Beverly Hills on a.. (Brentwood: mortgage, environment, student loans)

[matrix9250]

I figured id ask the experts here at CD what kind of house in the Beverly Hills flats one could acquire on a radiologist's salary with a combined income of roughly 400-450k and 3 kids? What about renting and waiting a few years for housing stabilization before buying? Whats it like down in Bev. hills?

[Charles]

Have you checked out what homes are available in your price range using any of the online real estate databases like realtor, google, or yahoo? What were those homes like?

What is your price range?
Are you going to rely on two continuous incomes?
Where will you (two) be working?

[hsw]

Prob smarter to rent in LA....many new, unsold houses avail for rent; declining price environment...

Look at BH, Brentwood, Palisades...lots of well-educated, affluent professionals w/families...

Major cost of raising kids in LA is private schools...for their own physical protection (even in BH)...

[matrix9250]

Originally Posted by hsw

Prob smarter to rent in LA....many new, unsold houses avail for rent; declining price environment...

Look at BH, Brentwood, Palisades...lots of well-educated, affluent professionals w/families...

Major cost of raising kids in LA is private schools...for their own physical protection (even in BH)...

Really? Worrying about protection even in BH huh? Kinda came off to me as a shock...

[Undulator]

Your available funds for down payment makes or breaks this deal, so let's take a look. The general loaners rule says you should not pay more than 28% of your monthly gross salary in mortgage payments (including principal, interest, home-owners insurance and taxes), which in your case equates to about $9916. That's what most banks would be comfortable with. If you're 100% debt free (no auto payments, student loans and what have you) you can stretch this to 36%, leaving you with $12750 for monthly mortgage payments. These numbers are for a 30 years mortgage at a fixed 7% interest (not likely to get anything below that this day and age), $3000 property taxes, and standard home purchase fees including inspection etc.

Now, if you have $250000 in your savings account for a down payment & you're debt free, you should be able to afford a house worth $2.08M. If you have $500000 you can get up to $2.35M, and if you have a million in the bank for a down payment you can afford a $2.83M home.

I ran these numbers through a tax deduction calculator. To borrow $1M means you'll be making $2.4M in total payments. The total amount you'll be paying in interest over 30 years is $1,4M (!) - so that's the rough cost of your loan. The total tax benefit would be $488,281.

Most homes south of Sunset Blvd (the more affordable area of BH) are in the $1.8-3M range.

I think it's fairly obvious that a $1M+ loan is a very bad idea. From a purely economical perspective I believe the smartest thing you'd do is to sell whatever you're sitting on right now. Then rent a fairly cheap place in a decent area until the prices have come all the way down to where they should be (roughly 25% of today's values, accounting for 3% inflation a year). This should happen within 3-4 years. Meanwhile live frugally, invest what you have in the bank wisely (across multiple options), and save every dime you can. After 3 years the prices will have come down and you'll have much more money in the bank. Let's say you manage to save 2/3rds of your income and invest all of it in a safe 5% yield. Then you'll have over $600K in the bank, home prices will have come down and you'll have 3 years of high salary history (which will grant you more freedom and better deals with banks). If you want to get into a house right now (which I would strongly advise against), don't stretch above a $1.6M house. Plan wisely! Good luck.

[matrix9250]

Originally Posted by Undulator

Your available funds for down payment makes or breaks this deal, so let's take a look. The general loaners rule says you should not pay more than 28% of your monthly gross salary in mortgage payments (including principal, interest, home-owners insurance and taxes), which in your case equates to about $9916. That's what most banks would be comfortable with. If you're 100% debt free (no auto payments, student loans and what have you) you can stretch this to 36%, leaving you with $12750 for monthly mortgage payments. These numbers are for a 30 years mortgage at a fixed 7% interest (not likely to get anything below that this day and age), $3000 property taxes, and standard home purchase fees including inspection etc.

Now, if you have $250000 in your savings account for a down payment & you're debt free, you should be able to afford a house worth $2.08M. If you have $500000 you can get up to $2.35M, and if you have a million in the bank for a down payment you can afford a $2.83M home.

I ran these numbers through a tax deduction calculator. To borrow $1M means you'll be making $2.4M in total payments. The total amount you'll be paying in interest over 30 years is $1,4M (!) - so that's the rough cost of your loan. The total tax benefit would be $488,281.

Most homes south of Sunset Blvd (the more affordable area of BH) are in the $1.8-3M range.

I think it's fairly obvious that a $1M+ loan is a very bad idea. From a purely economical perspective I believe the smartest thing you'd do is to sell whatever you're sitting on right now. Then rent a fairly cheap place in a decent area until the prices have come all the way down to where they should be (roughly 25% of today's values, accounting for 3% inflation a year). This should happen within 3-4 years. Meanwhile live frugally, invest what you have in the bank wisely (across multiple options), and save every dime you can. After 3 years the prices will have come down and you'll have much more money in the bank. Let's say you manage to save 2/3rds of your income and invest all of it in a safe 5% yield. Then you'll have over $600K in the bank, home prices will have come down and you'll have 3 years of high salary history (which will grant you more freedom and better deals with banks). If you want to get into a house right now (which I would strongly advise against), don't stretch above a $1.6M house. Plan wisely! Good luck.

This post is drenched in brilliance, thanks a ton friend.