Can I afford a $1,400,000 house

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randomizer
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Re: Can I afford a $1,400,000 house

Post by randomizer » Tue Nov 28, 2017 9:40 am

Seems way too much, too soon from my point of view.
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hafjell
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Re: Can I afford a $1,400,000 house

Post by hafjell » Tue Nov 28, 2017 9:41 am

If you buy the house, you are effectively trading your wife's time with your children for a big house. I wouldn't do that.

coastalinvestor
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Re: Can I afford a $1,400,000 house

Post by coastalinvestor » Tue Nov 28, 2017 10:30 am

I am a young physician as well so I can relate to your situation - everyone on this thread has given you excellent advice.

No - with a negative net worth you cannot afford a 1.4M home. Even if your family helps you with the 20% down payment do you really want to be saddled with even more debt?

It’s tough love but you’ll thank us later. Pay down your loans, build up your net worth by maxing out your retirement accounts, save for a down payment on a more reasonably priced home. I can tell you from experience that living debt free feels better than living in a 1.4 M home.

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goingup
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Re: Can I afford a $1,400,000 house

Post by goingup » Tue Nov 28, 2017 10:37 am

White Coat Investor wrote:
Tue Nov 28, 2017 3:37 am
Live like a resident until the loans are paid off. Or at least until you get back to broke.
OP- White Coat Investor has been in your shoes. Check out his post about this very thing.
https://www.whitecoatinvestor.com/live-like-a-resident/

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HomerJ
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Re: Can I afford a $1,400,000 house

Post by HomerJ » Tue Nov 28, 2017 10:41 am

Nate79 wrote:
Mon Nov 27, 2017 9:18 pm
Pay off the student loans. You are broke and in deep debt. I would suggest to have 2 years of income for each of you at these high income levels before trying to buy such a very expensive house.
Yep. This is the bIggest mistake new doctors make. Buying a expensive house IMMEDIATELY after making the big bucks. In this case, you are actually looking to buy the expensive house BEFORE the spouse starts making the big bucks.

Bad idea. Keep living like residents for two years, pay off a big chunk (or all) of your debt, and get yourself in a good financial position before spending money on a house.

KyleAAA
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Re: Can I afford a $1,400,000 house

Post by KyleAAA » Tue Nov 28, 2017 10:48 am

Mathematically you can probably afford it with the $200k gift but you'll probably feel stretched for quite a while with that student loan overhang. If you were otherwise debt free I'd say go for it. As mentioned above, truly "unique" opportunities are very rare. There's always another house you'll love just as much. If you're right and your income really does hit $800k+ over the next few years it will probably turn out to have been fine. How confident in that are you? You should probably wait until that 2nd income actually materializes in any event.

Frisco Kid
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Re: Can I afford a $1,400,000 house

Post by Frisco Kid » Tue Nov 28, 2017 11:30 am

Another no vote here for all the reasons previously mentioned................

gogleheads.orb
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Re: Can I afford a $1,400,000 house

Post by gogleheads.orb » Tue Nov 28, 2017 11:35 am

Yes,
you are both Doctors. The rules you live by are different than the rest of us. It is very unlikely that either of you will ever be out of work for long or ever take a pay cut.

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eye.surgeon
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Re: Can I afford a $1,400,000 house

Post by eye.surgeon » Tue Nov 28, 2017 11:36 am

Perspective--I'm also a physician, I make about the same as the two of you combined and have NW>$1m, mostly because I'm 20 years older. My house is currently worth $600k, in California.

Do yourself a favor and read The White Coat Investor, written by a physician member here, before you buy that house. I'm not saying don't buy it (I personally would not at your point), just go in with eyes open.
"I would rather be certain of a good return than hopeful of a great one" | Warren Buffett

jodydavis
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Re: Can I afford a $1,400,000 house

Post by jodydavis » Tue Nov 28, 2017 12:16 pm

Yes you can (or will be able to) afford it. But as others have pointed out, it's probably a bad idea. Mostly because, although you think you know how you will feel in a few years, you don't really know, and people are largely lousy at predicting how they will feel. If you buy the house and stretch, you will be locking yourself into a specific vision of the future, and won't have the freedom to adapt to changes (something that people seriously undervalue).

