Worth buying an excessive priced house?

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ThankYouJack
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Worth buying an excessive priced house?

Post by ThankYouJack » Mon Sep 18, 2017 8:41 am

My spouse and I grew up in homes where money was a concern. We're in terrific financial and employment shape now and live in a low-medium cost of living area. We have about 15x annual expensives saved after 10 years of saving, plan to work at least part time for a while, and love our current nice, yet modest home. We have two young kids (1 and 4) and trying to decide if a move a few miles away for better schools, a bit better location, and an expensive custom home (custom for experiences - pool, large kids game room, lots of outdoor living space, very large garage for cars, boats, bikes) would be worth the 2-3x annual income mortgage. The area with the great schools is pretty well developed and costs are a premium so would have to spend what seems like quite an excessive dollar amount from our humble upbringing to be more satisfied than we are now.
Anyway, just looking for opinions especially those who were in a similar situation and decided for or against moving to a HCOLA and splurging quite a bit on a home.

UPDATE: I haven't had a chance to go through all the responses yet. But by excessive, I don't mean huge house, it would probably be similar to what we have now. Im often turned off by the huge homes by us which is most of the new construction. The old homes are still much smaller, need more work and cost a lot more than our current home so we'd be sacrafising a ton for hopes of a better school experience for our kids. So we would want to customize it to be based on our desired lifestyle and that along with the cost of land would seem excessive. And I absolutely love water, outdoors and adventure - so the typical poster won't recommend pools and boats and other "money pits" but I've always enjoyed those tremendously and find they don't cost that much if you do a lot of research and are wise about things.
Last edited by ThankYouJack on Mon Sep 18, 2017 1:08 pm, edited 3 times in total.

EHEngineer
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Re: Worth buying an excessive house?

Post by EHEngineer » Mon Sep 18, 2017 8:48 am

In my opinion schools are worth stretching for, but game rooms and oversize garages are not. Can you find any options in the good school area with an older/smaller/cheaper home?
Or, you can ... decline to let me, a stranger on the Internet, egg you on to an exercise in time-wasting, and you could say "I'm probably OK and I don't care about it that much." -Nisiprius

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hand
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Re: Worth buying an excessive house?

Post by hand » Mon Sep 18, 2017 8:55 am

A couple of quick thoughts:

1) More isn't always more - unclear from your post, but many people who grow up with money as a concern feel that their financial success is partially tied to their struggles. Would a bigger house with all the fixings take that opportunity away from your kids? I wouldn't want to deprive kids of good schools, but have a more ambivalent view of all the toys - some add flavor and fun to life, but too much can be worse than too little.

2) While you make the case you have plenty of money, you don't explicitly frame the cost of the new house in terms of retirement and college savings or lifestyle costs. Make sure you can truly afford the upgrade before you committ

3) Along with a big house and a nicer area come larger expected costs (maintenance, furnishing), but potentially large unexpected costs "keeping up with the Jones"

Vanguard Fan 1367
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Re: Worth buying an excessive house?

Post by Vanguard Fan 1367 » Mon Sep 18, 2017 9:11 am

My wife is conservative on vacations, clothes, food, and other things. She wanted a nice house so we took the plunge. Thanks to Bogle and Vanguard, affording the home wasn't an issue. Momma seems to be happier in the nicer house, so I will go with the "happy wife, happy life."

Granted some folks are going to be miserable wherever they are but in my case the wife's attitude makes it worth the expense. The house cost slightly more than twice our annual income.

KlangFool
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Re: Worth buying an excessive house?

Post by KlangFool » Mon Sep 18, 2017 9:31 am

OP,

1) What do you give up with this house?

A) More vacation?

B) Better college for your kid?

2) What do you do with all those extra space when the kids are gone?

3) Would you rather spend more money maintaining the house or spend more money enjoying your life?

KlangFool

ClemsonBogle
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Re: Worth buying an excessive house?

Post by ClemsonBogle » Mon Sep 18, 2017 9:32 am

My issue is that a bigger house means a bigger energy bill and new furniture to fill it, a bigger garage means more toys to fit in it, a pool means more liability insurance and fences for safety, which means even more insurance and maintenance, a nicer school often means required donations OR you have to spend X hours to offset...

I think most on this board are conservative so most aren't going to be trying to help you spend more money. Yes you can probably afford it by the metrics people use, but most people probably don't save as much etc as they would like or retire as early as they would like, or as secure financially as they would like.

I want a pick up, a boat, a vacation home, early retirement, to work part time...etc etc... I really LOVE having friends with BOATS and PICKUPS and VACATION HOMES... they get free accounting and financial advice and i am the resident car guy.

When it comes down to it i end up being conservative because those things that i think well make me happy don't. It's thinking about them, researching them that i enjoy.

I would bet that you end up doing it, and i hope that it works out but for me it wouldn't be worth it.

