Need advice re moving vs. staying put, buying vs. renting - WWBD?

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calirunner
Posts: 11
Joined: Sun May 06, 2018 4:05 pm

Need advice re moving vs. staying put, buying vs. renting - WWBD?

Post by calirunner »

Hi Bogleheads,

This isn’t so much a portfolio question so I didn’t put this in the portfolio request format, but let me know if that would be more helpful.

I’m at a bit of a crossroads and am looking for input on potential next steps. After a late start I feel like I’m finally in a pretty good place financially (in large part, thanks to this forum) and have automated everything to where I can be hands off so long as I live frugally.

…Now what?

I’m 39 and just had a baby (our first). Every year I max out my 401(k) and max out my Roth IRA. My work just gave me a pretty significant raise upon my return after maternity leave (from $110k to $140k), so last month I opened a 529 to which I’m now contributing 1k monthly (after an initial 10k lump sum). I also have a taxable brokerage account to which I just upped my contributions to $1500 monthly (it’s at about $50k currently). I have $15k set aside for emergency expenses and also have close to $100k sitting in a savings account at my bank (earning virtually nothing). I have no debt. All of my investments (per this forum) are in low cost broad market index funds.

My partner just transitioned from freelancing to small business owner (business of one) and makes variable annual income, anywhere between $80k-$110k. He contributes roughly 20% to retirement accounts and invests an additional 30% or so after tax to taxable accounts. He’s got about $120k in savings (in his taxable brokerage account - he keeps low liquidity except for 15k emergency). His only debt is a car lease (when that runs out we’ve decided to either buy the car or buy another used car, whichever makes the most financial sense at the time).

Given our current life stage, we are interested in buying a home (that is what I’d earmarked the 100k for). California (we currently live in Los Angeles) is prohibitively expensive. Ideally, with a new babe, we’d be close to one set of our parents. My parents (and my sibling and his family) are in LA and his parents (and his sibling and her family) are in north Texas. So, we could move to Texas and probably afford a home there, although prices have skyrocketed like crazy (his sister bought a house for $579k two years ago that is now worth $739K). Both my partner and I work remotely (hilariously, we are both working full-time and split shifting to watch our baby - not sure how sustainable this will be in the long run but it’s working OK for now. Neither of our parents would watch our baby full-time, though both could help out here and there, so that wouldn’t have a huge impact on our decision to stay put or move).

So, some of our options:

(1) Inertia. Stay in LA and continue renting (currently paying $2,025/mo - which is below market value); leave the 100k in the savings account to dip into for future kid expenses like childcare, park it somewhere low risk for when we are ready to buy, or lump sump invest it in total market index funds. We’re in an old 2BR apartment with a small kitchen and no backyard but we’re just about walking distance to a huge city park. Also walking distance to coffee shops, restaurants, etc. So, apartment is so-so but we like the neighborhood. That said, living in LA can be tough - it’s crowded and it can be hard to do things (there is no such thing as ‘popping out to run a quick errand’).
(2) Start actively looking to buy in Texas (in this insane market...).
(3) Maybe move to Texas, rent for a while, and get a sense for the market (this sounds smarter to me than buying outright, though moving twice in short succession sounds awful).
(4) We love New Mexico and have also thought about splitting the difference and moving to Sante Fe or Albuquerque - it’s about halfway between both families. But it also sounds kind of sad to not be in the same city as either set of families.
(5) I have a fantasy of ‘trying out’ different cities while we’re both working remotely and before baby is in school. Has anyone done this?
(6) Or….?

Open to ideas, suggestions, words of wisdom, admonishments (lol). Would you stay put or try to buy somewhere (even if we don’t have a pressing ‘need’ to buy other than an overwhelming desire to nest)? If we stay put for a while longer, what to do with the 100k cash? In hindsight of course I wish I’d invested it rather than let it languish in a bank account but hindsight is always 20/20.
randybobandy
Posts: 297
Joined: Fri Oct 05, 2018 10:51 am

Re: Need advice re moving vs. staying put, buying vs. renting - WWBD?

Post by randybobandy »

Congrats on the baby and the raise!