1. How will you and your wife feel about your jobs in 2-3 years? Might one or both of you want to change jobs? Although her future job may sound great now, it's impossible to know until she starts working there. (Working conditions, colleagues, changes in the nature of the practice, etc.) If you buy the house, you may be locking both of you into jobs you don't want and restricting your freedom, which can lead to a lot of unhappiness.

2. How will you and your wife feel after you have kids? This one is really impossible to predict. Hopefully your kids will be healthy, but what if they aren't? How will you balance work/life? Might one of you want to take some time off? I know of so many examples where people's priorities change significantly after they have kids. If you buy your house, you may find that it doesn't suit your future lifestyle and priorities. And again, it's impossible to predict how you will feel about this, so better to wait and see.

3. Beware of a feeling of urgency or a need to hop on a "rare opportunity." There's a reason why many bad financial decisions are based on a feeling of urgency, and why many financial scams try to artificially create a sense of urgency. Houses come and go, there are always new houses coming on the market, and there is no one "ideal" house.

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Will do good
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Re: Can I afford a $1,400,000 house

Post by Will do good » Tue Nov 28, 2017 12:30 pm

gogleheads.orb wrote:
Tue Nov 28, 2017 11:35 am
Yes,
you are both Doctors. The rules you live by are different than the rest of us. It is very unlikely that either of you will ever be out of work for long or ever take a pay cut.
There are many experience Doctors here, they know what they are talking about when they say no.
The rules of living below your means applies to everyone.

WhiteMaxima
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Re: Can I afford a $1,400,000 house

Post by WhiteMaxima » Tue Nov 28, 2017 12:36 pm

yes if you will buy in a desirable area close to major job hub. You can easily sell you house and will see appreciation. No if you are buying in an area with no job growth and population growth. You will face tough sell if you move. 1.4 mil still a lot of money. Buy a house in the medium range that everyone in the area can afford.

betablocker
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Re: Can I afford a $1,400,000 house

Post by betablocker » Tue Nov 28, 2017 12:48 pm

Boglehead's tend to be moralistically frugal so think about who you are asking. You have plenty of money and if you are a physician-a very stead income. For everyone telling you about your high negative net worth, you haven't included the assets just the debts. How much is your current house and car worth? You might still be negative but possibly positive with the gift. Also DO NOT buy a cheaper house and then move in a few years. With all the transaction costs and disruption that is a terrible decision. You can afford it buy the house you want.

staythecourse
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Re: Can I afford a $1,400,000 house

Post by staythecourse » Tue Nov 28, 2017 1:17 pm

WhiteMaxima wrote:
Tue Nov 28, 2017 12:36 pm
yes if you will buy in a desirable area close to major job hub. You can easily sell you house and will see appreciation.
Not necessarily and often no. I live in a metro area and can't tell you HOW many million dollar homes in a desirable area in a metro. area were having difficult selling and didn't during the last real estate downturn. What folks don't realize is the difficulty in real estate when the times are TOUGHEST is on the 1million+ homes. There are just so many buyers at that price point and even those who want to buy may have trouble selling their own house if the market is bad.

My situation does not apply universally, but can say outside of learning about investing early in my career NOT buying an expensive house for the first 5+ years was the best move I made/ non made. When you are married with no kids I am not sure WHY you would want a million dollar home? You don't need the space, often you will be living in an area everyone else is much older then you, and you are just adding much more liabilities then you need. I would push the townhome that lives like a SFH at this point. I wouldn't even think about SFH until you are 1-2 kids down the road.

Good luck.

(For the OP EVERY decision in life has a tradeoff. This one may be as simple as million dollar house vs. million dollar portfolio in 5 years. That is BIG trade off.)
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

darrvao777
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Re: Can I afford a $1,400,000 house

Post by darrvao777 » Tue Nov 28, 2017 1:35 pm

it's also important to remember that most doctors don't end up staying with their first job

if that job has a strict non-compete radius, you could be looking at a very long commute, selling the home for a loss, or stay suffering at a job you hate because of your home

my advice is to make sure the job is right for you before committing to such a large purchase (timeframe = typically 1-3 years timeframe, depending on partnership opportunities)

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grap0013
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Re: Can I afford a $1,400,000 house

Post by grap0013 » Tue Nov 28, 2017 1:50 pm

I vote you can afford it but you should not buy it. What if your wife does not like her job? What if after having kids you both want to go down to 0.7 FTE? You probably feel you deserve this house because you have worked hard and paid your dues. Nobody owes you anything. Take your time. Pay down some debts. Once you pull the trigger you get handcuffed to that huge mortgage and other outstanding debts and become forced to work whether you like it or not.
There are no guarantees, only probabilities.

