Tuesday, September 22, 2009

On Sunday, walking home from Noisebridge, I passed a Home Open sign on 16th. As one does, I wandered inside - real estate porn is irresistible, right? A freshly renovated 6-unit block greeted me, each unit with identical floorplan: 3 bed (sort of), 1 bath. The front-most bedroom is a little questionable - a bit on the small side, and with a bay window onto the street (meaning lots of street noise), it seems better fitted to be a sitting room, but it's arguable either way.

Today I received verbal mortgage pre-approval. Tomorrow... I may put down an offer on one of these apartments (unless you talk me out of it).

Here's why I think this makes sense.

Money is pretty cheap right now. A conforming 5/1 ARM comes in under 4%; 30-year fixed at around 5%. If I get an ARM with a maximally sized conforming loan, I'll be paying ~$1900/month in mortgage. Mortgage insurance, HOA, and property tax will probably add another $600 or thereabouts.

I'm already paying $1650/month rent ($2250/month if you include Mountain View, which I intend to keep if all goes to plan, but could always drop), so it's clearly affordable. But it's more expensive, right? Is it worth it?

Well... maybe it isn't. Leaving aside the tax break on the interest, I have two extra bedrooms and a lifestyle that spends 1-3 months/year away from home, and half of every week sleeping elsewhere the rest of the time. I have no use for a kitchen, and minimal use for living areas. I basically keep an apartment to have somewhere to sleep... and now I'll have two extra bedrooms.

See where I'm going with this? Decent sized bedrooms in this part of town let at close to $1000/month. And, given I'm a part-time resident at best, it might even be workable to slot in a relocating couple or family into the place (which will obviously be unfurnished) at a premium over that again, despite the single bathroom. It might be over-ambitious to aspire to living in SF for free, but this could make it very, very cheap.

Also, I'm willing to take a bet on the real estate market going up from this point. SF hasn't crashed all that badly, but this is the cheapest I've ever seen this size of apartment. And, most important of all, if I commit sufficient cash to the down payment, I can defer the decision on facial surgery for a few more months.

Okay, now shoot me down.

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