I would choose 3 over 2 if you end up pursuing Texas. I would scratch 5.
I would pursue moving from LA, but continue renting if you stay.
--Randy Bo Bandy
Grammar and spelling matter. | Quoting the OP isn't a necessity.
ArchibaldGraham
Posts: 53
Joined: Wed Dec 27, 2017 12:11 pm

Re: Need advice re moving vs. staying put, buying vs. renting - WWBD?

Post by ArchibaldGraham »

calirunner wrote: Mon Jan 17, 2022 9:35 am Both my partner and I work remotely (hilariously, we are both working full-time and split shifting to watch our baby - not sure how sustainable this will be in the long run but it’s working OK for now. Neither of our parents would watch our baby full-time, though both could help out here and there, so that wouldn’t have a huge impact on our decision to stay put or move).
This quoted section doesn't make much sense to me.

Unless your partner's business is really part-time, the 2 shifts seems very unsustainable to me. Even if you both worked only 6.5 hrs/day (32.5 hrs/week), that would mean your hypothetical shifts might be something like shift 1: 7am-1:30pm and shift 2: 1:30pm to 8pm. Maybe you can cut that down slightly if you can both work while the baby is napping, but that's tough to count on for meetings or anything else where you need to be available at specific times. Even with full-time childcare I think there is some consensus in 2 working parent households that it is really tough to be both a decent worker and a decent parent - without childcare it would seem nearly impossible (unless perhaps one of the parents is really part-time with minimal hard commitments on their time, which would be important detail to add to the initial post if true).

The part about grandparents not watching full-time so that is not a huge decision point also doesn't resonate to me. The helping out from time to time is huge. Even with full-time childcare you need a backup. Setting aside childcare for while you work, you (presumably) might trust them for things that you might not trust a random babysitter for (e.g. taking them to the doctor or watching them overnight).

Of the options provided 1 and 3 make the most sense to me. Assuming you get along with the parents (or parents in law) being close to one of them makes the most sense. It's probably good for the kid and simplifies logistics when they can help out. Moving somewhere random with a little baby doesn't make much sense to me. I would not be in a rush to buy right away after a major relocation as there may be some important nuances that are hard to pick up on from internet research and whirlwind weekends of house hunting.

Other unsolicited advice is that I would also think hard about how much you fund the 529 at this point. It's not clear we have all the info on your situation from the post, but it feels like you may be being pretty aggressive with how much you are funding. If perhaps, you end up staying in California and want to buy in the future you may wish you didn't have too much money tied up in the 529. Also some states offer deductions for 529, so if you truly might move somewhere random then it might be more efficient to fund a 529 later if you wind up somewhere where you can deduct the contributions. I would consider pausing on the 529 until at least you have a better sense for where you will be living longer term.
Topic Author
calirunner
Posts: 11
Joined: Sun May 06, 2018 4:05 pm

Re: Need advice re moving vs. staying put, buying vs. renting - WWBD?

Post by calirunner »

randybobandy wrote: Mon Jan 17, 2022 9:45 am Congrats on the baby and the raise!

I would choose 3 over 2 if you end up pursuing Texas. I would scratch 5.
I would pursue moving from LA, but continue renting if you stay.
--Randy Bo Bandy
Thanks, Randy! And thank you for your two cents :happy
Topic Author
calirunner
Posts: 11
Joined: Sun May 06, 2018 4:05 pm

Re: Need advice re moving vs. staying put, buying vs. renting - WWBD?

Post by calirunner »

