At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

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Topic Author
stostech
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At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by stostech »

I have an informal survey that I'm hoping will help me figure out appropriate saving targets..

Given the following assumptions:
- 45 years old
- 22 years of high earnings
- Moderate desire to quit current job, with a likelihood of never returning to anything lucrative
- No pension or employer provided healthcare (after quitting)
- Requirement to live in VHCOL area to be close to family
- Desire to purchase a nice house on a large lot. Assume ~3-4 bedroom, 2.5 bath, 2200 sq ft.
- Excluding potential housing and healthcare costs for 2 people, other expenses/travel/hobbies aren't expected to exceed $60k/year total
- Net worth is accessible and invested sensibly for long term growth (60-70% in low cost equity index funds)
What is the lowest total net worth that you would be comfortable purchasing a $3MM house?
What about a $5MM house?

(In this area:
random $3MM house on zillow estimates $3,100/month in property tax and $750/month in insurance
random $5MM house on zillow estimates $5,000/month in proerty tax and $1200/month in insurance)
runner3081
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by runner3081 »

Honestly, never. Excessive price for a house, no matter where it is, in my opinion.

Also, net worth has absolutely zero to do with my mental math on purchasing a house.
000
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by 000 »

runner3081 wrote: Thu Dec 02, 2021 5:06 pm Honestly, never. Excessive price for a house, no matter where it is, in my opinion.
I agree, especially given only two people and 3-4 bedrooms. Like, those are for the kids....
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by z3r0c00l »

If I had about $12 million (e.g. won the lotto) I might consider spending about $3 million on a home, that is a perfectly reasonable price to pay in NYC for a nice place, but the real question is about income. I would also buy a $3 million home if I made $500K a year and only had a million saved up.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by Normchad »

Are you paying with cash? Or financing?

I’d be fine buying it if I had annual income around $1M with stable employment prospects.

If paying cash, I’d say a net worth of $15M.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by 60B4E24B »

Assuming you can cashflow the mortgage on your base salary, I wouldn’t want to spend more than 10-15% of my NW on the downpayment. So $6M NW for a $3M house.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by MaxDakota »

Thinking about it from another direction, we do not want more than 1/3 of our NW in real estate and do not count primary residence in our NW anyway. So 3M home, I would want at least 6M in liquid NW.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by pizzy »

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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by KlangFool »

OP,

Never.

I could retire and buy many beach houses and invite the family to those beaches.

<< Desire to purchase a nice house on a large lot. Assume ~3-4 bedroom, 2.5 bath, 2200 sq ft.>>

Why would I pay 3 m on a lousy house in a congested environment? It is not a nice house.

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climber2020
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by climber2020 »

I’d consider buying a 3M house if I had at least a 1.5M annual income. Net worth would have nothing to do with the decision.
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stostech
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by stostech »

runner3081 wrote: Thu Dec 02, 2021 5:06 pm Honestly, never. Excessive price for a house, no matter where it is, in my opinion.

Also, net worth has absolutely zero to do with my mental math on purchasing a house.
But doesn't it at a certain point? You wouldn't be comfortable purchasing a $3MM house when you have $30MM in the bank?
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stostech
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by stostech »

000 wrote: Thu Dec 02, 2021 5:11 pm
runner3081 wrote: Thu Dec 02, 2021 5:06 pm Honestly, never. Excessive price for a house, no matter where it is, in my opinion.
I agree, especially given only two people and 3-4 bedrooms. Like, those are for the kids....
Or weekly visitors. Or using the rooms for other purposes like a home office or media room...
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by Firemenot »

stostech wrote: Thu Dec 02, 2021 5:52 pm
000 wrote: Thu Dec 02, 2021 5:11 pm
runner3081 wrote: Thu Dec 02, 2021 5:06 pm Honestly, never. Excessive price for a house, no matter where it is, in my opinion.
I agree, especially given only two people and 3-4 bedrooms. Like, those are for the kids....
Or weekly visitors. Or using the rooms for other purposes like a home office or media room...
Totally depends on the geography. In my area of Coastal California nothing special houses sell for over $1,200/sq. ft. So a 2,000 sq ft. home could run 2.5-3 million.
Last edited by Firemenot on Thu Dec 02, 2021 5:54 pm, edited 1 time in total.
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stostech
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by stostech »

Normchad wrote: Thu Dec 02, 2021 5:13 pm Are you paying with cash? Or financing?

