lot of money on the 2nd, both because of job moves.) Given your old car situation, I might put part of it aside to build up the emergency/slush fund so you can pay cash when you need a new car. Since you are comfortable with 90/10 AA and have some cash, I think putting the rest in a taxable account all or mostly in stocks is fine. Others may have better ideas, but you look to have a good handle on things.
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Old 11-11-2015, 12:19 PM   #3
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You're off to a great start. I would continue renting if you think you might be switching jobs. The last thing you want to do is buy a home and then switch jobs. The increase in commute time could be really bad in LA. Wait until you're settled into a job and are fairly sure you'll stay for a minimum of 5 years before you buy. Condos generally don't go up in value nearly as fast as single-family homes so don't buy a condo as an investment. Only buy a condo if it's less expensive than renting a similar place and you plan to stay for several years. Good luck.
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Old 11-11-2015, 07:45 PM   #4
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IMO, saving for a 20% down payment is the way to go and avoid putting yourself in a position where you might become an accidental landlord.
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Old 01-21-2016, 01:11 AM   #5
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$1900 is a lot of money for renting a place for one person?


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Old 01-21-2016, 02:40 PM   #6
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$1900 is a lot of money for renting a place for one person?
Around here that is a lot but it is relative. Some places $1900 will get you a closet, if that.
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Old 01-21-2016, 03:05 PM   #7
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$1900 is a lot of money for renting a place for one person?


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when I was his age I was paying $475 a month for a one bedroom....so that's $950 a month in today's dollars

yeah $1900 seems extremely high, must be a nice place
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Old 01-21-2016, 03:11 PM   #8
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Around here that is a lot but it is relative. Some places $1900 will get you a closet, if that.
wouldn't that fund about a $400K mortgage?
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Old 01-21-2016, 04:02 PM   #9
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Condos generally don't go up in value nearly as fast as single-family homes so don't buy a condo as an investment. Only buy a condo if it's less expensive than renting a similar place and you plan to stay for several years. Good luck.
It is likely true that as you say, SFHs tend to appreciate faster than condos. However, there are many reasons to buy that are market specific. In fall 2011 I bought for $145 K a 700 sq ft city center condo that at the time was rented for $1250. Similar but arguably less desirable condos in my building have since sold up to $300K, and rented for $1450-$1600.

I believe that in a center city, no car needed area, with a highly paid expanding job market, to buy or rent is a business decision, not well suited to rule of thumb. Anyway, a SFH if it can be found is either a mess requiring much work, or $1MM +.

Also OP is in West LA, a very desirable fashionable neighborhood near to quality employment, and $1900 or whatever he pays sounds quite reasonable to me.

Ha
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Old 01-21-2016, 04:07 PM   #10
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when I was his age I was paying $475 a month for a one bedroom....so that's $950 a month in today's dollars
So was that in West LA? And when? In dynamic markets it is very likely that other factors are more meaningful than simple CPI inflation in determining a house price.

Ha
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Old 01-21-2016, 04:16 PM   #11
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So was that in West LA? And when? In dynamic markets it is very likely that other factors are more meaningful than simple CPI inflation in determining a house price.

Ha
H-town, 1988. Is west LA expensive or something? Do people make twice as much there as they do in Houston?
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Old 01-21-2016, 04:52 PM   #12
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H-town, 1988. Is west LA expensive or something? Do people make twice as much there as they do in Houston?
Look at Redfin. https://www.redfin.com/neighborhood/...1&market=socal

In 2003, a Los Angeles Times correspondent noted that:
"The meaning of the term West Los Angeles varies widely. Some use it to describe the entire Westside including Santa Monica, Venice and stretching east to Western Avenue. More precisely, though, it is the portion of incorporated Los Angeles between the Santa Monica city limits on the west, Wilshire Boulevard on the north, Century City to the east and extending just beyond National Boulevard on the south. Sections of West L.A. run the gamut from stylish Cheviot Hills to a cluster of generic homes east of Bundy Drive.[3]"

West LA has mostly fairly young high earning people, including a high number of gays who often make excellent salaries and like nice homes.