This quoted section doesn't make much sense to me.
I understand why you'd say that. The math didn't add up for me either when I tried to map it out. But she sleeps enough (and I can work while nursing her) that we've been able to make it work so far. (In case you are genuinely interested... partner typically works 5a-noon or so and I am usually able to get 3+ hours of work in during that time while she sleeps/eats, and then I pass her over for the afternoon, relieving him periodically so he can squeeze things in here and there). We've both also had to put some time in over the weekend. As I said, likely not sustainable long-term (people tell me once she walks it's game over). But boy does she make the work day more enjoyable.
The part about grandparents not watching full-time so that is not a huge decision point also doesn't resonate to me.
Here's what I meant: If one set of grandparents (in either LA or Texas) were willing to watch her full-time (or even half-time), that would very likely be a deciding factor in choosing between LA (where my parents live) and Texas (where his parents live). I hope I didn't imply that I don't value the help having grandparents in town can provide. In fact, that's partly why we want to be in the same city as family (the other, more important reason, is that we are genuinely close to both sets of parents).
Other unsolicited advice is that I would also think hard about how much you fund the 529 at this point. It's not clear we have all the info on your situation from the post, but it feels like you may be being pretty aggressive with how much you are funding. If perhaps, you end up staying in California and want to buy in the future you may wish you didn't have too much money tied up in the 529. Also some states offer deductions for 529, so if you truly might move somewhere random then it might be more efficient to fund a 529 later if you wind up somewhere where you can deduct the contributions. I would consider pausing on the 529 until at least you have a better sense for where you will be living longer term.
Your advice is solicited! Won't being more aggressive up front (and tapering off, rather than ramping up the older she gets) allow more time for compound interest to work its magic? I don't have to be this aggressive for the next 18 years. If something comes along that I want to put my money towards instead, I can do that. For now, I have savings and am actively contributing to a taxable account. Funding my daughter's education is a known goal, while buying a house is still hypothetical. That's my thinking anyway. Open to other thoughts, although I know (from reading this forum) that 529s can be a divisive topic.

If we move to a state that offers a tax deduction, my understanding is that we can roll over the 529 to that state. In any case, neither California nor Texas offer tax deductions for 529s.
randybobandy
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Joined: Fri Oct 05, 2018 10:51 am

Re: Need advice re moving vs. staying put, buying vs. renting - WWBD?

Post by randybobandy »

calirunner wrote: Mon Jan 17, 2022 8:08 pm
randybobandy wrote: Mon Jan 17, 2022 9:45 am Congrats on the baby and the raise!

I would choose 3 over 2 if you end up pursuing Texas. I would scratch 5.
I would pursue moving from LA, but continue renting if you stay.
--Randy Bo Bandy
Thanks, Randy! And thank you for your two cents :happy
I've moved a lot in the last 15 years for work, I'm up to 7 different locations. The closest I've been to family is 9 hours, and the last move was with a wife and a baby so I get the stress of all you are thinking through. I hope you come to the right decision, and don't have to think about it too long!

--Randy Bo Bandy
Grammar and spelling matter. | Quoting the OP isn't a necessity.
Topic Author
calirunner
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Re: Need advice re moving vs. staying put, buying vs. renting - WWBD?

Post by calirunner »

I've moved a lot in the last 15 years for work, I'm up to 7 different locations.
That's a lot of moving! I moved a ton in my 20s and remember thinking it was so easy and everyone else was weird for believing it was difficult. Now with a baby (and admittedly a lot more stuff) it feels like a big deal – and a big responsibility. I think a lot about where I want my daughter to grow up, since it will become such a big part of her identity.
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Re: Need advice re moving vs. staying put, buying vs. renting - WWBD?

Post by Sandtrap »

#3

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Kristopher
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Re: Need advice re moving vs. staying put, buying vs. renting - WWBD?

Post by Kristopher »

What is your estimated purchase price if you move to Texas? You mentioned a $700k home; you might be able to buy in LA for that much.
Topic Author
calirunner
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Re: Need advice re moving vs. staying put, buying vs. renting - WWBD?

Post by calirunner »

So, for those of you voting to keep renting... what do I do with my savings (100k, currently sitting in a bank account not earning anything), if anything? Leave it? Lump sum invest it into low cost index funds at my desired AA? Short-term bonds?
Topic Author
calirunner
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Re: Need advice re moving vs. staying put, buying vs. renting - WWBD?

Post by calirunner »

Kristopher wrote: Sun Jan 23, 2022 12:07 pm What is your estimated purchase price if you move to Texas? You mentioned a $700k home; you might be able to buy in LA for that much.
I don't know. The rule of thumb I've read on this forum is 3x income. So, for us that would be about 650k-750k. But that sounds like a lot to me (based on my income and comfort spending/taking on debt, not based on what houses are going for, lol). I would feel more comfortable maxing out in the 500ks. Unfortunately, that ship has sailed in LA (median home price is $800k).
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