I’d be fine buying it if I had annual income around $1M with stable employment prospects.

If paying cash, I’d say a net worth of $15M.
I would likely go the cash route. Thanks for your insight.
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stostech
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by stostech »

KlangFool wrote: Thu Dec 02, 2021 5:45 pm OP,

Never.

I could retire and buy many beach houses and invite the family to those beaches.

<< Desire to purchase a nice house on a large lot. Assume ~3-4 bedroom, 2.5 bath, 2200 sq ft.>>

Why would I pay 3 m on a lousy house in a congested environment? It is not a nice house.

KlangFool
It sounds like what you want has nothing to do with what I want.
Last edited by stostech on Thu Dec 02, 2021 6:00 pm, edited 1 time in total.
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stostech
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by stostech »

pizzy wrote: Thu Dec 02, 2021 5:34 pm Posted today: https://www.financialsamurai.com/income ... ce-points/
Great timing, thank you!
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by Aged Maduro »

There isn't a net worth large enough for me to pay $3,000,000 for a 2,200 square foot house with 4 bedrooms and 2 bathrooms. I live in a nice, upper income neighborhood in the northeastern U.S. and could buy a house like that for about $400,000.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by Bungo »

Assuming I had the income to support an 80% mortgage plus the property taxes for the foreseeable future, I would be reasonably comfortable doing it with $1.2M liquid net worth outside of retirement accounts: $600k for a 20% downpayment, and another $600k in reserve after the house purchase. If I could reasonably expect additional future cash infusions (e.g. RSU vesting) in addition to salary, I might be comfortable with less in reserve, so maybe $1M liquid net worth.

This all of course assumes that I thought that the house would at least hold its value in the long term after adjusting for inflation.

I'd seriously consider moving elsewhere for cheaper housing, though!
Last edited by Bungo on Thu Dec 02, 2021 6:06 pm, edited 6 times in total.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by Firemenot »

Aged Maduro wrote: Thu Dec 02, 2021 6:00 pm There isn't a net worth large enough for me to pay $3,000,000 for a 2,200 square foot house with 4 bedrooms and 2 bathrooms. I live in a nice, upper income neighborhood in the northeastern U.S. and could buy a house like that for about $400,000.
So if your current house happened to cost $3 million and you had a net worth of $50 million, you wouldn’t buy it?
Last edited by Firemenot on Thu Dec 02, 2021 6:02 pm, edited 1 time in total.
feh
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by feh »

runner3081 wrote: Thu Dec 02, 2021 5:06 pm Honestly, never. Excessive price for a house, no matter where it is, in my opinion.
+1

If I had $20M in assets, I might consider it, but it would still feel wrong.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by Firemenot »

feh wrote: Thu Dec 02, 2021 6:02 pm
runner3081 wrote: Thu Dec 02, 2021 5:06 pm Honestly, never. Excessive price for a house, no matter where it is, in my opinion.
+1

If I had $20M in assets, I might consider it, but it would still feel wrong.
It’s actually more the price for the dirt — not the house. :D
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quantAndHold
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by quantAndHold »

I’m reading the question as “I want to buy a nice house, retire, and live happily ever after. How much do I need to do that.” Please clarify if I have it wrong.

First, I’m not at all sure why Zillow would think insurance on a 2200 sq ft house would be $9k/year. We’re in a similar situation with a 2300 sqft house sitting on very expensive dirt, and our insurance is about $1500/year. Is it that high because it’s in a fire zone and it’s basically uninsurable?