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Devil's Advocate
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Re: Can I afford a $1,400,000 house

Post by Devil's Advocate » Tue Nov 28, 2017 2:33 pm

gogleheads.orb wrote:
Tue Nov 28, 2017 11:35 am
Yes,
you are both Doctors. The rules you live by are different than the rest of us. It is very unlikely that either of you will ever be out of work for long or ever take a pay cut.
Sorry,

Being a physician does not change the math. If anything the situation is worse since physician burnout is a fairly common sentiment. Saddling one in debt only chains one to their job. Having money allows you to have options.

DA

hmw
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Re: Can I afford a $1,400,000 house

Post by hmw » Wed Nov 29, 2017 12:50 am

If both of you are MDs starting out in your careers, I wouldn’t buy a 1.4 million dollars house. First attending jobs commonly don’t work out. You want to stay flexible and be ready to move. A 1.4 million house is going to hard to sell in many markets,and you will pay a lot $ in real estate commissions. I was just talking to a surgeon over lunch recently who built a “dream house”right out of residency. Guess what, it turned out that it wasn’t their “forever”house.

randomguy
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Re: Can I afford a $1,400,000 house

Post by randomguy » Wed Nov 29, 2017 1:22 am

Devil's Advocate wrote:
Tue Nov 28, 2017 2:33 pm
gogleheads.orb wrote:
Tue Nov 28, 2017 11:35 am
Yes,
you are both Doctors. The rules you live by are different than the rest of us. It is very unlikely that either of you will ever be out of work for long or ever take a pay cut.
Sorry,

Being a physician does not change the math. If anything the situation is worse since physician burnout is a fairly common sentiment. Saddling one in debt only chains one to their job. Having money allows you to have options.

DA
We would need to see unemployment numbers for doctors. For example in 2008-9 were there large chunks of doctors being laid off and unable to find work? Did incomes drop significantly. My guess is the answer is no. And burnout happens everywhere. Physicians just think they are special:)

OP is looking at ~700k of income in 8 months. They can obviously afford the house if they want it. And if the house is fairly prices, the cost of undoing this choice is likely to be a couple hundred k max and might even be profitable.

The tougher question is what will make them happier. The FIRE crowd will tell them to live on 40k/year and retire in 4 years. The live it up crowd will tell them they can afford 3 million dollar house. And you can split things in between. If the choice is simply buy a 1.4 million house today or in 2 years, you are talking minimal difference and the unknows will matter more (i.e. is that house worth 1.2 million or 1.6 million in 2 years matters a lot more than a little bit of interest). If you are talking 1.4 million versus say 700k, you are looking at a different question.

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Devil's Advocate
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Re: Can I afford a $1,400,000 house

Post by Devil's Advocate » Wed Nov 29, 2017 1:37 am

randomguy wrote:
Wed Nov 29, 2017 1:22 am
Devil's Advocate wrote:
Tue Nov 28, 2017 2:33 pm
gogleheads.orb wrote:
Tue Nov 28, 2017 11:35 am
Yes,
you are both Doctors. The rules you live by are different than the rest of us. It is very unlikely that either of you will ever be out of work for long or ever take a pay cut.
Sorry,

Being a physician does not change the math. If anything the situation is worse since physician burnout is a fairly common sentiment. Saddling one in debt only chains one to their job. Having money allows you to have options.

DA
We would need to see unemployment numbers for doctors. For example in 2008-9 were there large chunks of doctors being laid off and unable to find work? Did incomes drop significantly. My guess is the answer is no. And burnout happens everywhere. Physicians just think they are special:)

OP is looking at ~700k of income in 8 months. They can obviously afford the house if they want it. And if the house is fairly prices, the cost of undoing this choice is likely to be a couple hundred k max and might even be profitable.

