What to do with $1M now (in Bay Area)

Question

I am stuck and not sure what to do.

I live in the Bay Area. My primary home right now is one that I bought 50% share with another family member. It is sufficient for now (good schools and commute) and with own private living (in an ADU), so I don't have an urgent need to relocate and purchase my own 100% primary home. I have 1M on hand (half in stock market).

Long term, I would like to purchase a dream home in the Bay Area, but am waiting for the next down cycle for RE.

In the mean time, should I put some of the money into a SFH rental? I don't want to go too high, so am looking for homes that are less than 1M (that is the only way I could afford another 3rd "dream" home in the future). But going for <1M means I have to out of the Bay Area (e.g. Livermore).

The rents are decent *now* but it's not a high tech area, so I expect longer rental vacancies if I have it. What makes this worse is that we don't know what will happen with COVID. I expect Livermore to become a buyer market if government doesn't bail people out further.

What should I do?

Just sit tight another 6 months and see? or just go for it (a rental home)?

JJ P. · Answer

It does appear that we are poised for a downturn, but it hasn't happened yet. Real estate is a big lumbering elephant compared to the nimble stock market, but it's still a gamble to wait to time the market for downturns and upturns.

If you know your market inside and out... what's a good deal; what the micro-neighborhoods are like; which streets bog down during rush hours; etc, then you already have the tools for swooping up a good deal. Good deals and motivated sellers happen in all markets, the person who makes out is the person who has done enough homework to know what a good deal looks like. Knowing your market area allows for safer purchases based on knowledge, not so much market timing. It's like getting to home base one base at a time, instead of waiting for the home runs. The home runs are the funnest, for sure, but investors look for opportunity on the doorstep in every market.

Darius Ogloza · Answer

I have made two purchases recently (closing on one today) well under $1 million in southern Marin (3 beds/2 baths). We fixed and flipped one and are likely to do this again (possible rental after some repairs still debating). In other words, you do not have to go to Tracy or Stockton to find opportunities under $1 million. You have look around. They are out there. There are sellers for whom all cash no contingencies 15 days close means more than the price because of their special circumstances.

I know a guy who has been waiting for the dip since 1987.

Just a few words of encouragement and caution.

I know a guy who has been waiting for the dip since 1987.

Just a few words of encouragement and caution.

David Song · Answer

@Anil Jangity

Sit tight until the end of the year, then make your move.

That is my plan.

Jaron Walling · Answer

I'd split it 50/50 on Tesla stock and the new guy on the block Nikola... feels like a safe investment.

They make different vehicles so it's completely diversified.

What to do with $1M now (in Bay Area)

What to do with $1M now (in Bay Area)

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