Afty
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Re: Worth buying an excessive house?

Post by Afty » Mon Sep 18, 2017 9:54 am

EHEngineer wrote:
Mon Sep 18, 2017 8:48 am
In my opinion schools are worth stretching for, but game rooms and oversize garages are not. Can you find any options in the good school area with an older/smaller/cheaper home?
+1. Personally I wouldn't enjoy an excessively large house with a large yard, pool, etc. that I would have to maintain (or pay someone to maintain). I would think hard about whether those things would actually make you happier, or would instead just add more stress and expense.

BrianMc
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Re: Worth buying an excessive house?

Post by BrianMc » Mon Sep 18, 2017 9:55 am

TYJ,

One question: Who has to cut the grass and maintain the landscape? If you don't like doing these things and won't be paying someone to do so, forget it.

new2bogle
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Re: Worth buying an excessive house?

Post by new2bogle » Mon Sep 18, 2017 9:57 am

Depends on your finances.

I would buy if the schools are a significant upgrade. That is important.

I would not buy just to get a pool ("money pit" as one of my neighbors puts it), a bigger garage (just needs to be filled with more things that are expensive) or an outdoor living area.

If you can afford it without it impacting:
1) retirement
2) college savings
3) healthcare (HSA/FSA/etc)
4) Life enjoyment outside of a big house (vacations, eating out, going to cultural events)
then go for it!

Valuethinker
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Re: Worth buying an excessive house?

Post by Valuethinker » Mon Sep 18, 2017 9:58 am

ThankYouJack wrote:
Mon Sep 18, 2017 8:41 am
My spouse and I grew up in homes where money was a concern. We're in terrific financial and employment shape now and live in a low-medium cost of living area. We have about 15x annual expensives saved after 10 years of saving, plan to work at least part time for a while, and love our current nice, yet modest home. We have two young kids (1 and 4) and trying to decide if a move a few miles away for better schools, a bit better location, and an expensive custom home (custom for experiences - pool, large kids game room, lots of outdoor living space, very large garage for cars, boats, bikes) would be worth the 2-3x annual income mortgage. The area with the great schools is pretty well developed and costs are a premium so would have to spend what seems like quite an excessive dollar amount from our humble upbringing to be more satisfied than we are now.
Anyway, just looking for opinions especially those who were in a similar situation and decided for or against moving to a HCOLA and splurging quite a bit on a home.
It is worth buying location *if* that's worth it. By which I mean: schools, proximity to work/ commuting, general neighbourhood amenities (shopping, walkability, nature, lower crime etc.).

House? Less worth it. Space is worth having, and it's often worth extending where you live. But a bigger house costs more to build/ buy, to heat & cool, property taxes, to maintain. Main thing is separate play/ entertainment area for kids from age about 9ish to 18ish. Keeping adults and kids out of each other's hair.

How much do you need the extra space? Americans are amongst the most "over housed" people on the planet (alternative view, the rest of us are underhoused, also a valid viewpoint). You do not necessarily have to join in that "positional arms race" (or "social arms race" as economist Robert Frank dubbed it, I believe). https://en.wikipedia.org/wiki/Positional_good

Admiral
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Re: Worth buying an excessive house?

Post by Admiral » Mon Sep 18, 2017 10:01 am

Not enough info on your financial picture to offer an informed opinion on the potential move, but: pools are a money pit. If you plan to heat it...even more so. I do agree with others that good schools should be a priority, so that is a factor, but I would tend to lean toward a smaller/more affordable house.

Our policy is that we never took out a mortgage that we would not be able to pay on one of our salaries.

staythecourse
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Re: Worth buying an excessive house?

Post by staythecourse » Mon Sep 18, 2017 10:05 am

Valuethinker wrote:
Mon Sep 18, 2017 9:58 am
ThankYouJack wrote:
Mon Sep 18, 2017 8:41 am
My spouse and I grew up in homes where money was a concern. We're in terrific financial and employment shape now and live in a low-medium cost of living area. We have about 15x annual expensives saved after 10 years of saving, plan to work at least part time for a while, and love our current nice, yet modest home. We have two young kids (1 and 4) and trying to decide if a move a few miles away for better schools, a bit better location, and an expensive custom home (custom for experiences - pool, large kids game room, lots of outdoor living space, very large garage for cars, boats, bikes) would be worth the 2-3x annual income mortgage. The area with the great schools is pretty well developed and costs are a premium so would have to spend what seems like quite an excessive dollar amount from our humble upbringing to be more satisfied than we are now.
Anyway, just looking for opinions especially those who were in a similar situation and decided for or against moving to a HCOLA and splurging quite a bit on a home.
It is worth buying location *if* that's worth it. By which I mean: schools, proximity to work/ commuting, general neighbourhood amenities (shopping, walkability, nature, lower crime etc.).