The tougher question is what will make them happier. The FIRE crowd will tell them to live on 40k/year and retire in 4 years. The live it up crowd will tell them they can afford 3 million dollar house. And you can split things in between. If the choice is simply buy a 1.4 million house today or in 2 years, you are talking minimal difference and the unknows will matter more (i.e. is that house worth 1.2 million or 1.6 million in 2 years matters a lot more than a little bit of interest). If you are talking 1.4 million versus say 700k, you are looking at a different question.
I didn't say they were at risk for layoffs. They are at risk of having to work in a job they don't enjoy to pay for their house. And yes, physicians are not special when it comes to burnout. However they do have a helluva lot of time, blood, sweat, and tears invested into their careers.

Of course they can afford payments. But the house could own them and not the other way around. To each their own, but if I were in their situation I wouldn't want to chain myself to the payments.

DA

edge
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Re: Can I afford a $1,400,000 house

Post by edge » Wed Nov 29, 2017 2:12 am

It seems odd that your networth is so small? Did you mean > 10M?
eye.surgeon wrote:
Tue Nov 28, 2017 11:36 am
Perspective--I'm also a physician, I make about the same as the two of you combined and have NW>$1m, mostly because I'm 20 years older. My house is currently worth $600k, in California.

Do yourself a favor and read The White Coat Investor, written by a physician member here, before you buy that house. I'm not saying don't buy it (I personally would not at your point), just go in with eyes open.

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Re: Can I afford a $1,400,000 house

Post by edge » Wed Nov 29, 2017 2:17 am

Yes, you can afford this but I would wait till your debts are paid and your wife is somewhat settled in her job and you have decided this is the place to be. There are lots of 'unique' multi-million dollar homes and depending on the market they are hard to move.

What is the expected PITI?

Taxes could have a big impact. A 1.4MM house in NYS can pay ~35k in taxes per year.

snowox
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Re: Can I afford a $1,400,000 house

Post by snowox » Wed Nov 29, 2017 5:41 am

Afford it? Yes.. Wise...No! I think it was the Millionaire next door where it was written about Doctors and lawyers being the worst at saving. Now I am not meaning to slam you or any Doctor or Lawyer as I know both that are doing quite well BUT let the big pay days happen, get your saving habits in line, see how the adjustments with your wife go and bank some money. There will be plenty of these so called deals that come along in life.

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Re: Can I afford a $1,400,000 house

Post by 2tall4economy » Wed Nov 29, 2017 11:06 pm

Afford as in paycheck to paycheck living? Sure. Afford as in you can meet all your financial goals and have that house? No.

Build your emergency fund, especially given how little you have that you can access in a crisis and how your expenses are. Pay off your debt. Get $1m in taxable assets, then maybe look for a house.

You would have no way to weather one person leaving the worksforce, such as the kids you want in 2 years. And kids change everything and your tastes may change with them.

I’ve got a house in that range and make around what your household does but I wasted my money for 10 years and saved for another 10 and only then decided it was time.
You can do anything you want in life. The rub is that there are consequences.

Nearly A Moose
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Re: Can I afford a $1,400,000 house

Post by Nearly A Moose » Wed Nov 29, 2017 11:30 pm

Yes, you can afford it. We make less than you will combined and are looking at taking on mortgage in a home upgrade than this in a couple years. But I'm going to encourage you to pump the brakes on this one. I'm not in the "you can't afford it because you have negative net worth, etc." camp, and very quickly grew into a mortgage that was a bit tight initially (and have benefited from a lot of appreciation). BUT:

As others have said (and as WCI points out very clearly in his blog), it's incredibly valuable to "live like a resident/law student/B-school student/whatever" for a few years, as that accumulation (whether in the form of an invested nest egg or less debt and thus more cashflow) gives you a tremendous amount of flexibility later on. We weren't spendthrifts before house and kids, and we also spent much more loosely than we do now, and while I don't think we outright wasted money, I could have put that to a much better use now.

I also can't emphasize how much having kids changes things in ways that are very difficult to predict. We bought a house about 11 months before our first kid was born. We bought knowing kids were in the near future and with kid-specific needs. If we could do it all over again, we would not have bought this particular house, and we're very likely going to have to move (possibly even just a few blocks) within the next couple years if we want to stay in our part of town. For example, it turns out one of our kids is a very light sleeper, and because the laundry closet is right outside her room, we can't run laundry when she's asleep (i.e., the only time parents can get anything done); the open-concept living area that sounded great for house parties is a total mess all the time because we don't have a room we can keep tidy from toys; we should have gotten a basement with an in-law suite that gave our parents more room to visit for longer, because our kids don't bunk well together in the same room to make room for guests, etc. None of these things we could have anticipated in advance. So I'd be very reluctant to buy what I assume is at least a reasonably expensive house with kids in the reasonably near future.

