The rain thrashed our office windows hard one February Friday in San Francisco. The weatherman encouraged us to stay in and avoid the roads if we could. Most people would be glum, but not my friends and I. Rain during the winter in SF means lots and lots of snow in Lake Tahoe! My buddies and I decided to take a 2.5 hour drive up to Sugar Bowl and hit the slopes that Saturday. A total of 2 feet of fluffy powder fell overnight and we were in snowboarding heaven!
When we returned that evening, our legs were sore but our faces beamed with smiles as we reminisced our daring jumps off of several of the steepest slopes. We had no fear because the landing zone was soft. The very next day in SF, the sun was beaming down a warm 76 degrees and we decided to play some tennis at the local park. It was that exact moment when I knew that San Francisco was the place I wanted to live for as long as possible. Months later I bought my first place.
BUYING A HOME IS NOT ABOUT THE MONEY
Knowing when to buy a home is not so much about one’s finances. Everybody knows that you should follow my 30/30/3 home buying guideline where you have 30% of the value of the home saved up in cash, spend no more than 30% of your monthly gross income on the mortgage, and pay no more than 3X your annual gross salary for a home. That is obvious. You aren’t some horny teenager who can’t keep it in his or her pants and buy as soon as a bank says you can. You’re a full-fledged adult who knows the basics of personal finance.
The most important factor in deciding whether you should buy a home is whether you love the environment you are in, and can see yourself living there for years. In addition, you’ve found a career or entrepreneurial endeavor you enjoy. Ask yourself this main question: If you were forced to live in your current location for 10 years, would you be happy, OK, or frustrated? If the answer is ‘happy’, you have yourself a winner.
HOME BUYING IS REALLY THAT SIMPLE
The key to wealth is simply being in the game for a long enough period of time. Larry accumulated $5.7 million in his 401K because he invested for 35 consecutive years at his firm. It’s the same thing with owning a home. Thanks to inflation, and an ever increasing population, if you buy a house and live there for 20-30 years, you are most certainly going to come out fine. And if nothing else, after 20-30 years, you’ll have a nice little asset to call home, where you can live rent free.
After three years of saving and investing all my money after college, I was sick of renting. I didn’t want to spend more than $2,000/month on a nice one bedroom, and the rental stock really is inferior to the ownership stock here in San Francisco There’s no point in making money if one doesn’t spend it on things that improve the quality of your life.
I knew very well after that glorious weekend that San Francisco was the place I could see myself living for the rest of my life. I had already lived in five different countries, studied abroad in three others, and visited 23 more up until that point, and I just knew I had found myself a winner. Nowhere combines the weather, job opportunities, culture, food, nightlife, and great outdoors like San Francisco.
LIFE IS HOW YOU LIVE IT
Deciding on buying a home is like deciding on a relationship or a marriage. You just know at that point in time, s/he is the person you want to spend the rest of your life with. If you are unhappy or uncertain with your career, haven’t explored enough places, and still don’t know what you want to do in life, renting is an absolutely fantastic choice. If you do happen to know early on what you want to do and where you want to live, then by all means go for it.
Post updated as of 1/1/2014. We are in a rip roaring bull market in housing now!
Recommendations For Protecting Your Assets And Saving Money
* Manage Your Finances In One Place: The best way to become financially independent and protect yourself is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 25+ difference accounts (brokerage, multiple banks, 401K, etc) to manage my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing and how my net worth is progressing.
* Check Your Credit Score: Take a moment to check your free TransUnion credit score through GoFreeCredit.com, a company I trust. 30% of credit reports have errors, which could put a serious hamper on your refinancing or new loan borrowing abilities. I had a $8 late payment I didn’t even know I owed crush my score by 100 points come up during my last refinance! The average credit score for rejected mortgage borrowers has risen to 729 due to more stringent lending requirements. Do you know what your score is? If you don’t want the credit monitoring service, simply cancel before the grace period is up.