Anyway, figuring $130k/year living expenses ($60k, plus $30k for healthcare and $40k for care and feeding of the house), somewhere in the $4-5m range (not including home equity) would support you indefinitely. Really, the value of the house is irrelevant, except in how it affects the property taxes. The cost of keeping the house (property tax, insurance, maintenance) needs to be added to your living expenses. A less expensive place with lower property taxes, or a smaller place with lower maintenance and insurance would reduce living expenses, and so reduce the total you need.

The healthcare number I came up with is the unsubsidized monthly premiums for a bronze ACA plan in San Diego, plus the $7k deductible, multiplied by 2 people. Usually mine is a lot less than that, because I’m very healthy and have never spent the full deductible, and I can generally qualify for a subsidy. But if you’re doing a conservative budget, there you go. If you’re not in California, expect it to cost more than that unless you can qualify for a subsidy.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by azanon »

For a 3M house, at least 600K for the down payment (to avoid PMI), and a (very stable) net income or cash flow that's at least 4x what it would take to make payments on the rest financed at no more than 15 years.

Since the home is so expensive, you want to stick to this fairly strict rule for financing.

That said, as someone of more modest means, I would tend to think if you're considering buying houses that are more than 2M, ideally you're just dropping cash for it. I couldn't even begin to buy something like that, but even I with more modest means, has a cash only mindset from this point forward for anything that I want.
Last edited by azanon on Thu Dec 02, 2021 6:08 pm, edited 1 time in total.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by stostech »

I was hoping people could treat the assumptions as actual assumptions

assumption : a thing that is accepted as true or as certain to happen, without proof.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by azanon »

stostech wrote: Thu Dec 02, 2021 6:07 pm I was hoping people could treat the assumptions as actual assumptions

assumption : a thing that is accepted as true or as certain to happen, without proof.
I looked at those again - I'd probably want 4x liquid net worth for the house. ex. 3M home, 12M liquid net worth minimum. So 9M left after you're done. I have 6x liquid net worth of my house, but i'm in a very low housing cost area (Little Rock, AR).
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by Firemenot »

stostech wrote: Thu Dec 02, 2021 6:07 pm I was hoping people could treat the assumptions as actual assumptions

assumption : a thing that is accepted as true or as certain to happen, without proof.
You might receive more feedback if you provide guidance on your expected annual non-housing/non-healthcare spending. Some might spend 40K. Others 200K. Totally changes the net worth numbers. For myself and on my spending, to purchase a $3 million house where dirt is most of the value and property taxes would be high, I’d be looking at at least a $7-8 million net worth. If I’m still planning to work 10 years that would change the calculus a lot based on future income.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by stostech »

quantAndHold wrote: Thu Dec 02, 2021 6:03 pm I’m reading the question as “I want to buy a nice house, retire, and live happily ever after. How much do I need to do that.” Please clarify if I have it wrong.

First, I’m not at all sure why Zillow would think insurance on a 2200 sq ft house would be $9k/year. We’re in a similar situation with a 2300 sqft house sitting on very expensive dirt, and our insurance is about $1500/year. Is it that high because it’s in a fire zone and it’s basically uninsurable?
Fire and earthquake are the biggest risk factors, though the estimate might still be too high.

Your feedback was helpful so thanks.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by stostech »

Firemenot wrote: Thu Dec 02, 2021 6:13 pm
stostech wrote: Thu Dec 02, 2021 6:07 pm I was hoping people could treat the assumptions as actual assumptions

assumption : a thing that is accepted as true or as certain to happen, without proof.
You might receive more feedback if you provide guidance on your expected annual non-housing/non-healthcare spending. Some might spend 40K. Others 200K. Totally changes the net worth numbers. For myself and on my spending, to purchase a $3 million house where dirt is most of the value and property taxes would be high, I’d be looking at at least a $7-8 million net worth. If I’m still planning to work 10 years that would change the calculus a lot based on future income.
See assumption #7:
- Excluding potential housing and healthcare costs for 2 people, other expenses/travel/hobbies aren't expected to exceed $60k/year total
Thanks for the reply.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by AnnetteLouisan »

I would pay it if it were on the place Vendome and I had 9 mil. And then I would sell it. 😅
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by KlangFool »

stostech wrote: Thu Dec 02, 2021 5:58 pm
KlangFool wrote: Thu Dec 02, 2021 5:45 pm OP,

Never.