I also lean toward the camp that says no house is so unique that you simply must have it. At $1.4M, you're not buying the old house that Benjamin Franklin lived in that only comes on the market every 50 years or whatever. Maybe it's an amazing coastal lot with a very unique view into you city or something, but I'd bet that if you went on Zillow or Redfin, you'd see there are actually a number of houses like that that turn over frequently enough. Of course, let us know if we're missing something, as I do agree some houses are truly unique.

Anyway, short version is consider waiting until you have kids. If you really want to own rather than renting or living where you do, consider a condo or more of a starter home.
Pardon typos, I'm probably using my fat thumbs on a tiny phone.

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emp2b3
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Re: Can I afford a $1,400,000 house

Post by emp2b3 » Thu Nov 30, 2017 1:00 pm

As part of a two physician marriage I would not recommend buying the house yet. It is really hard to know how much your wife will like her first job and this would be a very heavy anchor tying you to the area if a better job were to open up in the next year or two. As others have mentioned it is very common to switch jobs within the first couple of years. Even if you are personally loving your job and think that it will be your "forever" job it will be much easier to actually know what both of you are looking for in your careers and in life (kids etc) in 3-5 years.

There is a reason that WCI recommends living like a resident for a few years. We have done so and it is made a humongous difference in our future prospects. We didn't feel like we had to sacrifice almost anything and now we can be very selective about how much and for how long we work going forward.

Good luck!

pencap75
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Re: Can I afford a $1,400,000 house

Post by pencap75 » Thu Nov 30, 2017 2:43 pm

Another physician perspective.

I'm 42, and 10 years into practice.

I did not make the mistake of overspending with fancy houses/cars/etc when I started to make real money.
Instead I lived like a cheap bastard resident, paid off all debts and saved like crazy and let the power of compounding do its job. Drove an ancient toyota while everyone else was leasing the BMW.

Now, 10 years later, I have a huge 7 figure 401k with plans of easily retiring at age 50. Able to buy a 1M dollar house in suburbs of nyc and a fleet of luxury cars (Boglehead approved CPO and all paid in cash of course).

My similar age colleagues who spent early in their career all appear wealthy with nice houses and cars, but have barely anything in retirement and are likely in debt and will have to work until they are 70. And with the way medicine is going, there is no guarantee any of us will be making any money in the future.
Last edited by pencap75 on Thu Nov 30, 2017 2:53 pm, edited 4 times in total.

Marjimmy
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Re: Can I afford a $1,400,000 house

Post by Marjimmy » Thu Nov 30, 2017 2:50 pm

pencap75 wrote:
Thu Nov 30, 2017 2:43 pm
Another physician perspective.

I'm 42, and 10 years into practice.

I did not make the mistake of overspending with fancy houses/cars/etc when I started to make real money.
Instead I lived like a cheap bastard resident, paid off all debts and saved like crazy. Drove an ancient toyota while everyone else was leasing the BMW.

Now, 10 years later, I have a huge 7 figure 401k with plans of easily retiring at age 50. Able to buy a 1M dollar house in suburbs of nyc and a fleet of luxury cars (Boglehead approved CPO and all paid in cash off course).

My similar age colleagues who spent early in their career all appear wealthy with nice houses and cars, but have barely anything in retirement and are likely in debt and will have to work until they are 70. And with the way medicine is going, there is no guarantee any of else will be making any money in the future.
+1 Well done
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

staythecourse
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Re: Can I afford a $1,400,000 house

