Can we really afford $1.25M house?

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Topic Author
nacious
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Can we really afford $1.25M house?

Post by nacious » Sun May 12, 2019 12:02 pm

Hi all,

My wife and I were prequalified for a $1M loan with $250k down at a 3.89% rate. We live in a very HCOL area with an extremely competitive housing market, and are currently renting at a $4700/mo cost. We were hoping to keep the house hunt to a budget of $1M total in order to have a similar mortgage cost to our current rent, but finding what we like is realistically going to push us all the way to $1.25M, which will be about $6k monthly.

This is our financial picture, first the highlights:

75000 cash
650000 stocks (non-retirement, will need to pay cap gains on all of it)
120000 IRA
We own an investment home with $180k remaining on the mortgage. We pay $1250 monthly and it is rented for $1750 with a stable tenant.

Now the financial lowlights:

25000 student loans at a ~6% rate
50 months remaining on car loan at ~$1k/mo
Home we are considering will require up to $100k in renovations, which we can do quite a bit cheaper as wife’s father is a contractor
We spend approx $1k/mo on our pets (I know...)

Our earnings:
I (32) make 250k base pay with potential for another 250k in annual bonuses. This year should land in the 400s.
Wife (30) is finishing a postgrad certificate program, plans to do what she loves. Would not be surprised if she earns approx $50k in year one starting this fall, and $80k-100k in 3 years.

So there you have it. We are committed to staying in the home for 5 yrs+, and need to stay in this area as my industry is here and my pay is 75% higher than would be elsewhere. But after a decade of frugality, it is scary to sell 300k stocks to make this purchase, and then also reduce monthly cash flow by $1200.

Thanks as always to the community here. :happy

HEDGEFUNDIE
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Re: Can we really afford $1.25M house?

Post by HEDGEFUNDIE » Sun May 12, 2019 12:06 pm

This thread may be helpful:

viewtopic.php?f=2&t=280692&newpost=4540370

Are you in CA? If so there are relationship mortgage bankers who can get your rate down to the high 2% to low 3% range. All it would require is for you to move your stocks over to their brokerage (no selling required).

PM me for details.

EDIT: To answer your question, yes you can afford it. Not counting principal payments (which are really a form of savings) you would be paying the same as your current rent.

tugofpeace
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Re: Can we really afford $1.25M house?

Post by tugofpeace » Sun May 12, 2019 12:19 pm

I'm curious what do you do to be making $250k + $250k bonus at 32? I'm pulling in $100-115k at 30 and feel like a peasant, lol.

runner540
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Re: Can we really afford $1.25M house?

Post by runner540 » Sun May 12, 2019 12:22 pm

Your income is high but variable. I would recommend a bigger downpayment, and smaller mortgage. I recommend that people cut what they are approved for by 30-50%. What are you paying for rent/housing today? If it is <$6K, what will be cut from your budget?

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whodidntante
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Re: Can we really afford $1.25M house?

Post by whodidntante » Sun May 12, 2019 12:31 pm

nacious wrote:
Sun May 12, 2019 12:02 pm
So there you have it. We are committed to staying in the home for 5 yrs+, and need to stay in this area as my industry is here and my pay is 75% higher than would be elsewhere. But after a decade of frugality, it is scary to sell 300k stocks to make this purchase, and then also reduce monthly cash flow by $1200.
Depending on how close it is to 5 and how "+" it is, I would keep renting. A house worth 1.25 million dollars is an enormous undiversified risk to take and you don't have the wealth to take it in my opinion. The value of the house might be correlated to the health of the industry that pays you 75% more to live in that area. That's right, I'm suggesting you light $56,400 on fire every year just for digs. Welcome to California.

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Nate79
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Re: Can we really afford $1.25M house?

Post by Nate79 » Sun May 12, 2019 12:33 pm

Why do you have debt with such high income?

$1m loan with such high consumer and student loan debt and additional housing debt on the rental house seems very high debt load with a $250k income, maybe spouse starts making money soon and a high potential for bonus. I would at a minimum pay off the consumer debt and student loans first and put a higher down payment to reduce the risk due to 50% of your income being bonus related.

Topic Author
nacious
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Re: Can we really afford $1.25M house?

Post by nacious » Sun May 12, 2019 12:34 pm

Given my wife’s income will be incremental, I’m not expecting to have to eliminate anything from the budget. To the prior person, I’m a sr manager of a tech company.

Ron Ronnerson
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Re: Can we really afford $1.25M house?

Post by Ron Ronnerson » Sun May 12, 2019 12:41 pm

whodidntante wrote:
Sun May 12, 2019 12:31 pm
nacious wrote:
Sun May 12, 2019 12:02 pm
So there you have it. We are committed to staying in the home for 5 yrs+, and need to stay in this area as my industry is here and my pay is 75% higher than would be elsewhere. But after a decade of frugality, it is scary to sell 300k stocks to make this purchase, and then also reduce monthly cash flow by $1200.
Depending on how close it is to 5 and how "+" it is, I would keep renting. A house worth 1.25 million dollars is an enormous undiversified risk to take and you don't have the wealth to take it in my opinion. The value of the house might be correlated to the health of the industry that pays you 75% more to live in that area. That's right, I'm suggesting you light $56,400 on fire every year just for digs. Welcome to California.
I agree. The transaction costs on a 1.25M house are high. 5 years is a blink of an eye. Unless you can commit to something long-term, just keep renting. If you find a house you want to stay in for many years to come, I think you can afford it.