House? Less worth it. Space is worth having, and it's often worth extending where you live. But a bigger house costs more to build/ buy, to heat & cool, property taxes, to maintain. Main thing is separate play/ entertainment area for kids from age about 9ish to 18ish. Keeping adults and kids out of each other's hair.

How much do you need the extra space? Americans are amongst the most "over housed" people on the planet (alternative view, the rest of us are underhoused, also a valid viewpoint). You do not necessarily have to join in that "positional arms race" (or "social arms race" as economist Robert Frank dubbed it, I believe). https://en.wikipedia.org/wiki/Positional_good
I would agree with the above, but would also say if you have the money and have done all the financially responsible things thus far why not spend it on a house? It is the one thing you, your spouse, any guests, and kids can enjoy both for tangible (as mentioned above) and intangible (sense of accomplishment in life).

Keep in mind new house usually means less in maintenance for the first decade or so then a 20+ year old home.

Good luck.
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Watty
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Re: Worth buying an excessive house?

Post by Watty » Mon Sep 18, 2017 10:09 am

EHEngineer wrote:
Mon Sep 18, 2017 8:48 am
In my opinion schools are worth stretching for, but game rooms and oversize garages are not. Can you find any options in the good school area with an older/smaller/cheaper home?
+1

It sounds like you are at a point where moving to a nicer house especially with better schools would be a reasonable choice but this house sounds like it might be more than you really could use. If it is possible that you will have more kids then I would be concerned that you would be stretched too far to get by on one income if you had to. If you have a kid with even moderate and temporary health issues then daycare might not be a realistic option so being able to get by on one income would be a good option to keep open.

One thing you did not mention was college savings for the kids. If buying that expensive of a house would impact your ability to pay for their college that might not be a good tradeoff.

Pools are problematic in that a lot of people don't get enough use out of them to make them worthwhile. Some people eventually spend tens of thousands of dollars to get the pool taken out. There have been a number of threads on this that you can look up.

Pools are huge safety issues too.
Despite decrease, drowning is still the leading cause of unintentional death among children ages 1 – 4; second leading cause of death in children ages 5 – 14 years old
https://www.cpsc.gov/content/new-cpsc-r ... since-2010

When my son was young there were a couple of times when I would not let him go over to play at a friends house because they had a pool and I did not trust the parents to supervise them properly.

I would look for a less expensive house with the better schools without a pool especially if you don't live in an area where the pool is usable most of the year.

Slacker
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Re: Worth buying an excessive house?

Post by Slacker » Mon Sep 18, 2017 10:15 am

ClemsonBogle wrote:
Mon Sep 18, 2017 9:32 am
My issue is that a bigger house means a bigger energy bill and new furniture to fill it, a bigger garage means more toys to fit in it, a pool means more liability insurance and fences for safety, which means even more insurance and maintenance, a nicer school often means required donations OR you have to spend X hours to offset...

I think most on this board are conservative so most aren't going to be trying to help you spend more money. Yes you can probably afford it by the metrics people use, but most people probably don't save as much etc as they would like or retire as early as they would like, or as secure financially as they would like.

I want a pick up, a boat, a vacation home, early retirement, to work part time...etc etc... I really LOVE having friends with BOATS and PICKUPS and VACATION HOMES... they get free accounting and financial advice and i am the resident car guy.

When it comes down to it i end up being conservative because those things that i think well make me happy don't. It's thinking about them, researching them that i enjoy.

I would bet that you end up doing it, and i hope that it works out but for me it wouldn't be worth it.
As an anecdotal point of reference:

No kids at home (but young nieces and nephews are here on occasion which was revealed to the insurance agent during the interview) and moving into a house with a pool raised our combined insurance bill ($1M Umbrella, $300K renter's liability policy) about $10 per month. Kids at home bringing friends over probably would have increased it more, but it wasn't anything to really consider - just don't go out to eat lunch one day per month.

ResearchMed
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Re: Worth buying an excessive house?

Post by ResearchMed » Mon Sep 18, 2017 10:16 am

ThankYouJack wrote:
Mon Sep 18, 2017 8:41 am
My spouse and I grew up in homes where money was a concern. We're in terrific financial and employment shape now and live in a low-medium cost of living area. We have about 15x annual expensives saved after 10 years of saving, plan to work at least part time for a while, and love our current nice, yet modest home. We have two young kids (1 and 4) and trying to decide if a move a few miles away for better schools, a bit better location, and an expensive custom home (custom for experiences - pool, large kids game room, lots of outdoor living space, very large garage for cars, boats, bikes) would be worth the 2-3x annual income mortgage. The area with the great schools is pretty well developed and costs are a premium so would have to spend what seems like quite an excessive dollar amount from our humble upbringing to be more satisfied than we are now.
Anyway, just looking for opinions especially those who were in a similar situation and decided for or against moving to a HCOLA and splurging quite a bit on a home.
What does this mean: "We have about 15x annual expensives saved after 10 years of saving, plan to work at least part time for a while"?
[emphasis added]
Does it mean you plan not to work full time anymore in this new scenario, or that's a good chance anyway?
That doesn't seem to match up with "splurging on a home".

