By Ian Batra
Real Estate Agent at Real Estate Experts
Silicon Valley is home to tech companies such as Google and Facebook. The companies are associated with high pay to workers, which has significantly changed Silicon Valley. In the twentieth century, houses in Silicon valley sold cheaply, and most people termed the houses unworthy. Not in today’s market. Silicon Valley is among the most expensive places in the United States, and the situation will not change soon. Not with Covid 19 and the tech companies continue to employ more people. The average cost of buying a house is currently $1.9 million, and the number of homes does not meet demand. People interested in purchasing a property in the area may wonder if it is essential to cash out all the capital to get a house in Silicon Valley.
Spending all the money by a buyer has merits and demerits, especially when Silicon Valley is the house’s location. Generally, buying a home has advantages because it attracts sellers. Also, it puts a buyer in a position for better deals due to the associated quote “time value of money.” Buying a house is associated with vast advantages, but how many people have cash lying in the bank to cater for a place in Silicon Valley. The number of people with such massive amounts is close to zero, especially first-time home buyers.
Buying a house without a mortgage means that one must have all the money required in the buying process. Most first-time buyers do not have such massive amounts and thus liquidate all their investments, transferring them to one account to put the money together. It is also good to note that Silicon Valley is among the most expensive cities and would require more money. The selling security is altered because some sellers see their deal and attempt to dispose of the house as soon as possible.
Putting all the money into one asset is not a good decision for first-time buyers. Estimating that the buyers earn a salary of $300,000 annually means they would have to have roughly saved for about six years and then invest all the money in one asset. Houses lag in stock which would be a loss on the buyers’ side and lead him to future constraints.
Spending all the budgeted money on the house leads to loose financial leverage, whereby if the house adds value after purchasing, the person who bought it with cash receives less profit than one who used a mortgage.
A $1,9 million home would need a deposit of around $380,000.The amount of deposit is a lot, and not everybody has such amount of money, and a first-time home buyer has the possibility of getting into debt and not saving on maxing out a budget to buy a home. Emergencies are also affected if the buyer decides not to deposit in the accounts and use the money for home buying. Otherwise, the buyer deposits a small amount in the history, and the money might not be enough for contingencies and other unforeseen expenses.
Silicon is associaite with hgh inflation retes.Especially when mega-companies such as google employ more people, it automatically leads to higher prices. The trend has been consistent since 2012. High inflation rates serve as an advantage or disadvantage depending on the reason for buying the house. If first-time home buyers intend to get the house to rent it out or as an investment, it is a good thing since the place is prospected to add value with time, and the buyer will be able to recover his money. However, for first-time buyers buying the property to live there, it might not be a good idea, especially when one considers that it is possible to get a better house in other states at a price that equals the deposit of buying a home in Silicon Valley. In 2018 Silicon valley experienced a drop in prices, which is a
When buying a house, it is good to consider future expenses such as repairs. A home may require new paint and windows fixed after purchase. In most cases, after cashing out all the budgeted money, there might be little to no money to cater for future expenses. The buying process might also be so fast that the buyer does not note any problem in the house, only to realize later that if lenders are involved, some procedures such as inspection are a must-do depending on the lenders.
Silicon Valley is associated with high living costs, from housing to schools in the area. Over the last few years, the place has more older families moving from the home to other states. However, young families have moved to Silicon Valley more than older couples. When deciding on the payment methods, it is always advisable to conduct thorough research to develop the best plan that suits the buyer.