I could retire and buy many beach houses and invite the family to those beaches.

<< Desire to purchase a nice house on a large lot. Assume ~3-4 bedroom, 2.5 bath, 2200 sq ft.>>

Why would I pay 3 m on a lousy house in a congested environment? It is not a nice house.

KlangFool
It sounds like what you want has nothing to do with what I want.
You were asking for our opinion. I give you mine. 3 millions is enough to retire on a nice beach some where. Why would I spend it on a small 2,200 sq ft house in a VHCOL area?

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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by azanon »

You'd probably get the most helpful results if you gave the number that really mattered - what's your liquid net worth and cash flow? That'd make answering this quite a bit easier.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by grkmec »

Here is my answer. I am assuming no income other than net worth.

3 million house economically costs 5% a year. That is what I think the true cost is of equity, debt, insurance, maintenance and capex. So that’s a $150k annual nut. I don’t think housing should exceed 30% of annual budget, so I must have an annual budget of $500k a year. In order to spend 500k, it must be capped at 3% of my net worth. So that means $16.6mm net worth.

Do the same math for 5mm house gets me to $27.8mm net worth.

Note, I am defining net worth here an investable assets and thus not including any equity I might use to buy said house.

Now if you have stable recurring income stream away from spending your net worth, then I wound accept a lower net worth threshold.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by Firemenot »

stostech wrote: Thu Dec 02, 2021 6:16 pm
Firemenot wrote: Thu Dec 02, 2021 6:13 pm
stostech wrote: Thu Dec 02, 2021 6:07 pm I was hoping people could treat the assumptions as actual assumptions

assumption : a thing that is accepted as true or as certain to happen, without proof.
You might receive more feedback if you provide guidance on your expected annual non-housing/non-healthcare spending. Some might spend 40K. Others 200K. Totally changes the net worth numbers. For myself and on my spending, to purchase a $3 million house where dirt is most of the value and property taxes would be high, I’d be looking at at least a $7-8 million net worth. If I’m still planning to work 10 years that would change the calculus a lot based on future income.
See assumption #7:
- Excluding potential housing and healthcare costs for 2 people, other expenses/travel/hobbies aren't expected to exceed $60k/year total
Thanks for the reply.
Missed the second clause. Do you have Prop 13 property tax protections? If property tax mil rates can freely change like most places other than California, then I wouldn’t want to cut it too tight.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by stostech »

KlangFool wrote: Thu Dec 02, 2021 6:18 pm
stostech wrote: Thu Dec 02, 2021 5:58 pm
KlangFool wrote: Thu Dec 02, 2021 5:45 pm OP,

Never.

I could retire and buy many beach houses and invite the family to those beaches.

<< Desire to purchase a nice house on a large lot. Assume ~3-4 bedroom, 2.5 bath, 2200 sq ft.>>

Why would I pay 3 m on a lousy house in a congested environment? It is not a nice house.

KlangFool
It sounds like what you want has nothing to do with what I want.
You were asking for our opinion. I give you mine. 3 millions is enough to retire on a nice beach some where. Why would I spend it on a small 2,200 sq ft house in a VHCOL area?

KlangFool
If you read my post you'll see that I was asking for a number based on certain assumptions. You ignored the assumptions and also didn't provide a number, so the reply isn't too relevant to this discussion ;)
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by azanon »

grkmec wrote: Thu Dec 02, 2021 6:19 pm Here is my answer. I am assuming no income other than net worth.