Also, use your cash savings to immediately pay off that students loan at 6% interest. Also, your car is expensive for someone paying student loans at 6% interest. I know you know that since you put it under "financial lowlights." What's done is done but think carefully about your purchases going forward. With your high salary, you can really put yourself in an amazing position in a short amount of time. The key to that is simply keeping your expenses under control.

Regattamom
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Re: Can we really afford $1.25M house?

Post by Regattamom » Sun May 12, 2019 12:43 pm

I wouldn't do it, yet. You are counting on your bonus to be there every year and it may not be. I would use your bonuses to save up for a much larger down payment and possibly pay off the car loan (depending on interest rate) and definitely pay off student loans first.

My husband also receives large bonuses - 100 percent of target is more than his annual salary. We would never take out a mortgage that would be dependent on it.

What's the interest rate you're paying on the car loan?

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nacious
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Re: Can we really afford $1.25M house?

Post by nacious » Sun May 12, 2019 12:50 pm

Car loan interest is also in the 3% range. I’m going to pay off the student loan in full imminently. Agree that we could stand to reduce spending. I drive my cars into the ground FWIW.

HEDGEFUNDIE
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Re: Can we really afford $1.25M house?

Post by HEDGEFUNDIE » Sun May 12, 2019 12:52 pm

Regattamom wrote:
Sun May 12, 2019 12:43 pm

My husband also receives large bonuses - 100 percent of target is more than his annual salary. We would never take out a mortgage that would be dependent on it.
OP makes $250k base. Housing expense would be $70k. Income taxes would be another $70k, leaving $110k for everything else.

He can easily afford the house on his base salary alone.

Ron Ronnerson
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Re: Can we really afford $1.25M house?

Post by Ron Ronnerson » Sun May 12, 2019 1:05 pm

nacious wrote:
Sun May 12, 2019 12:50 pm
Car loan interest is also in the 3% range. I’m going to pay off the student loan in full imminently. Agree that we could stand to reduce spending. I drive my cars into the ground FWIW.
Driving your car into the ground is fine but if it's a really expensive car, it could drive you into the ground as well. For instance, if you owned an inexpensive car, your $1k/month car payments would disappear. That would help your cash flow and you could more easily afford the house you're looking to buy now. Perhaps, if you invested the savings (in your early 30s), that money compounds to a significant amount in the years ahead. It's so easy to get comfortable and casually start spending money without careful consideration. Don't fall into that habit and you'll do yourself a big favor.

edge
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Re: Can we really afford $1.25M house?

Post by edge » Sun May 12, 2019 1:28 pm

I’m not even sure it makes sense to drive a high end car into the ground. The maintenance gets crazy.

I lease the cars that I know will be a maintenance cost nightmare eg Benz, bmw, JLR, etc.

Anyway you can probably afford the house. Depends on how stable your company is.

ImmigrantSaver
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Re: Can we really afford $1.25M house?

Post by ImmigrantSaver » Sun May 12, 2019 1:41 pm

The retirement accounts seem to low for your income level. I would focus on that first. Do you have an option to contribute after-tax into your 401k for mega back door Roth conversion?

Topic Author
nacious
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Re: Can we really afford $1.25M house?

Post by nacious » Sun May 12, 2019 1:44 pm

Unfortunately don’t have the ability to do that...definitely wish the retirement account was stronger though. Alas primarily due to my age and work experience in startups without 401ks, most of my NW is in taxables.

TheEternalVortex
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Re: Can we really afford $1.25M house?

Post by TheEternalVortex » Sun May 12, 2019 4:02 pm

I bought a house for the same amount in CA a few years ago with slightly lower income (though put 40% down). Compared to how much rent has kept going up it definitely turned it to be good financially. Also my income has kept increasing which was lucky (but I didn’t count on it).

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Watty
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Re: Can we really afford $1.25M house?

Post by Watty » Sun May 12, 2019 4:38 pm

nacious wrote:
Sun May 12, 2019 12:02 pm
Wife (30) is finishing a postgrad certificate program, plans to do what she loves. Would not be surprised if she earns approx $50k in year one starting this fall, and $80k-100k in 3 years.
Regardless of the affordability I would not buy a house until she gets settled in a job. You could buy a house that is in the opposite direction from her job and she could end up with a terrible commute.
nacious wrote:
Sun May 12, 2019 12:02 pm
I (32) make 250k base pay with potential for another 250k in annual bonuses.
I would not count on the bonuses in your calculation, there will be years with small or no bonuses.
nacious wrote:
Sun May 12, 2019 12:02 pm
We own an investment home with $180k remaining on the mortgage. We pay $1250 monthly and it is rented for $1750 with a stable tenant.
What are the details on this house. You are only clearing $500 a month and there will be occasional large repairs and vacancies so it does not sound very lucrative. If you are managing it yourself even spending minimal time on it is not very cost effective given your high income. How much could you net if you sold it?
nacious wrote:
Sun May 12, 2019 12:02 pm
But after a decade of frugality, it is scary to sell 300k stocks to make this purchase, and then also reduce monthly cash flow by $1200.
Then sell most of the stock and have a huge down payment and smaller monthly payment.

