How to buy a home in a high cost of living area | Living in the Bay Area

by | Buying


If you live in a high cost of living area you may thing you can’t afford to buy a home… Not only can you buy a home I’m going to say you absolutely can’t afford NOT to.  


I’m going to tell you how you can do it, just like I did, and at the end I’m going to reveal my number one best way to buy in a high cost of living area to not only BUY a home to live in but also have a rental at the same time!


Ok, so if you live in a high cost of living area or maybe just moved to one you might be wondering how you can ever buy a home. But let’s be real here, unless you’re currently living with family or splitting expenses with roommates you’re already paying a high price for rent. Why not exhaust every single option to start paying your own mortgage instead of your landlords?


My first suggestion is to adjust your expectations. It’s very common for buyers to start off thinking they need to buy a detached house with 3 bedrooms and 2 bathrooms, but in a high cost of living area this might not be possible as your first home purchase. Now, I understand if you have a family and some kids you might actually need 3 bedrooms and of course that makes sense, but you still have options.


When I bought my first home I was a single 20 something living in Googleville (aka Mountain View). It’s a very high cost of living place, but it’s also my hometown and at the time most of my family and friends still lived there or close by. I could have bought a bigger place in another city like Sunnyvale, Santa Clara, Milpitas, San Jose, Livermore, etc.. for a lot less money, but at the time I didn’t want to. So instead I opted to buy a small 1 bedroom condo. It was just me and my dog so I didn’t really NEED a house or more bedrooms. Now, I will mention that this was not my first choice. I had actually tried to pursue a friend or two and even a cousin into buying a house together and at the time we could have easily done it right there in Mountain View, but the timing wasn’t right and that just didn’t work out, so I went for the only other option I could afford which was a small condo.


So if you have more people in your household than just yourself you might need a bigger place. There are a lot of condos and townhomes with 2, 3, and even 4 bedrooms around. Some, but not all, tend to be priced lower than buying a detached single family home in the same area. The benefit to buying a condo or townhome is they tend to require less maintenance than a single family home. There’s less yard space you’re responsible for so less of your time will be spent pulling weeds or cleaning up your yard. That is a big perk if you spend a lot of time working.


But if you have your heart set on a single family home, but can’t afford exactly what you want, adjust your expectations. Maybe find a smaller home or one that hasn’t been updated since it was built 50 years ago. You can always update a home later.


My next suggestion is to buy a home with the intention of house hacking. No, I don’t mean to buy it and hack it up. House hacking can work in a number of different ways so let me give you a few examples.

Let’s say you qualify for a loan on a 3/2 bath single family home, which is what you’d really like to buy, but that monthly payment is much higher than you’re really comfortable paying. Well, having roommates isn’t just for renters. Homeowners can have roommates too! Take a look at what rooms rent for in your area and see if that makes your monthly expenses more comfortable. In high cost of living area I’ve seen rooms rent for $1000-1500 a month. I know not everyone wants to live with roommates, but don’t think of it as a forever solution. This is a solution that gets you into homeownership, into a home that is more like what you have your heart set on, perhaps a home that you will own longer too. In a few years you may have more income and not need roommates anymore. Or maybe your family will grow or circumstances will change and you’ll have another income earner in the family. You could even refinance your loan after a few years after you’ve built up some equity and assuming interest rates are favorable, maybe your payment will be more affordable. 


And here is my bonus tip to buying in a high cost of living area…


Buy a detached single family home, in a city that allows for flexible ADU permitting, and search for a house that has an existing floor plan that would work well to create a separate rental unit. This is my version of house hacking on steroids. When I look a homes I always envision how the floor plan might be reconfigured to create a separate studio or in-law type space. Is there a place for an exterior door that makes sense as an entrance? Does it have a bathroom just for that separate space? Is there an idea space for a kitchenette? Is it possible to separate the heating/a/c so that area has separate controls? 


In fact, this has even worked out for a client of mine recently. He found a 2 bedroom 2 bath condo and when we went to see it I immediately realized the master bedroom could easily be converted to a completely separate studio apartment. This unit just so happened to already have an exterior door from the master and two closets. Once he bought it he converted one closet to a kitchenette, it already had a separate heater in that room, and the only thing left to do is change the bedroom door to a more secure and private solid core if he wanted to rent it out separately. He has lots of options now with this layout. 


Since I bought that first small one bedroom condo I’ve moved a few times. I’m a proponent of owning rental property and as of now we currently own several. When I’m considering a single family home I always look at the floorplan to see how I might get 2 separate spaces out of one house. I might not do it right away, but it give me peace of mind to know if money gets tight I can create some extra income from a property I already have. 


Now I know not everyone sees what I see when I look at floor plans, but if this strategy to home ownership appeals to you then you just found the best agent to work with…. and that’s me. 


Don’t let living in a high cost of living area prevent you from achieving homeownership. 


I’m Maria D’ Aura, the Bay Area Real Estate Mom. If you’re buying or selling in the San Francisco Bay Area I’d love to have a conversation with you.


Maria D’Aura, Realtor® | eXp Realty | 925.400.8488