3 million house economically costs 5% a year. That is what I think the true cost is of equity, debt, insurance, maintenance and capex. So that’s a $150k annual nut. I don’t think housing should exceed 30% of annual budget, so I must have an annual budget of $500k a year. In order to spend 500k, it must be capped at 3% of my net worth. So that means $16.6mm net worth.

Do the same math for 5mm house gets me to $27.8mm net worth.

Note, I am defining net worth here an investable assets and thus not including any equity I might use to buy said house.

Now if you have stable recurring income stream away from spending your net worth, then I wound accept a lower net worth threshold.
That's a good answer using backwards math,and made me realize my answer is a bit aggressive. I forget this is a whole lot different than someone like me who'll have a pension and ss, where those amounts are actually relevant.
Last edited by azanon on Thu Dec 02, 2021 6:24 pm, edited 1 time in total.
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stostech
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by stostech »

Firemenot wrote: Thu Dec 02, 2021 6:21 pm
stostech wrote: Thu Dec 02, 2021 6:16 pm
Firemenot wrote: Thu Dec 02, 2021 6:13 pm
stostech wrote: Thu Dec 02, 2021 6:07 pm I was hoping people could treat the assumptions as actual assumptions

assumption : a thing that is accepted as true or as certain to happen, without proof.
You might receive more feedback if you provide guidance on your expected annual non-housing/non-healthcare spending. Some might spend 40K. Others 200K. Totally changes the net worth numbers. For myself and on my spending, to purchase a $3 million house where dirt is most of the value and property taxes would be high, I’d be looking at at least a $7-8 million net worth. If I’m still planning to work 10 years that would change the calculus a lot based on future income.
See assumption #7:
- Excluding potential housing and healthcare costs for 2 people, other expenses/travel/hobbies aren't expected to exceed $60k/year total
Thanks for the reply.
Missed the second clause. Do you have Prop 13 property tax protections? If property tax mil rates can freely change like most places other than California, then I wouldn’t want to cut it too tight.
Yes, prop 13 does apply.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by Firemenot »

stostech wrote: Thu Dec 02, 2021 6:24 pm
Firemenot wrote: Thu Dec 02, 2021 6:21 pm
stostech wrote: Thu Dec 02, 2021 6:16 pm
Firemenot wrote: Thu Dec 02, 2021 6:13 pm
stostech wrote: Thu Dec 02, 2021 6:07 pm I was hoping people could treat the assumptions as actual assumptions

assumption : a thing that is accepted as true or as certain to happen, without proof.
You might receive more feedback if you provide guidance on your expected annual non-housing/non-healthcare spending. Some might spend 40K. Others 200K. Totally changes the net worth numbers. For myself and on my spending, to purchase a $3 million house where dirt is most of the value and property taxes would be high, I’d be looking at at least a $7-8 million net worth. If I’m still planning to work 10 years that would change the calculus a lot based on future income.
See assumption #7:
- Excluding potential housing and healthcare costs for 2 people, other expenses/travel/hobbies aren't expected to exceed $60k/year total
Thanks for the reply.
Missed the second clause. Do you have Prop 13 property tax protections? If property tax mil rates can freely change like most places other than California, then I wouldn’t want to cut it too tight.
Yes, prop 13 does apply.
I know it varies on locality, but for a $3 million purchase price you’re probably looking at a minimum of $37,500 a year in property taxes (1.25% mil rate). So if you pay cash and go with a 3.5% withdrawal rate to pay property taxes + 10K other housing + 60K spending you’re looking at an absolute minimum of $6 million. Even if you firesaled house in a hugely down market seems like you’d be fine. For myself, 60K wouldn’t be near enough unless I made drastic changes.
Last edited by Firemenot on Thu Dec 02, 2021 6:29 pm, edited 1 time in total.
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stostech
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by stostech »