Post by staythecourse » Thu Nov 30, 2017 4:06 pm

Nearly A Moose wrote:
Wed Nov 29, 2017 11:30 pm

I also can't emphasize how much having kids changes things in ways that are very difficult to predict. We bought a house about 11 months before our first kid was born. We bought knowing kids were in the near future and with kid-specific needs. If we could do it all over again, we would not have bought this particular house, and we're very likely going to have to move (possibly even just a few blocks) within the next couple years if we want to stay in our part of town. For example, it turns out one of our kids is a very light sleeper, and because the laundry closet is right outside her room, we can't run laundry when she's asleep (i.e., the only time parents can get anything done); the open-concept living area that sounded great for house parties is a total mess all the time because we don't have a room we can keep tidy from toys; we should have gotten a basement with an in-law suite that gave our parents more room to visit for longer, because our kids don't bunk well together in the same room to make room for guests, etc. None of these things we could have anticipated in advance. So I'd be very reluctant to buy what I assume is at least a reasonably expensive house with kids in the reasonably near future.
This is what I was emphasizing in my posts. NO ONE no matter how smart you are will know what needs they want in housing until AFTER having kids. We lived in a townhouse when we went from no kids to 2 kids and then built a house. There is NO way I would have designed the house as we did if it was not for the experience of having/ raising kids. After raising kids you get know what living situation is best for your family. Before that, no chance. That is the difference between intelligence and wisdom.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

Wellfleet
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Re: Can I afford a $1,400,000 house

Post by Wellfleet » Thu Nov 30, 2017 4:13 pm

emp2b3 wrote:
Thu Nov 30, 2017 1:00 pm
As part of a two physician marriage I would not recommend buying the house yet. It is really hard to know how much your wife will like her first job and this would be a very heavy anchor tying you to the area if a better job were to open up in the next year or two. As others have mentioned it is very common to switch jobs within the first couple of years.
My friends in medicine are experiencing this. They took high paying jobs in LCOL areas and are moving on for different opportunities 3-4 years later.

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knpstr
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Re: Can I afford a $1,400,000 house

Post by knpstr » Thu Nov 30, 2017 4:24 pm

You can afford it, but I'd advise against it.

For what it's worth:
My brother and his wife are both MDs. They bought a "reasonable" $750,000 house in the Midwest. It is still way too much, they mention that they sometimes miss their old house worth maybe $200,000 they had in residency and frequently say they were just as happy there. (they have even tossed around the idea of downsizing). His wife now mainly stays home with the kids, but does some part-time work.

My brother is only in his late 30s and getting burned out at work a bit already. He saves for retirement but is now in full debt pay off mode, rather than buying stuff with the "extra" money.

My advice was for him to get debt free and save ~$1,000,000 then you're set for life, that $1M will be ~$5M even without adding anything to it in another 20-25 or so years. Buy what you want after that. Of course he didn't listen to his "little brother", and he will be fine anyway, but I think he sees why that would have made more sense looking back on it now.
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

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avenger
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Re: Can I afford a $1,400,000 house

Post by avenger » Thu Nov 30, 2017 4:38 pm

Another guy (subspecialty surgeon here) recommending you wait on the house buy. You already have a mortgage. A mortgage on your brain. Pay that debt first.
cheers ... -Mark | "Our life is frittered away with detail. Simplify. Simplify." -Henry David Thoreau | [3 fund portfolio: VTI, VXUS, SV fund (yield 3.01%)]

maj
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Re: Can I afford a $1,400,000 house

Post by maj » Thu Nov 30, 2017 4:57 pm

Question:
How many rooms can you be in at the same time?
If the answer is only one, then why do you need a $1.4 million home?

peace

CnC
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Re: Can I afford a $1,400,000 house

Post by CnC » Thu Nov 30, 2017 5:33 pm

aqan wrote:
Mon Nov 27, 2017 11:08 pm
LarryAllen wrote:
Mon Nov 27, 2017 10:41 pm
anon1212 wrote:
Mon Nov 27, 2017 8:20 pm
LarryAllen wrote:
Mon Nov 27, 2017 7:56 pm
I am confused on income. What do you each make now including bonuses?
Right now $330k + $56K.
In 8 months spuose's income goes to 320k + bonus
I would say you don't make enough. I would save more. I think you will be house poor.
Really? The mortgage payment is high but collectively they'll make 650K and I'm guessing they're both doctors.. so the job will be safe enough. If they want they could pay off all the loans in 10-15 years with this much income.
And it would be crazy to take 15 years to pay off your debts making 650k a year.

Let's take everything down a peg for anyone who thinks doctors making 650k are special and thus don't have regular folks economic problems.

Right now let's pretend the OP is a manager at taco Bell making 33k a year and gets a 5k Christmas bonus.

His wife is making 5k part time at Moto Mart and is promised that in 8 months she will get a job in management there.

