conversation: User (shouldwebuyahouse): "My wife and I have been seriously considering buying a second house; We are interested in the opinion(s) of [/r/personalfinance](/r/personalfinance). \n\nBasically, the rent in the city we live in is very high. For a 1 bedroom we pay around $2,500/mo and would like to upgrade to a 2+ bed, 1.25+ bath. Rent for this would be around 3500-4500/mo.\n\nWe have found many affordable condos and detached in the city with features that we want for $675k - $800k. Right now we have 30k sitting around in cash with another 40k in IRA's and mutual funds. The housing market is low for what it should be and seems like a good time to buy. By a couple calculations, it seems that we could get into a house for a payement that would roughly equal rent for a comparable (if not smaller) space, which we plan to live in for the next 5+ years.\n\n**Factors**\n\n* We put about $1400/month into cash savings and $5500/month into the market (aside from our maxed out 401k's).\n\n* Current Ages: 27 and 26\n\n* Income: $280,000+/yr gross\n\n* Rental unit on other side of country: $147,000 left with ~15% equity ($1k/mo payment and rented for $1k).\n\n* No debt other than a small used car payment and the mortgage on our rental.\n\n* The rental used to be our primary residence until we relocated for work.\n\n* We are rent controlled right now.\n\n\n**Pros**\n\n* We get into the market here at a good price.\n\n* We have a plan to possibly retire early, and this would add to our nest egg and give us a place to live - our rental is only a 1 bedroom, and we don't want to end up there.\n\n* We would be paying down something instead of giving a landlord thousands of dollars per month (you always need a place to live).\n\n* Our jobs are very secure.\n\n* We likely move up the food chain more with regard to salary in the next 3-5 years.\n\n**Cons**\n\n* We don't have anywhere near 20% sitting around for an $800k purchase, let alone 10% (we used to blow a lot of money).\n\n* If we wait longer, there is uncertainty in home prices rising.\n\n* If we go through with this, our savings would be depleted along uncertainty if either of us lost our job(s) (you never know) andour renter stopped paying.\n\n\nAre we crazy for trying to get into another mortgage?\n\n**Edit**\n\nPlaying around with this tool: http://www.nytimes.com/interactive/business/buy-rent-calculator.html there is not much difference between 5% and 20%. Granted you are assuming a lot of risk if the home value goes down and would save money on interest by having a larger down payment."
  Self: "In your situation I would stay in your rent controlled $2500/month apartment until you save up 20% (beyond your emergency fund). For a $800,000 loan, it will be 3-5 years before you pay interest less than $2500 month (i.e. just more money down the toilet, not even counting PMI). If you continue saving $5500 a month and target most of that towards an eventual down payment, you should be able to save up 20% in just a bit over 2 years."
  User (shouldwebuyahouse): "This is exactly what our inner Jack Bogle is telling us!\n\nOur gambling side is telling us that we can get a 1MM house for 750k right now and in 2 years that will not be the case - compounded with the fact that we really want to get a larger unit.\n\nThus this post :/  Thanks for all the sane replies."
  philasurfer (philasurfer): "&gt;Our gambling side is telling us that we can get a 1MM house for 750k right now \n\nOr you could be getting a 500K house for 750K.  That house was 1mm at the peak of an epic real estate bubble.  Prices may, and possibly likely, never will reach that level again.  Look at Japan. Real Estate prices peaked 30 years ago, and have not recovered since then.\n\nPurchasing real estate as a retirement tool made sense 30  years ago, it does not make sense now.  Put the money into Apple, Facebook and Google stock and you will likely do much better in the long run.  "
  zeroair (zeroair): "&gt; Look at Japan. Real Estate prices peaked 30 years ago, and have not recovered since then.\n\nSerious question: Any suggestions how I can go about looking at their real estate history?  I'd like to know more about what you're describing."
  