This week we have a guest post for you, put together by Chris Tung. He takes us through his adventure of buying his first condo on the West Coast.
After living and working in New York City for four years, I decided that I was finally ready to move back to the Bay Area. Once I decided to make the move, I found a great job at a startup in San Francisco, which inevitably meant figuring out where I would live and whether I would rent again or take the plunge and buy my first home.
I looked at the market in the Bay Area and realized I was definitely moving from the second most expensive city in the world to the most expensive city. If I decided to rent, I would be paying upwards of $3,000 a month for a comparable 1-bedroom to the one I had on the Upper West Side in NYC. This was a pretty bitter pill to swallow because I always knew I wanted to buy, but paying $3,000 a month for rent would really eat into the amount I could save each month for a down payment.
Keeping this in mind, I knew I needed help with how to proceed on my quest for a new home, so I reached out to Bernard Klein at Blooming Sky. During my conversation with Bernard, we spoke about what I was thinking long term, I mentioned the following: I wanted to pay about the same or less than my apartment on the UWS, I wanted to buy a place in the near future, and because I did well at three startups in NYC, I had a modest amount of funds across my brokerage, savings and checking accounts. After a few meetings, Bernard advised that now might be the perfect time to buy given the insane rent prices, white hot housing market in the Bay Area, and the continued growth of Silicon Valley. But, if I were to buy, it would mean moving to another blossoming city just outside of SF...Oakland!
The Three Things to Know When Looking
Once my mind was set on buying, I began looking at properties around the Bay Area, and I learned a few things pretty quickly:
Whether you’re looking in SF, NYC, or any other city with rapidly rising home prices, you’re going to need to look at the listing price and compare it to comparable homes or “comps” as they’re often called, in the neighborhood. Comps give you an idea of what you’ll actually end up bidding. From my experience, in Oakland and SF you’ll likely be bidding at least 30% above the list price. This meant that if I was looking to spend a maximum of $600,000 for a home I would have to look at listings in the $300,000 - $450,000 range.
When looking at condos, you’ll need to factor in the cost of the monthly homeowners association, or HOA, fees. One place we found had monthly HOA fees of $700! When you’re looking at spending around $2,200 on your monthly mortgage payments, extremely high HOA fees like that could make the difference between eating out or eating ramen every week.
You’re going to look at a lot of stinkers, and that’s okay. With markets the way they are in SF and NYC, people are looking to sell their homes for a nice return, but that doesn’t mean the listings you look at will meet your minimum requirements for comfort. One place we looked was the strangest loft we’d ever seen. It was three floors but no walls, so if you ever wanted privacy you had to keep walking up. Another one we saw was listed as an amazing two-bedroom, but in reality, the bedrooms were tiny, the bathroom was dated, and the kitchen was a hallway. When looking for your first home, it’ll be rough, but when you do find a place that checks of all your boxes, it truly is a magical thing... except of course when you get outbid.
Losing Your Dream Home
Unfortunately, due to soaring home prices, getting outbid is a very real thing. A friend of mine found a place in the suburbs of Pennsylvania, and his bid was accepted even though he bid roughly 10% under the list price.
This won’t happen in the Bay Area and NYC. We found an amazing two-bedroom, two-bath condo, and even though we bid $80,000 above the list price, we lost the condo because another couple put in an offer that was $70,000 more than ours. It was devastating to hear that we didn’t get it, but when you’re looking at neighborhoods that have historically great returns, this will unfortunately happen.
Finding (and Affording) Your Home
After looking at a few more places, we eventually found a one bedroom, one bathroom with a bonus room that was perfect for us. It had everything we were looking for- great area, a one bedroom with some extra space, remodeled kitchen, and a big living room for our TV. The day that our offer was accepted was both the happiest day and the most terrifying day of my life! Why? Because once the offer was accepted it meant that it was time to commit and gather enough funds to afford the downpayment.
In the end, I had to invest almost all my assets to afford the condo, but don’t get me wrong, it was truly the best decision of my life. My mortgage plus taxes and HOA fees are less than anything I would rent in SF. I own property in an area where the price per square foot has grown almost 73% over the past five years and continues to climb. Most of all, I own a home where I can put down roots, invest in, and start a family. Ultimately, buying your first home will be one of the most exhausting things most people will ever do, but with good planning and research, it can be one of the most rewarding experiences of your life.