When I was younger, I always imagined having a huge, beautiful house to call my own. However, as the years went by that dream started to fade. I started doing calculations and couldn’t quite understand why someone would sign up to be put in shackles for 30 years.
You see, in the Bay Area, homes are ridiculously expensive. For $600,000 you can get a starter home on a street where gun fire will be heard every few months. Seriously someone was stabbed to death and another shot to death on my street this year. So if I want to avoid getting shot, I’m looking at closer to $1,000,000+. Going a little north, the average home price in Palo Alto is $2.5 million. In my opinion, that’s too much to live in the nice part of San Jose.
After three years of extreme saving, we would have enough for the down payment. Our mortgage would then be close to $4,000 per month, plus $10,000 per year in property tax and don’t forget maintenance fees. This is a lot of money just for a place to sleep!
Is it worth paying $5,000 per month for 30 years for a house?
Even if you can afford this, why would you want to? The money can always dry up. Why survive when you can thrive?
So for the past few years it’s been decided that we will not buy a house in the Bay Area unless there is a huge drop in prices.
But should we buy a house at all?
My wife and I have gone back and forth on this since we first started saving for our early retirement. The last few years we have toyed with the idea of renting forever and living the perpetual traveler lifestyle. Our friends at Go Curry Cracker are big fans of this and it’s hard to poke many holes in their arguments.
How do you know if you should buy and when you should rent?
There are thousands of articles on this topic so I won’t cover in too much depth. But my summary is this: Buy only if it’s similar or cheaper than renting and you plan to stay in that area for many years. Having ample savings and a steady income also come in handy.
That takes San Jose completely out of the picture for us. Not only do we not plan to stay here forever; it’s also way cheaper to rent than to buy here. You can rent a small house for $2000 a month but you can’t buy one for that price! And in tech, you never know what day will be your last.
Much of the reason I live in San Jose is for the excellent job market. But would I live here if I didn’t have to work? Absolutely not!
I’ve been blessed to grow up with California weather. But there are many worldwide locations with incredible warm weather. Southeast Asia, much of Central and South America and parts of Europe to name a few. So without its’ amazing job market, the Bay Area isn’t all that impressive to me. It’s simply is a concrete jungle providing golden handcuffs.
So where would I live if I didn’t have to work? The answer may be, back in my home town of Jackson, CA.
It’s funny that many people hate where they grow up. I had a paddle boarding instructor in Santa Cruz tell me how growing up in Hawaii was so boring. I know people in Los Angeles who need to move to San Francisco and visa versa. A few friends of mine who grew up in Cupertino can’t stand going back. Meanwhile their parents’ home values shot through the roof from all the sheep flocking there for the “good school district” and proximity to Apple’s campus.
I also loathed my home town growing up. My entire county had a population that was less than my college. From high school, my dream was always to get away. And I went away. I’ve been away since I was 18. But I kind of miss it. And I want to go back.
The more we consider the lifestyle we want to live after early retirement, the more we realized we want a home base for 3-9 months a year and travel the rest. Jackson is perfect for this. The homes are inexpensive in comparison to the Bay Area. We could buy something respectable for $250,000 today. And with some patience and luck I think we could find something for around $200,000. I’ve also considered buying twenty acres right outside of town and building a house. A good way to guarantee peace and quiet.
This is also a sweet spot for The Millionaire Next Door type lifestyle. Many of these people buy a reasonably priced house and live in them forever. I never liked the term starter home. If I’m going to buy a house, I would like to keep it forever. And without plans for a big family or massive mortgage, this plan keeps our early retirement dreams alive.