15x expenses is great after 10 years, but you've also got young children, with many years of support ahead...

RM
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tainted-meat
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Re: Worth buying an excessive house?

Post by tainted-meat » Mon Sep 18, 2017 10:18 am

I agree with some of the prior posts regarding kids and a pool.

I would not get a pool with small kids as they can easily fall in and drown (or near-drown which can cause brain damage).

soccerrules
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Re: Worth buying an excessive house?

Post by soccerrules » Mon Sep 18, 2017 10:28 am

POOL ("money pit" as one of my neighbors puts it)

Actually it is hole in the ground you pour money in to.

Put one in 16 years ago when the kids where 6,3, and almost born. Have loved it for the most part, but now it is a really big fountain with a hot tub attached.
Don't let your outflow exceed your income or your upkeep will be your downfall.

bigred77
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Re: Worth buying an excessive house?

Post by bigred77 » Mon Sep 18, 2017 10:53 am

You haven't given specific details but it sounds like you can afford it.

If you can afford it, and want it, then buy it. That's what money is for.

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DaftInvestor
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Re: Worth buying an excessive house?

Post by DaftInvestor » Mon Sep 18, 2017 11:02 am

soccerrules wrote:
Mon Sep 18, 2017 10:28 am
POOL ("money pit" as one of my neighbors puts it)

Actually it is hole in the ground you pour money in to.

Put one in 16 years ago when the kids where 6,3, and almost born. Have loved it for the most part, but now it is a really big fountain with a hot tub attached.
I've had an inground pool for 20 years. The costs have been modest and predictable for me (e.g. NOT a money pit). Its important to research ongoing costs before you buy something - likely your neighbor didn't do so (or doesn't know how to maintain it himself in a modest fashion).

THY4373
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Re: Worth buying an excessive house?

Post by THY4373 » Mon Sep 18, 2017 11:20 am

Honestly this is really going to depend on what you want out of life. I am happy to pay extra for better schools. a good neighborhood and short commute. I made the mistake somewhat earlier in life in buying a big house with a big yard in a very nice neighborhood (it was an older custom built house). Coming from a HCOL to now a LCOL I thought it was awesome how much yard and house I could buy. Over the years I regretted it. In particular the yard. My son once he discovered computers pretty much never played outside. The climate here in the Mid-Atlantic region basically meant that my wife and I didn't spend much time outside either other than a few weeks in Spring and Fall. But I got to spend every darn weekend working on that yard oh how I grew to hate it even in the winter I did some work out there (don't even get me started on sweetgum trees and their seed balls). The size of the house was less of an issue but as other point out it is more maintenance, more stuff to fill and more energy costs. I actually converted a room into an awesome home theater (did it all myself and on a budget) and I did like that but even so it didn't get used that much certainly much less than expected.

My wife and recently separated and she kept the house (bought out my share) and I moved to renting a much smaller house. I love it, much lower operating costs and almost no yard work. Every time I go back to my now wife's place I think to myself about how happy I am I don't have to deal with the yard.

I also agree with others I would only buy a house you can comfortably afford if only one of you is working.

As I get older I have learned that more stuff, rarely equals more happiness which is quite a change from my younger years.
Last edited by THY4373 on Mon Sep 18, 2017 11:24 am, edited 1 time in total.

chicagoan23
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Re: Worth buying an excessive house?

Post by chicagoan23 » Mon Sep 18, 2017 11:22 am

ThankYouJack wrote:
Mon Sep 18, 2017 8:41 am
My spouse and I grew up in homes where money was a concern. We're in terrific financial and employment shape now and live in a low-medium cost of living area. We have about 15x annual expensives saved after 10 years of saving, plan to work at least part time for a while, and love our current nice, yet modest home. We have two young kids (1 and 4) and trying to decide if a move a few miles away for better schools, a bit better location, and an expensive custom home (custom for experiences - pool, large kids game room, lots of outdoor living space, very large garage for cars, boats, bikes) would be worth the 2-3x annual income mortgage. The area with the great schools is pretty well developed and costs are a premium so would have to spend what seems like quite an excessive dollar amount from our humble upbringing to be more satisfied than we are now.
Anyway, just looking for opinions especially those who were in a similar situation and decided for or against moving to a HCOLA and splurging quite a bit on a home.
You answered your own question. I've found that if you love your current home/neighbors/community, it's almost always a bad idea to move to a more expensive one in the "chase for more."