They have 9k in the bank and 7k saved for retirement and 31k in student loans from their local community college and they still owe 18k on their starter home.

Would you suggest they buy them selves a new $140,000 house or would you say they should wait until Moto follows through and makes her a manager.

Would you say it's ok for a ±30 year old to only have $9k in savings?


Just my 2¢

Hug401k
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Re: Can I afford a $1,400,000 house

Post by Hug401k » Fri Dec 01, 2017 9:32 pm

Give yourself a year or two to 1) see if your wife likes her job 2) send every penny to your debt. Think about how far ahead you'll be in life if you just give yourself 2 years to get rid of the debt.

If you are both doctors (and one is still a resident) how often will you even be in your house for the next year?

kayli69
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Re: Can I afford a $1,400,000 house

Post by kayli69 » Fri Dec 01, 2017 10:41 pm

As a 40 y/o physician, I advise strongly against buying this house. This is a very poor financial decision. Medicine as a field is very unstable with incredible burnout. Minimize your debt and achieve financial independence as soon as possible so you can work on your terms and not be forced to remain at a stressful job you hate because of huge debt. You also do not have children yet. They COMPLETELY change your life as well as your outlook on life. You are likely going to be a completely different person once you have children and they very well could add significant stress to your marriage and career. The amount of time that children take to raise is absolutely incredible.

I chose to buy a very modest house and avoid the flashy cars etc. By age 40 (8yrs in practice), I have saved close to 4 million in my taxable account alone (not including my retirement accounts) and am practicing on MY terms on an income quite close to what your families is projected to be. This feels better than any multi-million dollar house would ever feel. I have cut my work week to 4 days while my partners who made poor financial decisions like you are considering (the 2 million dollar house, 2 Mercedes, airplanes, etc while still underwater in debt) are working 80 hrs per week and seeing patient on saturdays. In contrast, my investment income is now equal to or exceeding my monthly income from work and I am free to spend as much time to see my children or pursue my hobbies as I please.

Eliminate your debt, save a substantial nest egg, let compound interest work its magic, and you will thank me in your 40s

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LucyB
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Re: Can I afford a $1,400,000 house

Post by LucyB » Mon Dec 04, 2017 8:59 am

A few thoughts:

There will be many beautiful houses that come up from time to time, and so I wouldn’t let that be the deciding factor. Especially in the 1m++ price range, you can always find something that will make you happy.

This seems to be a more significant and complex question of how you want to structure your future. Think about what you want for yourselves and your future family.

It can be very exciting to be a two career couple, but know that it is extremely difficult at times. You want to leave flexibility and breathing room so that you always have choices. If you mortgage yourselves to the top or even very significantly, you remove your choices. Having two careers can cause a lot of stress from time to time, and then if you add kids to the equation, it’s even more.

My advice is to live on one salary for now (maybe always) and make a life plan. Buy something that you can afford on one salary and see how that feels. Bank the rest—keep your choices open. It is very liberating to know that you can change course if you need to, or if one of you gets sick, or if you want to take a break from working for whatever reason. The key is to always have your fixed expenses under control.

You don’t really need to worry too much about inflation, as your incomes will keep up with inflation.

Finally, the money you save early is so so valuable. You are better off saving and letting it work for you early rather than starting your savings later. It’s like your portfolio becomes another worker in the family, kicking off annual income. You will be surprised how fast your portfolio grows if you bank one salary early for several years (or always) and let it grow for 20-30 years . . . . Be patient—wait a bit. Keep your options and life choices open . . . .
The above comments are merely an expression of personal opinion and should not be considered advice in any form—tax, legal, financial or otherwise.

supersharpie
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Re: Can I afford a $1,400,000 house

Post by supersharpie » Mon Dec 04, 2017 9:16 am

anon1212 wrote:
Mon Nov 27, 2017 7:36 pm
Looking to possibly buy a 1.4 million dollar house.
We are both in our late 20s, no kids yet but will probably have them in the next 2-3 years. My spouse has a signed contract to make a base of $320k starting August 2018, expects productivity bonus of about $50k/year. Her salary will likely increase to $400k/yr in 2 years. I expect my salary to remain steady.