azanon wrote: Thu Dec 02, 2021 6:19 pm You'd probably get the most helpful results if you gave the number that really mattered - what's your liquid net worth and cash flow? That'd make answering this quite a bit easier.
I was trying to approach it differently in the hopes of getting more useful data. If I had said, I have $XXMM then I suspect the replies would have been more along the lines of "yes" or "no" as opposed to specific number cutoffs.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by azanon »

stostech wrote: Thu Dec 02, 2021 6:29 pm
azanon wrote: Thu Dec 02, 2021 6:19 pm You'd probably get the most helpful results if you gave the number that really mattered - what's your liquid net worth and cash flow? That'd make answering this quite a bit easier.
I was trying to approach it differently in the hopes of getting more useful data. If I had said, I have $XXMM then I suspect the replies would have been more along the lines of "yes" or "no" as opposed to specific number cutoffs.
I guess I could see that, but just saying it might save a lot of time if you had a figure either well above or below where it becomes a discussion. Just pulling this out of the air, but (for the 3M house) if you're under 10M liquid I'd' say fairly hard no, and above, ole... 20M, pretty easy to do it. No reason for a long thread outside those boundaries. Between 10-20M, it's a discussion maybe worth having. Scale those numbers up proportionally for the 5M house.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by Normchad »

stostech wrote: Thu Dec 02, 2021 5:50 pm
runner3081 wrote: Thu Dec 02, 2021 5:06 pm Honestly, never. Excessive price for a house, no matter where it is, in my opinion.

Also, net worth has absolutely zero to do with my mental math on purchasing a house.
But doesn't it at a certain point? You wouldn't be comfortable purchasing a $3MM house when you have $30MM in the bank?
It’s all relative. I can’t imagine myself buying a $3M house. But honestly, I live in a house now with a price that would have been unimaginable to my parents. At some point in my lifetime, my kid will likely buy a $3M house, and it won’t be anything special.

Although I don’t see it for me. People spending that much in VHCOL seems reasonable so long as the finances make sense.

As for using net worth, I just don’t think that way when it comes to housing. But you are right, that at high levels of net worth, you can’t ignore it either. If I had 30M, I probably would not even buy houses. I’d probably just rent them for a couple years then move to the next one.

There have been threads asking for “what % of my NW should I so end on a house”, and that’s a silly question. But your question is different….
Last edited by Normchad on Thu Dec 02, 2021 6:38 pm, edited 2 times in total.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by 60B4E24B »

KlangFool wrote: Thu Dec 02, 2021 6:18 pm
You were asking for our opinion. I give you mine. 3 millions is enough to retire on a nice beach some where. Why would I spend it on a small 2,200 sq ft house in a VHCOL area?

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A 2200 sqft house is not small.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by Dontridetheindexdown »

Thirty million net, if and only if with 1/2 in cash or cash equivalents.

That is, 15 million in equities and/or bonds, and 15 million in FDIC insured deposits, or VUSXX (Vanguard Treasury Money Market) equivalent.

Just my opinion, for what it's worth!
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stostech
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by stostech »

azanon wrote: Thu Dec 02, 2021 6:32 pm
stostech wrote: Thu Dec 02, 2021 6:29 pm
azanon wrote: Thu Dec 02, 2021 6:19 pm You'd probably get the most helpful results if you gave the number that really mattered - what's your liquid net worth and cash flow? That'd make answering this quite a bit easier.
I was trying to approach it differently in the hopes of getting more useful data. If I had said, I have $XXMM then I suspect the replies would have been more along the lines of "yes" or "no" as opposed to specific number cutoffs.
I guess I could see that, but just saying it might save a lot of time if you had a figure either well above or below where it becomes a discussion. Just pulling this out of the air, but (for the 3M house) if you're under 10M liquid I'd' say fairly hard no, and above, ole... 20M, pretty easy to do it. No reason for a long thread outside those boundaries. Between 10-20M, it's a discussion maybe worth having. Scale those numbers up proportionally for the 5M house.
Remember that the $3MM or $5MM houses I'm talking about are probably closer to $500k or $1MM elsewhere. It's really the cost of the land. So I'm not sure how accurate the 5% a year cost estimate can be... that seems excessive, especially if paying cash.
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stostech
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by stostech »

Dontridetheindexdown wrote: Thu Dec 02, 2021 6:37 pm Thirty million net, if and only if with 1/2 in cash or cash equivalents.