By all means look to move if you need to get into a better school district or if you have run your course at your current house/neighborhood. Otherwise, if you are happy where you are now, then stay put. You, your wife, and your kids are happy now and don't really want anything more. The extra money that you will not be spending on something you don't need or even necessarily want will just be a bonus.

rec7
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Re: Worth buying an excessive house?

Post by rec7 » Mon Sep 18, 2017 11:25 am

I would not do it stay put and save. Then one day you can pay cash for that puppy.
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chevca
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Re: Worth buying an excessive house?

Post by chevca » Mon Sep 18, 2017 11:33 am

I would do it. In fact, the wife and I are doing it now... close next month! :happy

We are homebodies though, and the idea of having a lovely home with space and garage space and all we want is well worth it to us. Even if it is more than we really need. We don't travel or take big vacations. We spend more than we probably need to on things we love though, and our home is one of them. We're not going overboard and doing something we can't afford either.

I say go for it. It sounds like you're in fine financial shape to do so. Why not? I'd also skip the pool though. I say that based on my parents having one when I grew up. I loved it as a kid. But, looking back at all the time my dad spent on it and yes money too... I would never want one of my own. That may be worth it to some though. It was to my dad. He loved it and loved putting in the time. To each their own.

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DaftInvestor
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Re: Worth buying an excessive house?

Post by DaftInvestor » Mon Sep 18, 2017 1:05 pm

OP: I just read your update.
Based upon the fact that you used the word "excessive" it sounded like you have already answered yourself - it sounds like you "think" you are being excessive and buying an "excessive" housse. If you are buying a similar sized house in a nicer area with better schools - I wouldn't use the word "excessive". Maybe you meant "excessively priced house" not "excessive house" - perhaps update your title to get more targeted responses.

An example off your list of "excessive" items: In my case - when we priced out a pool I was initially against it. After some convincing from my spouse and research into actual costs I moved forward. After spending weekends and after-work hours with the kids in it for MANY years (and now enjoying unwinding with a gin-and-tonic next to it) I would hardly call it a Money-Pit. It was one of the best money savers we ever had - far less trips to the beach and other places if we had not had it and years of memories that will be with me forever. I think the only people who call it a money pit are those that buy one without properly researching what the ongoing costs are and understanding how it will fit in with their lifestyle (e.g. if you will never be home it probably isn't worth it). Sounds like you already have a good handle on your list of items and how they would pay off - none sound excessive to me.

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Toons
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Re: Worth buying an excessive priced house?

Post by Toons » Mon Sep 18, 2017 1:12 pm

For some,
Less Is More,
Especially as one ages.
Give it some thought. :happy


https://www.fool.com/investing/general/ ... t-suc.aspx
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

ThankYouJack
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Re: Worth buying an excessive priced house?

Post by ThankYouJack » Mon Sep 18, 2017 1:18 pm

Thanks all. Great replies. Thinking back some of my fondest memories from childhood are spending all day at my friends family pool, boating and water sports and other adventures. It's what I still enjoy so not surprisingly I want to provide the same experiences for my kids and their friends.

I also have friends with boats and get multiple free beach trips from friends and their parents with nice beach homes. I always appreciate it tremendously, and I don't want to be a mooch and feel we have the finances to start to pay it forward.

The thing I struggle with the most is the ROI with the schools as we could adjust our current house. The better district gets significantly higher scores on the state ratings but friends in our current district are quite happy with the schools and they'll likely get even better with rapid growth. I would hate to move for the schools and then not be that satisfied.

ThankYouJack
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Re: Worth buying an excessive priced house?

Post by ThankYouJack » Mon Sep 18, 2017 1:20 pm

Toons wrote:
Mon Sep 18, 2017 1:12 pm
For some,
Less Is More,
Especially as one ages.
Give it some thought. :happy


https://www.fool.com/investing/general/ ... t-suc.aspx
I agree less is more, unless you're talking about experiences and love/passion :)

I think the largest house we'd want is 3,000 sqft and that's for a family of 4 (possible more kids to come) and we have many people visit stay with us throughout the year.

bloom2708
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Re: Worth buying an excessive priced house?

Post by bloom2708 » Mon Sep 18, 2017 1:25 pm

After working, sleeping, eating, bathing and family responsibilities, how much time is left?

The answer: not enough

I think you know the answer. But, you may have to do it to find out. The "balance time" is precious. I've come to try to do a lot to protect it.

Every extra chore, duty, gadget, toy subtracts from that "balance time". A boat takes time away from a camper. The camper reduces the time spent using the pool. The 4 wheeler zaps boat minutes.

Striving for FI means that you have more time (less work). The new house will likely push back FI (if that is a goal).
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

rbaldini
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Re: Worth buying an excessive priced house?

