Second house advice please !

[OldShooter]

... Both houses are in the Bay Area. (Note: Personally, I think that the second house can be considered as AA diversification (you can shoot at me here )) ...

Consider yourself shot.

Seriously, as an investor the Bay Area is probably the last place in the country I would choose for a real estate investment. By all accounts the prices are bubbling. (Remember the rule: If something can't go on forever, it won't.) Lots of negative price pressure including that CA and especially the Bay Area are bleeding high-income workers and companies. The partial population backfill of immigrants will not have the ability to buy expensive housing for a long time, maybe never. The only population boom in SF appears to be the homeless. Oh, and we may be looking at a recession for a few years here.

From the tone of your posts it sounds like your mind is made up, but notice that you are not getting much affirmation here. For good reason.

Best of luck to you.

 

[wanaberetiree]

Consider yourself shot.

Seriously, as an investor the Bay Area is probably the last place in the country I would choose for a real estate investment. By all accounts the prices are bubbling. (Remember the rule: If something can't go on forever, it won't.) Lots of negative price pressure including that CA and especially the Bay Area are bleeding high-income workers and companies. The partial population backfill of immigrants will not have the ability to buy expensive housing for a long time, maybe never. The only population boom in SF appears to be the homeless. Oh, and we may be looking at a recession for a few years here.

From the tone of your posts it sounds like your mind is made up, but notice that you are not getting much affirmation here. For good reason.

Best of luck to you.

My main consideration for a second house -- is personal family affairs driven.

Your reply sounds very emotional...

Let's look at the facts.

I live in SF for 33 years and own a house for 27 years and never ever do I see prices go down.

Do you have examples to contrary?

The only exception was before my time here, after the big earthquake in 1989. Which is a possibility and is a very real risk.

Summarizing the poll: you would not buy a second house with either 4.5M or 7.5M assets.

Correct?

 

[pacergal]

With a portfolio of either one, you most likely can afford the second house.
You really sound like you want it, so buy it.
I would go for a 15 year fixed mortgage. You can always re finance if rates go down, or pay down more if you sell the other house

What does Firecalc say if you put in both mortgages plus your other spending?

 

[wanaberetiree]

With a portfolio of either one, you most likely can afford the second house.
You really sound like you want it, so buy it.
I would go for a 15 year fixed mortgage. You can always re finance if rates go down, or pay down more if you sell the other house

What does Firecalc say if you put in both mortgages plus your other spending?

Thx

I consider 10 year ARM, but now thinking about a margin loan, assuming I can get ~2% interest on it.

Firecalc was happy

 

[MuirWannabe]

I vote buy it. Not sure your best financing route. But you obviously want it. You can afford it. You can’t take it with you. Enjoy!

 

[OldShooter]

My main consideration for a second house -- is personal family affairs driven. ...

That's why I prefaced my comment " ... as an investor ..." Life is not only about investing.

Re value, looking to history to predict prices may not be useful. IMO demographics and trends are probably better tools, also family income trends. Though no one can really know. But a middle-of-the-road view that values might become flat, even declining with inflation, might still be enough given your other motivations.

But I will stick to my guns regarding diversification. Buying a second nearly-identical asset does not provide diversification.

 

[pjigar]

My main consideration for a second house -- is personal family affairs driven.

Just like you have reason for buying a second home you should have equally good or better reason for keeping the old house. No one is suggesting that you should buy a house. All we are saying is you need a clear plan for the old house. You can't just wing it for an asset that is 30% of your portfolio. It is just not prudent.

Summarizing the poll: you would not buy a second house with either 4.5M or 7.5M assets.

Correct?

I wouldn't. FWIW we were hesitant to buy our second home which was 20% of networth during RE down market.

 

[ncbill]

My main consideration for a second house -- is personal family affairs driven.

Your reply sounds very emotional...

Let's look at the facts.

I live in SF for 33 years and own a house for 27 years and never ever do I see prices go down.

Do you have examples to contrary?

The only exception was before my time here, after the big earthquake in 1989. Which is a possibility and is a very real risk.

Summarizing the poll: you would not buy a second house with either 4.5M or 7.5M assets.

Correct?

CA is at the forefront of eliminating single-family zoning.

Any lots or tear-downs near enough to your prospective second home that a multi-family residential property would impact it?

Other than that, no, I don't see a problem borrowing 30% at under 2% on margin loan for a second home...I would pay it down ASAP.