Hi, my name is Lee and I'm 24 and just started working as a software engineer after graduating from my MS program back in May. I'm new to the SF Bay Area, and I am shocked by the housing prices! I currently split a 2 bedroom apt for $1800/month. All my finances can be seen at leeonlife.com.
Basically, my question is does anyone know how to reduce housing cost to ERE friendly levels ($200 - $400) per month in this location? And what do you guys think about buying vs. renting?
SF bay area and ERE
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jacob
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Maybe ...
http://belmont-ca.patch.com/listings/be ... ailer-park
Or if you're adventurous, look into liveaboard slips at nearby marinas. (Last time I checked Berkeley, they were 200 for the slip + 120 per person/month --- I heard that Southbay is less).
Or rent a house and get more people in on it. The peninsula has a lot of geek-houses of young professionals.
http://belmont-ca.patch.com/listings/be ... ailer-park
Or if you're adventurous, look into liveaboard slips at nearby marinas. (Last time I checked Berkeley, they were 200 for the slip + 120 per person/month --- I heard that Southbay is less).
Or rent a house and get more people in on it. The peninsula has a lot of geek-houses of young professionals.
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secretwealth
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Great blog, Lee--I've subscribed.
My secret to cheap housing in America is simple: don't be a racist.
I only know the NYC market very well and never lived in SF, but I imagine the same principle applies. Here in NYC, you have the very expensive Upper West Side and Upper East Side, where a studio is around $1500-2000/mo. Less than a mile away (much less in many cases) is Harlem, where you can find 2 bedrooms for the same price.
Most white people, however, would never even dream of moving to Harlem and feel a need to pay the racist premium. The same excuses are usually trotted out about schools, crime, etc., but I really think it all boils down to racism. The fact is that a lot of whites and upper middle class people (both white and non-white) have been moving to Harlem and the crime rate in the area is lower than the crime rate in the UWS/UES was just 15-20 years ago. Crime in America is at a record low, so just about any neighborhood is safe relative to what we grew up with.
So for the non-racist, there are incredible deals to be had. You have a market advantage by being okay with living around people who have a different skin tone.
The same applies for buying property in NYC--a 1 bedroom co-op in Harlem can cost less than $100k. A similar unit in a similar building would cost $300k just a mile away.
My secret to cheap housing in America is simple: don't be a racist.
I only know the NYC market very well and never lived in SF, but I imagine the same principle applies. Here in NYC, you have the very expensive Upper West Side and Upper East Side, where a studio is around $1500-2000/mo. Less than a mile away (much less in many cases) is Harlem, where you can find 2 bedrooms for the same price.
Most white people, however, would never even dream of moving to Harlem and feel a need to pay the racist premium. The same excuses are usually trotted out about schools, crime, etc., but I really think it all boils down to racism. The fact is that a lot of whites and upper middle class people (both white and non-white) have been moving to Harlem and the crime rate in the area is lower than the crime rate in the UWS/UES was just 15-20 years ago. Crime in America is at a record low, so just about any neighborhood is safe relative to what we grew up with.
So for the non-racist, there are incredible deals to be had. You have a market advantage by being okay with living around people who have a different skin tone.
The same applies for buying property in NYC--a 1 bedroom co-op in Harlem can cost less than $100k. A similar unit in a similar building would cost $300k just a mile away.
Rents have recently skyrocketed here. People are bidding up asking rents, bribing managers, etc. that said, if you stay in the same place for years, rent control can set you up.
One strategy is the bankroll a house. Say, a 3 or 4 bedroom place and then sublet the rooms. But don't split it 3 or 4 ways, charge a market rate for the room. You basically get a subsidized room at the cost of managing the roommate situation (taking a hit during vacancies) etc. You need to qualify though, so you may do the same with a 2br for less benefit.
By the way, there are no 100k condos in sf. Ou can get a studio in the tenderloin for 150-200k.
One strategy is the bankroll a house. Say, a 3 or 4 bedroom place and then sublet the rooms. But don't split it 3 or 4 ways, charge a market rate for the room. You basically get a subsidized room at the cost of managing the roommate situation (taking a hit during vacancies) etc. You need to qualify though, so you may do the same with a 2br for less benefit.
By the way, there are no 100k condos in sf. Ou can get a studio in the tenderloin for 150-200k.
Thanks for all the suggestions. One of the problems is that my job is in the expensive area of town (Belmont) and all the affordable housing (definitely taking a non-racist attitude) is in the East Bay. So even though I may be able to save $200 - $300 a month in rent over there, I'd have a $200+ increase in transportation cost (there is a $6 toll one way from east bay to Belmont 
). Public transit is not really an option for my office because it is over 3 miles from the station.
I do like the idea of boat living. I may try that when my lease is up here. I agree wholeheartedly with the decluttering philosophy of ERE. I also like the idea of trying to find an equal paying job that is located in the East Bay. That would make saving on housing so much easier. Buying a 3 or 4 bedroom place and subletting the rooms would be good if I could qualify. Probably wouldn't be able to do that for 2 years+ though even in the East Bay.
). Public transit is not really an option for my office because it is over 3 miles from the station.I do like the idea of boat living. I may try that when my lease is up here. I agree wholeheartedly with the decluttering philosophy of ERE. I also like the idea of trying to find an equal paying job that is located in the East Bay. That would make saving on housing so much easier. Buying a 3 or 4 bedroom place and subletting the rooms would be good if I could qualify. Probably wouldn't be able to do that for 2 years+ though even in the East Bay.