Post by rbaldini » Mon Sep 18, 2017 1:39 pm

Mortgage of 2-3x annual income sounds totally fine. I wouldn't call that excessive, especially given your apparently good financial standing. Unless you're expecting a dip in income, or you can think of something you'd much rather do with the money (more savings and investing? family vacations? early retirement? expensive colleges? do you value these more than this house and its neighborhood?), I'd say do it.
Last edited by rbaldini on Mon Sep 18, 2017 1:45 pm, edited 1 time in total.

ThankYouJack
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Re: Worth buying an excessive priced house?

Post by ThankYouJack » Mon Sep 18, 2017 1:40 pm

bloom2708 wrote:
Mon Sep 18, 2017 1:25 pm
After working, sleeping, eating, bathing and family responsibilities, how much time is left?

The answer: not enough

I think you know the answer. But, you may have to do it to find out. The "balance time" is precious. I've come to try to do a lot to protect it.

Every extra chore, duty, gadget, toy subtracts from that "balance time". A boat takes time away from a camper. The camper reduces the time spent using the pool. The 4 wheeler zaps boat minutes.

Striving for FI means that you have more time (less work). The new house will likely push back FI (if that is a goal).
I now work part time and hoping my spouse will do the same at least for a few years when time is a premium, especially before kids go off to kindergarten. I would still feel comfortable splurging on a house with the reduced income. The biggest thing preventing us from being FI seems to be health insurance and health care costs and we want to splurge on food and experiences and not worry about money. But we both enjoy working so becoming FI ASAP isn't our top priority.

DanMahowny
Posts: 47
Joined: Sun Aug 06, 2017 8:25 pm

Re: Worth buying an excessive priced house?

Post by DanMahowny » Mon Sep 18, 2017 1:44 pm

Whenever I'm faced with a decision such as this, I always remind myself . . .

"The things you own end up owning you"

tampaite
Posts: 348
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Re: Worth buying an excessive priced house?

Post by tampaite » Mon Sep 18, 2017 2:27 pm

ThankYouJack wrote:
Mon Sep 18, 2017 8:41 am
We have about 15x annual expensives saved after 10 years of saving, plan to work at least part time for a while, and love our current nice, yet modest home. We have two young kids (1 and 4) and trying to decide if a move a few miles away for better schools, a bit better location, and an expensive custom home (custom for experiences - pool, large kids game room, lots of outdoor living space, very large garage for cars, boats, bikes) would be worth the 2-3x annual income mortgage.
Short answer Yes. Given that you have already saved 15x and this gives you a cushion.

If you will be borrowing entirely for new home with say 20% down, then absolutely go for it.

JGoneRiding
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Re: Worth buying an excessive priced house?

Post by JGoneRiding » Mon Sep 18, 2017 2:58 pm

I bought a house 3x income. Some what of a stretch but not as much as BH would make you think. It mostly is more expensive to heat and maintain. So that is more of an issue than the mortgage (but it is also 11.3 acres so that is relevant) I would do it again! :D

Where I live there is minimal school district difference (there are only 2)

bloom2708
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Location: Fargo, ND

Re: Worth buying an excessive priced house?

Post by bloom2708 » Mon Sep 18, 2017 3:29 pm

ThankYouJack wrote:
Mon Sep 18, 2017 1:40 pm
I now work part time and hoping my spouse will do the same at least for a few years when time is a premium, especially before kids go off to kindergarten. I would still feel comfortable splurging on a house with the reduced income. The biggest thing preventing us from being FI seems to be health insurance and health care costs and we want to splurge on food and experiences and not worry about money. But we both enjoy working so becoming FI ASAP isn't our top priority.
15x expenses wouldn't be a lock for early FI. Would this move up require you to go back to work full time?

I guess I'm not following your scenario without income and other numbers. 10 years of saving puts you in low to mid-30s I assume.

How big would the mortgage be on this new house? Where is KlangFool to come in and set you straight? :wink:
Last edited by bloom2708 on Mon Sep 18, 2017 3:43 pm, edited 1 time in total.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

KlangFool
Posts: 6732
Joined: Sat Oct 11, 2008 12:35 pm

Re: Worth buying an excessive priced house?

Post by KlangFool » Mon Sep 18, 2017 3:40 pm

ThankYouJack wrote:
Mon Sep 18, 2017 1:40 pm
bloom2708 wrote:
Mon Sep 18, 2017 1:25 pm
After working, sleeping, eating, bathing and family responsibilities, how much time is left?

The answer: not enough

I think you know the answer. But, you may have to do it to find out. The "balance time" is precious. I've come to try to do a lot to protect it.

Every extra chore, duty, gadget, toy subtracts from that "balance time". A boat takes time away from a camper. The camper reduces the time spent using the pool. The 4 wheeler zaps boat minutes.

