‘The American dream is not working out here’
theguardian.com
theguardian.com
If you make $1m/yr and are scraping by, I don't care where you live, you're terrible at managing money.
I currently pay $4500/mo to rent a home in California. Because of it's location, the home would cost $2M+ for me to buy. So the debt service / maintenance / taxes is way more than the rental income. You're either renting the house or renting the money (mortgage). The idea that you're throwing money away on rent never considers the gap between rental income and expenses, vaporized down payments and going underwater from falling prices, tax hikes, etc.
I'll probably move into a smaller house soon because I don't need as much space and I've been buying investment homes instead of worrying about my primary residence. My first investment property pays the mortgage and makes money. It's increased in value too but I don't bank on that.
Why buy a home you cannot rent out for more than the debt service? Also - why buy a starter home in California for $1M+. That's fundamentally messed up to spend that much on a home that you know for a fact is not your forever home. The only way to know if it's a good deal is if you can rent it out for more than it costs, or about the same and you're going to be there for ~7 yrs+.
But yes most landlords out here are lucky if they break even. They take tax write-offs and hope for appreciation. Cap rates in Cali are super low and prices are really high.
I've rented 4 different homes in Cali and 3 were owned by family trusts. The one that wasn't made nothing and she ended up selling to get out. I rented that house for $3600/mo and she got 925k for it.
It's about $33k. My only friends that make that much money work in tech. $33k is a comfy yearly salary in Montana.
High W2 income earners are heavily taxed in the US.
45-50% is a better total estimate for a total tax rate.
The last dollar made is taxed at 53% (40% federal, 13% CA), so that's why the 60% number didn't sound horribly off. This is also ignoring FICA and SS taxes, which it's far too late to do the math on :)
Someone earning £1,000,000 in the UK would pay 46% tax.
Not necessarily. Everything in SF/Bay Area will require a compromise. Want to save on real-estate? You will pay in time traveled. Want to save on travel, you pay for somewhere to live. Either way you loose.
For all the hi-tech in these companies the question should be asked, "Why do you have to come to work to do your job?" Is it necessary every day?
I'm pretty sure you'd be able to live in most large cities like a king for USD1M. What is the traffic and parking like?
Tricks like buying out of the super expensive area, meaning paying in time.
Plus they probably want a house in San Francisco itself, which has hyperinflated housing prices.
She didn't say it was their net income either.
I've never seen it done with a seven-figure income though.
1. That's ~$300/mo more than the average 1 BR apartment [1], so seems reasonable.
2. That leaves another $3750/month for non-rent spending money, which itself, more than most Americans earn in salary. (note: this leaves a LOT of room to spend more in rent if you need a 2br, 3br, etc)
So yes. San Francisco is expensive. But if you feel like it's a struggle while earning $160k, you probably have a lot of fat you need to cut in your budget.
[1] https://www.rentjungle.com/average-rent-in-san-francisco-ren...
35 year old me could not live like 25 year old me.
Having a family is expensive, so be sure to cut that fat too.
Yeah, I don't get that. Just pretend you "only" make $160k, save the rest, and you can still buy a house outright after several years.
No idea how they thought moving to LA for a $350k paycut was worth it...
I live in an unfashionable neighborhood south of 280, but even here, you'd be lucky to get a decent 3br for less than a million. So assuming you have a down payment together, you're probably looking at 4k a month in mortgage. You get a tax break, yeah, but you also get property taxes, maintenance, and insurance, so it's a wash.
Child care is the real killer. Standard 8am-6pm child care runs north of $2,500 a month. Same for preschool. If you have two kids, oh man. So now you're looking at
6,500 a month with one kid 8,000 a month with two kids
Keep in mind, if you can afford the child care in SF, odds are you're too high income to qualify for the child care tax break. So all in all, it really is true that it isn't easy to make it on two incomes totaling 200k a year.
Beyond that, though? If you're north of 350k, I'd say this is about expectations. You should be able to make it fine.
There is one strategy - remain a one income family! $120k a year for a family of 4 qualifies for government housing assistance in SF. Developers must set aside a number of units for "middle". It's hard to get, but if you can pull it off, you're guaranteed a lower rent (I think it's about $2500 a month at that income level) and it's intensely rent controlled.
So Silicon Valley employers, take note. Hire a middle aged person with a family for $120k a year, and you can get that highly skilled worker in critical shortage that you've told congress you can't hire at any price, and you can get the taxpayer to cover the gap between the salary you pay and the housing costs in the Bay Area! Seriously, consider the benefits of hiring older people with families.
But seriously, fly me over from EU and I'll sleep in your basement and teach your kids computers, for 2000 per month.
One of the guys I interviewed with said he spent $1,800 a month to rent a single room in a house with a few other people. He didn't even have his own bathroom. My friend that tried to get me the job out there was paying over $3,000 a month for a small 1 bed room apartment across the street from Twitter.
In Atlanta I was renting a 2,600 sq ft warehouse loft for $1425 a month.
The weirdest part was they offered me the job of a Lead Android Developer for $135k. I make almost $160k here in Atlanta as an Application Architect, and it costs way less to live here. Glad I turned that down.
I used to live right next to the Beltine near PCM in a 1 bedroom, 1 bath, 900 sqft, all upgraded unit for less than $1200 a month. Now the prices are ridiculous (for ATL) - $1800+ for a one bedroom.
But it's still a hell of a lot cheaper than our most expensive cities. You would think the salaries would be adjusted accordingly, but from my experience job hunting, they aren't to any appreciable degree.
There are plenty of great software developer jobs in major cities paying 130K+ where the cost of living is a lot lower.
I miss very few things about SF besides the weather, and if I missed it that much I would move to SoCal. The quality of life does not match the price.
Regardless, my take home pay stayed the same, and my rent went way down for a house instead of an apartment. My only regret is that I stayed in SF as long as I did.
> "He said he won’t miss some of the more mundane day-to-day costs, like spending $8 on a bagel and coffee or $12 on freshly pressed juice."
What. The. Hell. There are so many ways to save money that people just flat out ignore or pretend don't exist. This is much more about expectations of how they should be able to live rather than actual struggles. This article isn't going to go over well.
Put another way: How far out does one have to live to house a family of 3 or 4 affordably with respect to a 160k salary? Lets say, hypothetically, 2000 sq ft dwelling of some kind (house, condo, rowhome), good school district, for ~$2500-3500/mo - rent or mortgage? Or if that's a ridiculous question for the Bay Area, let's say 35-40% DTI and call it $5000/mo.
Speaking anecdotally, when I lived in the DC area, it ran me ~2400/mo for my 900 sq ft rowhouse in a good zip code walkable to the metro. The problem being that a 3rd bedroom would put me north of 600k (closer to 750k today) for a home if I wanted to be in the same zip code, or move outside the beltway and commute 90 minutes. I moved... to northern new england.
Notice the peninsula (where a lot of the good school districts are) is pretty empty. Also most houses go for a large percent above asking.
Of course, if you can find work in northern New England, things are much cheaper. I was visiting the folks this weekend, and my mom was showing me listings in the paper for four-bedroom houses with acres of back yard for $800/month, with heat and utilities included...
This is the core problem.
A 20-30 min. bart ride from East Bay to SF is not only reasonable but decreases your rent by half. The people in the article don't have a solid grip on reality.
http://www.nytimes.com/interactive/business/buy-rent-calcula...
Appreciation in the Bay Area and other denser areas have seen prices grow at more than inflation, which is probably attributable to restrictive zoning limiting supply over the long term. I agree that's not sustainable economically, socially, and hopefully politically.