Go to craigslist and look under "rooms/shared" and put in a max limit of $400 (or whatever you want to spend). There is not a lot of supply, but there are rooms available in your range on the peninsula. You can also search for apartments this way too and if you split a 1br / studio with another person you could probably also approach $400-$500.
Hi Lee,
You're paying an awful lot. When I graduated in 98 I just stayed in the garage I was renting in the country club area of Los Altos. Lived there five years even with a healthy engineers salary during dot com insanity. This made a huge difference in fact, it allowed me to turbocharge my investment plan. It looked insane because most with my income bought or rented nicer homes.
I like the non racist post. Good when you're young, single and have nothing to steal. Drive a junk car with an am fm radio. Know when and where you can go out at night. Once you get your groove you're existing. I guess you gotta ask yourself how bad you want to FIRE.
Rent vs. buy? That depends on what kind of an investor you are. A few years ago a smart young guy asked me this and I answered it in a novel way. I'm a perpetual renter incidentally. I took my roommate in grad school (pre garage days) and calculated through our then ten year careers in the valley ex post facto. I knew roughly what he earned, his house cost and closing date, loan rates and cost of living, tax, etc.. Whip out an HP 12c and calculate his net worth. It was really low. This calc was done before the downturn too. I'd beat him by a longshot...but I had good investment returns. Bottom line, my investments did better than his investment.
Everyone who does the rent buy comparison likes to see monthly payments, equity per payment and rent thrown away. I'd done that one and it wasn't as enlightening as a real time experiment between two equally educated engineers saving money. What the former calculation lacks is what happened to all the money you saved? Okay, and that brings us back to what kind of investor you are.
For my friend who hates risk and is of average imagination it was a good decision to buy. Bottom line is he cannot be me but he is the best him I can foresee. Depends what you want to do. How bad do you want it?
You're paying an awful lot. When I graduated in 98 I just stayed in the garage I was renting in the country club area of Los Altos. Lived there five years even with a healthy engineers salary during dot com insanity. This made a huge difference in fact, it allowed me to turbocharge my investment plan. It looked insane because most with my income bought or rented nicer homes.
I like the non racist post. Good when you're young, single and have nothing to steal. Drive a junk car with an am fm radio. Know when and where you can go out at night. Once you get your groove you're existing. I guess you gotta ask yourself how bad you want to FIRE.
Rent vs. buy? That depends on what kind of an investor you are. A few years ago a smart young guy asked me this and I answered it in a novel way. I'm a perpetual renter incidentally. I took my roommate in grad school (pre garage days) and calculated through our then ten year careers in the valley ex post facto. I knew roughly what he earned, his house cost and closing date, loan rates and cost of living, tax, etc.. Whip out an HP 12c and calculate his net worth. It was really low. This calc was done before the downturn too. I'd beat him by a longshot...but I had good investment returns. Bottom line, my investments did better than his investment.
Everyone who does the rent buy comparison likes to see monthly payments, equity per payment and rent thrown away. I'd done that one and it wasn't as enlightening as a real time experiment between two equally educated engineers saving money. What the former calculation lacks is what happened to all the money you saved? Okay, and that brings us back to what kind of investor you are.
For my friend who hates risk and is of average imagination it was a good decision to buy. Bottom line is he cannot be me but he is the best him I can foresee. Depends what you want to do. How bad do you want it?
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Spartan_Warrior
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Haha, wow, not everyone who avoids ghettos is "racist". There are parts of Baltimore that the black and middle-eastern families in my neighborhood wouldn't dare to tread anymore than I would as a white. The fact is, the quality and proximity of local schools, services, and businesses, the socioeconomics of the neighborhood, and the crime rate ARE the driving forces in determining how location affects pricing. Whether there is a correlation with race in those factors is an entirely different discussion.
Sure, I absolutely agree with "don't be a racist"--as in, don't care what color your neighbors are--but to extrapolate that to "ignore crime rates or neighborhoods' bad reputations" seems like a recipe for getting mugged while walking on your lunch break, catching a stray bullet from the street while showering in your house, or getting stabbed in a mall parking lot (all recent occurrences in the area of Baltimore where I work).
If a neighborhood has a bad reputation my first inclination wouldn't be "That's racist, I'm going anyway". At least do your due diligence.
Disclaimer: I only know Baltimore real estate. All this said, if someone can tell me of an enclave that has low cost of living ONLY because a certain race or races live there and DOESN'T suffer from crime, poor services, crappy businesses, etc--let me know as I'd like to live there. Perhaps Harlem is such a place. Never been.
Sure, I absolutely agree with "don't be a racist"--as in, don't care what color your neighbors are--but to extrapolate that to "ignore crime rates or neighborhoods' bad reputations" seems like a recipe for getting mugged while walking on your lunch break, catching a stray bullet from the street while showering in your house, or getting stabbed in a mall parking lot (all recent occurrences in the area of Baltimore where I work).
If a neighborhood has a bad reputation my first inclination wouldn't be "That's racist, I'm going anyway". At least do your due diligence.
Disclaimer: I only know Baltimore real estate. All this said, if someone can tell me of an enclave that has low cost of living ONLY because a certain race or races live there and DOESN'T suffer from crime, poor services, crappy businesses, etc--let me know as I'd like to live there. Perhaps Harlem is such a place. Never been.
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secretwealth
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Spartan_Warrior
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