Striving for FI means that you have more time (less work). The new house will likely push back FI (if that is a goal).
I now work part time and hoping my spouse will do the same at least for a few years when time is a premium, especially before kids go off to kindergarten. I would still feel comfortable splurging on a house with the reduced income. The biggest thing preventing us from being FI seems to be health insurance and health care costs and we want to splurge on food and experiences and not worry about money. But we both enjoy working so becoming FI ASAP isn't our top priority.
ThankYouJack,

Why?

A) You have 15 years of expense based on your current expense. What would be the new number with your new increased expense with the bigger house?

<< I now work part time and hoping my spouse will do the same at least for a few years when time is a premium, especially before kids go off to kindergarten.>>

B) Plus, you plan to reduce your income.

C) What is the highest priority for you?

If more time for your kids is the highest priority, you would reduce income. But, why would you spend more on the house?

D) Why do you think you could afford both? Reduce income and increase expense at the same time?

KlangFool

ThankYouJack
Posts: 1788
Joined: Wed Oct 08, 2014 7:27 pm

Re: Worth buying an excessive priced house?

Post by ThankYouJack » Mon Sep 18, 2017 5:51 pm

KlangFool wrote:
Mon Sep 18, 2017 3:40 pm
ThankYouJack wrote:
Mon Sep 18, 2017 1:40 pm
bloom2708 wrote:
Mon Sep 18, 2017 1:25 pm
After working, sleeping, eating, bathing and family responsibilities, how much time is left?

The answer: not enough

I think you know the answer. But, you may have to do it to find out. The "balance time" is precious. I've come to try to do a lot to protect it.

Every extra chore, duty, gadget, toy subtracts from that "balance time". A boat takes time away from a camper. The camper reduces the time spent using the pool. The 4 wheeler zaps boat minutes.

Striving for FI means that you have more time (less work). The new house will likely push back FI (if that is a goal).
I now work part time and hoping my spouse will do the same at least for a few years when time is a premium, especially before kids go off to kindergarten. I would still feel comfortable splurging on a house with the reduced income. The biggest thing preventing us from being FI seems to be health insurance and health care costs and we want to splurge on food and experiences and not worry about money. But we both enjoy working so becoming FI ASAP isn't our top priority.
ThankYouJack,

Why?

A) You have 15 years of expense based on your current expense. What would be the new number with your new increased expense with the bigger house?

<< I now work part time and hoping my spouse will do the same at least for a few years when time is a premium, especially before kids go off to kindergarten.>>

B) Plus, you plan to reduce your income.

C) What is the highest priority for you?

If more time for your kids is the highest priority, you would reduce income. But, why would you spend more on the house?

D) Why do you think you could afford both? Reduce income and increase expense at the same time?

KlangFool
highest priority to me is to live life to the fullest, not if I have 15x or 12x by age Y. Reduced income would be about $140K. Currently debt free. Mortgage would be about 3x with plenty in portfolio to easily cover if "disaster" strikes.

THY4373
Posts: 445
Joined: Thu Mar 22, 2012 3:17 pm

Re: Worth buying an excessive priced house?

Post by THY4373 » Mon Sep 18, 2017 7:12 pm

ThankYouJack wrote:
Mon Sep 18, 2017 5:51 pm
highest priority to me is to live life to the fullest, not if I have 15x or 12x by age Y.
That is a pretty fuzzy priority. Hard to offer any real advice without knowing what your definition of living life to the fullest is. My definition is very likely quite different than yours.

KlangFool
Posts: 6732
Joined: Sat Oct 11, 2008 12:35 pm

Re: Worth buying an excessive priced house?

Post by KlangFool » Mon Sep 18, 2017 7:22 pm

ThankYouJack wrote:
Mon Sep 18, 2017 5:51 pm

highest priority to me is to live life to the fullest, not if I have 15x or 12x by age Y. Reduced income would be about $140K. Currently debt free. Mortgage would be about 3x with plenty in portfolio to easily cover if "disaster" strikes.
ThankYouJack,

<<highest priority to me is to live life to the fullest, >>

To me, it meant spending more time with my family.

<<not if I have 15x or 12x by age Y.>>

Versus not having the flexibility to spend time with my family. Where does the house come into play?

<<Currently debt free. Mortgage would be about 3x>>

I assume that you meant 3 X income = 420K.

<<with plenty in portfolio to easily cover if "disaster" strikes.>>

Really?

A) How long can you last without any income?

B) Can you save any money with the house?

C) Do you have the money to pay for your kids' college education?

Maybe you can afford both: the house and reduced income with more time with the family. But, if you have to choose, which one would you choose?

I am just not a house person. I would trade a bigger house for more vacations.

KlangFool

BanquetBeer
Posts: 137
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Re: Worth buying an excessive priced house?

Post by BanquetBeer » Mon Sep 18, 2017 7:53 pm

Lots of people getting caught up on this. You have a high enough income you can afford the house - just depends how you want to prioritize your re$ource$.