Income
My current income - $330,000
Spouses current income (will increase in 8 months)- $56,000

Savings
- Cash - $95k
- 403b/401k/Roth IRA - $75k

Debts
- Student loans - $315k
- Mortgage - $175k
- Car loan - $25k

Monthly expenses (including student loan/car/mortgage/daily expenses/savings for preventative maintenance/vacation/gifts/etc) - $10k

Monthly take home home - $22K
My company funds my 401k with $27k/yr

Estimated new mortgage payment (P&I + taxes + insurance) - $9k
Would rent out current home for about $1700/month
Would put $200k down (from a gift) on the mortgage. No PMI on the mortgage, rate of 4.1%.

I would ideally buy a house in about 2 years after I have more in savings but this is a very unique opportunity on a very unique property. I imagine if I pass up this opportunity I would probably be looking at spending a similar amount on a house in 2-3 years anyway. It makes our budget very tight for the next 8 months.
Of course you can afford it! People claiming otherwise are being ridiculous. Can a couple making 150k not afford a 300k home? How is this any different?

Whether it is the best use of your $$$ is an entirely different story.

kathyauburn
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Re: Can I afford a $1,400,000 house

Post by kathyauburn » Mon Dec 04, 2017 9:23 am

anon1212 wrote:
Mon Nov 27, 2017 7:36 pm
Looking to possibly buy a 1.4 million dollar house.
I've never understood the "can I afford" question. The more I've made in my life, the more I've downsized. I like living on less than 10 percent of what I bring in. If I could lower that even more by downsizing further or earning more, I would. To me, freedom is all about freedom from debt and bills. I know people with big houses. They all use just a few rooms. Me? I use two rooms most of the time. That's all I need.

kathyauburn
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Re: Can I afford a $1,400,000 house

Post by kathyauburn » Mon Dec 04, 2017 9:26 am

pencap75 wrote:
Thu Nov 30, 2017 2:43 pm
I'm 42, and 10 years into practice.

I did not make the mistake of overspending with fancy houses/cars/etc when I started to make real money.
Instead I lived like a cheap bastard resident, paid off all debts and saved like crazy and let the power of compounding do its job. Drove an ancient toyota while everyone else was leasing the BMW.
Just what the doctor ordered for a secure, happy life, unburdened life. Well done.

beezquimby
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Re: Can I afford a $1,400,000 house

Post by beezquimby » Mon Dec 04, 2017 9:40 am

Often in these posts the person asking the question already has an answer in mind, any advice that matches their preconceived answer they will listen to and any advice that contradicts it they will dismiss.

kathyauburn
Posts: 192
Joined: Thu May 07, 2015 12:25 pm

Re: Can I afford a $1,400,000 house

Post by kathyauburn » Mon Dec 04, 2017 9:43 am

beezquimby wrote:
Mon Dec 04, 2017 9:40 am
Often in these posts the person asking the question already has an answer in mind, any advice that matches their preconceived answer they will listen to and any advice that contradicts it they will dismiss.
I figured that. Responding in message boards like these is really primarily for one's own enjoyment, if you can call it that. I think the world was better before the Internet, myself. But then again, I'm getting old and have a 20/80 portfolio.

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Raymond
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Re: Can I afford a $1,400,000 house

Post by Raymond » Mon Dec 04, 2017 10:16 am

beezquimby wrote:
Mon Dec 04, 2017 9:40 am
Often in these posts the person asking the question already has an answer in mind, any advice that matches their preconceived answer they will listen to and any advice that contradicts it they will dismiss.
OP hasn't posted in a week.

Is probably muttering, "Those cheap bastard, Toyota-driving residents on Bogleheads did not confirm my thinking! Bah, we'll buy the house anyway, those ramen-eating cheapskates!"

:D
"Ritter, Tod und Teufel"

kathyauburn
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Re: Can I afford a $1,400,000 house

Post by kathyauburn » Mon Dec 04, 2017 10:20 am

Raymond wrote:
Mon Dec 04, 2017 10:16 am
beezquimby wrote:
Mon Dec 04, 2017 9:40 am
Often in these posts the person asking the question already has an answer in mind, any advice that matches their preconceived answer they will listen to and any advice that contradicts it they will dismiss.
OP hasn't posted in a week.

Is probably muttering, "Those cheap bastard, Toyota-driving residents on Bogleheads did not confirm my thinking! Bah, we'll buy the house anyway, those ramen-eating cheapskates!"

:D
Haha. The wife will end up with the house anyway. ;)

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