BTW, do people make twice as much in Silicon Valley as they do in Houston? I sincerely doubt that they do, but that isn't the only factor.

Ha
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Old 01-21-2016, 05:44 PM   #13
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wow - guess I won't be moving there any time soon


how does anyone afford housing there?
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Old 01-21-2016, 05:53 PM   #14
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BTW, do people make twice as much in Silicon Valley as they do in Houston? I sincerely doubt that they do, but that isn't the only factor.

Ha
I had a job opportunity in SF a long time ago, I looked at the COL difference between Houston and SF and told the headhunter they would have to double (it may have been triple) my pay to get me to move. He didn't call back.


One of my golf buddies took an xfter to San Ramon from Houston and they gave him some kind of pay adjustment and a killer relo package but I don't think it was double. This was back in 2010 when the oil biz was still good.
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Old 01-21-2016, 06:36 PM   #15
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Look at Redfin. https://www.redfin.com/neighborhood/...1&market=socal



In 2003, a Los Angeles Times correspondent noted that:

"The meaning of the term West Los Angeles varies widely. Some use it to describe the entire Westside including Santa Monica, Venice and stretching east to Western Avenue. More precisely, though, it is the portion of incorporated Los Angeles between the Santa Monica city limits on the west, Wilshire Boulevard on the north, Century City to the east and extending just beyond National Boulevard on the south. Sections of West L.A. run the gamut from stylish Cheviot Hills to a cluster of generic homes east of Bundy Drive.[3]"



West LA has mostly fairly young high earning people, including a high number of gays who often make excellent salaries and like nice homes.



BTW, do people make twice as much in Silicon Valley as they do in Houston? I sincerely doubt that they do, but that isn't the only factor.



Ha

Lots of UCLA students in West L.A. too (been there, done that). All Bay Area and L.A. rentals are WAY more expensive than Houston.

And yes, some people make 10x what they do in Houston. As a physician in Sunnyvale, I watched my IT neighbors take stock options and move to houses in Cupertino and Los Altos Hills that were gorgeous. My DS floundered in schools that were sub-par and could not possibly meet his needs.

I never met my investing goals living in California.

I sold a condo in Silicon Valley for $360K and bought a 4 bedroom house with a full basement and 1/3 acre lot for $240K. I have since outfitted it with a pool, swim spa, home recording studio and home theater and paid off everything. That CA condo could command a price of $800K now. For what? Shared walls and a pool. Traffic, railroad tracks and a "desirable" address.

I love the Bay Area. And I liked living in L.A. as a student. The best decision I ever made in my life was to leave it behind.

You pay dearly for the incredible weather and incredible location...with so much energy and time paying for it, you never get to experience it.


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Old 01-21-2016, 08:35 PM   #16
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You guys realize this was posted a few months ago and the OP hasn't posted since.
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Old 01-22-2016, 02:23 PM   #17
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I never met my investing goals living in California.

You pay dearly for the incredible weather and incredible location...with so much energy and time paying for it, you never get to experience it.

Oh don't I know it.

Regarding those asking about rent pricing, etc:

My apartment is pretty modest by Midwestern standards. I have about ~500 sq ft with an excellent location. I could save ~400-500/mo if I moved into a 2bed and split an apartment, but lifestyle wise I'd rather cut out other things first if that $$ was important. I could also save ~400/mo if I moved inland, but I would be dealing with a 45 minute+ commute vs ~10 minutes via foot.
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Old 01-22-2016, 02:25 PM   #18
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You guys realize this was posted a few months ago and the OP hasn't posted since.
I'm still lurking.
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Old 01-22-2016, 02:36 PM   #19
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wow - guess I won't be moving there any time soon


how does anyone afford housing there?
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Old 01-22-2016, 03:06 PM   #20
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Jon6, I concur with the advice of others that you rent unless you KNOW you won't move for at least 5 years. Renting will give you flexibility to make a move if your employment or family circumstances change. I understand the high rent as what you are paying is not out of line for your market.
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