Some comments about pools - might be low cost or could have settlement/root issues that cause $. There is some element of chance - can't prepare for everything. Again, is this worth it to you? Sounds like the pool is more important than the house.

School - what are we talking about? Elementary? How is middle/high school? What advanced classes are available at your current school? Are your kids really academically successful?

Someone posted ''the house will be too big as an empty nester' - that's like 20 years away. Average home ownership is probably less than that.

I would estimate cost and look at my savings targets and spending desires. A more expensive house means less discretionary spending. Maybe a little less savings. But those are my priorities- look at how you would shift your budget and how that makes you feel.

ThankYouJack
Posts: 1788
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Re: Worth buying an excessive priced house?

Post by ThankYouJack » Mon Sep 18, 2017 9:59 pm

BanquetBeer wrote:
Mon Sep 18, 2017 7:53 pm
Lots of people getting caught up on this. You have a high enough income you can afford the house - just depends how you want to prioritize your re$ource$.

Some comments about pools - might be low cost or could have settlement/root issues that cause $. There is some element of chance - can't prepare for everything. Again, is this worth it to you? Sounds like the pool is more important than the house.

School - what are we talking about? Elementary? How is middle/high school? What advanced classes are available at your current school? Are your kids really academically successful?

Someone posted ''the house will be too big as an empty nester' - that's like 20 years away. Average home ownership is probably less than that.

I would estimate cost and look at my savings targets and spending desires. A more expensive house means less discretionary spending. Maybe a little less savings. But those are my priorities- look at how you would shift your budget and how that makes you feel.
The main driver for the move would be for the better schools. We'd also save some driving time. But I find it tough to determine ROI on schools. Current elementary school has advanced classes which I am happy about since my 4 year old is reading and enjoys learning.

estimating the additional expenses Is a good idea. We currently have a very high savings rate so we could get a feel for how much that would shift.

ThankYouJack
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Re: Worth buying an excessive priced house?

Post by ThankYouJack » Tue Sep 19, 2017 6:50 pm

Well, we drove around an area we'd be interested in today and saw some setups that appealed, but they all had huge homes - way bigger than we would want. Even though we could probably afford them it would seem wasteful to us and extra work and definitely not worth the money. I also realized that most of the land for sale is also very tough to develop on (extra slopes, water runoff) or on the outskirts of town which wouldn't be a better location.

And I did a deeper dive on the schools and the ratings are closer than I thought - especially when you compare via demographics and income levels. We'll casually continue to look but I think we'll be good Bogleheads and stay put and keep saving :happy

Leemiller
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Re: Worth buying an excessive priced house?

Post by Leemiller » Tue Sep 19, 2017 7:23 pm

I would move and keep it closer to 2x income. That is still very conservative. The other home with better schools should appreciate more. I grew up with a pool and it was awesome. Now we live up north so I'm not sure if I want to put one in or just join a country club. As for schools and test scores, it is critical who your kids make friends with and living in a certain neighborhood impacts that.

randomguy
Posts: 4691
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Re: Worth buying an excessive priced house?

Post by randomguy » Tue Sep 19, 2017 9:04 pm

ThankYouJack wrote:
Mon Sep 18, 2017 9:59 pm


The main driver for the move would be for the better schools. We'd also save some driving time. But I find it tough to determine ROI on schools. Current elementary school has advanced classes which I am happy about since my 4 year old is reading and enjoys learning.

estimating the additional expenses Is a good idea. We currently have a very high savings rate so we could get a feel for how much that would shift.

I would move just to save driving time. It isn't like you are remotely stretching for the house. You are going from ultraconservative to very conservative.

In the end you really just need to think about what you would do with the money if you don't buy the house. With 15x of expenses, you are going to be FI in 10 years if you don't save another cent. You need to decide if you would be happier retiring early, buying the kids more experiences, living in a nicer house, or whatever else you want to do with money. There really isn't a right answer. It is all about your desires. If you buy a 400k house, the person in the 200k house will consider it excessive and the one in the 600k will think it is inadequate. Neither of those opinions should matter.

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gloss151
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Location: Minneapolis, USA

Re: Worth buying an excessive priced house?

Post by gloss151 » Tue Sep 19, 2017 9:48 pm

ThankYouJack wrote:
Mon Sep 18, 2017 5:51 pm
Mortgage would be about 3x with plenty in portfolio to easily cover if "disaster" strikes.
I'd suggest just buying your next house with cash. Our values get thrown out of whack when we use debt to finance a residence. Also, I've been working 12 years and have 22x annual expenditures in savings and don't feel we save that much, what with much international travel and many dinners out. I need to echo others comments "the more things you own, the more they own you." I'd consider the walk/bike score in the new hood as well.
Aim above morality. Be not simply good, be good for something. -Thoreau

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