That is, 15 million in equities and/or bonds, and 15 million in FDIC insured deposits, or VUSXX (Vanguard Treasury Money Market) equivalent.

Just my opinion, for what it's worth!
$30MM for a $3MM house? or a $5MM house?
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by azanon »

stostech wrote: Thu Dec 02, 2021 6:37 pm
azanon wrote: Thu Dec 02, 2021 6:32 pm
stostech wrote: Thu Dec 02, 2021 6:29 pm
azanon wrote: Thu Dec 02, 2021 6:19 pm You'd probably get the most helpful results if you gave the number that really mattered - what's your liquid net worth and cash flow? That'd make answering this quite a bit easier.
I was trying to approach it differently in the hopes of getting more useful data. If I had said, I have $XXMM then I suspect the replies would have been more along the lines of "yes" or "no" as opposed to specific number cutoffs.
I guess I could see that, but just saying it might save a lot of time if you had a figure either well above or below where it becomes a discussion. Just pulling this out of the air, but (for the 3M house) if you're under 10M liquid I'd' say fairly hard no, and above, ole... 20M, pretty easy to do it. No reason for a long thread outside those boundaries. Between 10-20M, it's a discussion maybe worth having. Scale those numbers up proportionally for the 5M house.
Remember that the $3MM or $5MM houses I'm talking about are probably closer to $500k or $1MM elsewhere. It's really the cost of the land. So I'm not sure how accurate the 5% a year cost estimate can be... that seems excessive, especially if paying cash.
I get that, and I would imagine 9 out of 10 people (in the public) would consider me too financially conservative. But from my browsing over the past 10 years or so at this specific forum, I'm fairly median boglehead-minded. We're a conservative lot here, in general.

Me personally, I "live in the wrong neighborhood" (as do probably a lot of bogleheads). If my neighbors knew my real means, I'm not sure I'd feel entirely safe here. ;)
Last edited by azanon on Thu Dec 02, 2021 6:47 pm, edited 2 times in total.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by Cycle »

If I didn't have much income, 7m. 3m for house, 4m for living.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by PowderDay9 »

For $3M house with all your assumptions, the minimum net worth would be $9M. For $5M house, minimum net worth would be $12M.
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ram
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by ram »

stostech wrote: Thu Dec 02, 2021 4:09 pm
What is the lowest total net worth that you would be comfortable purchasing a $3MM house?
What about a $5MM house?
Assume: Annual expenses including healthcare and housing (no mortgage)= 120K
Assume withdrawal rate 2.5% annually ( Need 40 x)
120 K x 40x = 4.8 million

For 3 M house = 7.8 M (Lowest NW)

For 5 M house: Add expense of 20K/yr or 800K in net worth.
Therefore 10.6 M ( 4.8 + 0.8 + 5M )
Last edited by ram on Thu Dec 02, 2021 7:04 pm, edited 1 time in total.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by sschoe2 »

I'd say ~$10 million but even if I had 10 million I still wouldn't. As a single guy all I need is ~1200ft^2 of space or less, A decent sized bedroom, kitchen, bathroom, laundry room, living and dining room and maybe an extra room or basement for treadmill and stuff.

Buying more house than you need for people or activities is a major drain of money. More utilities, property taxes, maintenance costs, cleaning... I just don't see the need to buy more than you need and don't see who needs more than say 2000 ft^2 in the case of a large extended family max.
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Re: At what net worth would you to be comfortable purchasing $3MM house? (given certain assumptions)

Post by arf30 »

Overall carrying costs varies widely by state - a 3M house in NJ would be ~55k/year property taxes alone, and I'm guessing "only" around 15k in CO. This would have to factor in to the income/net worth equation.
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