I didn't crunch the numbers but you could likely buy the house with a seven or ten year ARM and then have it paid off if you wanted to.

With the way you have a 6% student loan that you have not paid off I would suspect that you are not exactly making good choices when it comes to debt so it might be best to just avoid debt as much as possible.

That is ok, by you salary your strengths are in other areas so as long as your recognize the areas that you are not so good at at you can work around your weaknesses.
nacious wrote:
Sun May 12, 2019 12:02 pm
I (32) ....Wife (30)
What are your plans for kids? Is the house in a very good school district?

You really do not want to buy this house and then have to move in five years to get better schools.
Last edited by Watty on Sun May 12, 2019 5:15 pm, edited 1 time in total.

HornedToad
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Re: Can we really afford $1.25M house?

Post by HornedToad » Sun May 12, 2019 4:40 pm

You can afford it easily; especially with how much you are paying in rent. It's really a question of financial priorities. If you really wanted to you could sell all the stocks and easily be able to afford mortgage with just base salary. If you really wanted to be more conservative then sell the investment property (i'm assuming there's a decent equity amount in there as well).

From your total compensation, is the other $250k all bonus or a mix of stock + bonus. That might slightly affect risk/consistency going forward but if this is where you are staying for awhile and the house gives a good commute to you and your wife then buy. The other consideration is also career based, in that if you buy and other potential companies would give a terrible commute then it limits your flexibility to move if that's something of interest. Ala, buying in Los Gatos while working at Netflix and then later looking at the commute if you switch to Facebook.

SovereignInvestor
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Re: Can we really afford $1.25M house?

Post by SovereignInvestor » Sun May 12, 2019 5:09 pm

I don't understand the comments about it being too much debt. The new debt is 1M and existing debt under 100K and he has 600K in assets. Net debt is 400K against income nearly the same amount. That is low leverage.

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8foot7
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Re: Can we really afford $1.25M house?

Post by 8foot7 » Sun May 12, 2019 5:12 pm

I would not call 25k in student loan debt, a 50k car financed over at least 5 years, and 1k/month on pets “a decade of frugality” and with income like you have I would have expected to see much more put away (and if this income is new I would not count on it continuing at the same level, particular in bonus land).

You can probably afford the house but it is probably a poor decision all things considered.

Starfish
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Re: Can we really afford $1.25M house?

Post by Starfish » Sun May 12, 2019 5:29 pm

Watty wrote:
Sun May 12, 2019 4:38 pm
nacious wrote:
Sun May 12, 2019 12:02 pm
Wife (30) is finishing a postgrad certificate program, plans to do what she loves. Would not be surprised if she earns approx $50k in year one starting this fall, and $80k-100k in 3 years.
Regardless of the affordability I would not buy a house until she gets settled in a job. You could buy a house that is in the opposite direction from her job and she could end up with a terrible commute.
This.
Is not like you can get a great price nowadays anyway.

SallyP
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Re: Can we really afford $1.25M house?

Post by SallyP » Sun May 12, 2019 5:35 pm

How much will your property tax be? Our home is in that price range and our property taxes are about $1400 per month. Our heating & cooling bill can reach $700 in peak months. Most people in our HCOL area pay for various lawn care and gardening services (would depend on your time constraints).

All of these can take a serious toll on the budget; for us, I estimate about $3000/mo without any major home improvements.

Topic Author
nacious
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Re: Can we really afford $1.25M house?

Post by nacious » Sun May 12, 2019 6:17 pm

Assuming property tax is 1.4%. Schools are good for elementary at least. The student debt is my wife’s but the investment property is hers as well, and there’s is about $100k of equity in the home. I am paying it off in exchange for being added to the title. This is why we have the high interest debt currently. Working through the details. We are relatively newly married. Not looking for marriage counseling of course...I know how these threads can go :)

Starfish
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Re: Can we really afford $1.25M house?

Post by Starfish » Sun May 12, 2019 6:22 pm

"In exchange?"

You are inviting the counselling :D

Frisco Kid
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Re: Can we really afford $1.25M house?

Post by Frisco Kid » Sun May 12, 2019 6:41 pm

California state income tax will hit you hard selling that amount of stocks to fund your down payment, don't forget to factor that in. Are kids in your future? You mentioned that you were newly married, makes sense to me to let her find employment, reduce your spending and concentrate on saving your down payment. If you buy the house where does your $100k for renovations come from? Those things always cost more than anticipated.

ImmigrantSaver
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Re: Can we really afford $1.25M house?

Post by ImmigrantSaver » Sun May 12, 2019 6:49 pm

nacious wrote:
Sun May 12, 2019 1:44 pm
Unfortunately don’t have the ability to do that...definitely wish the retirement account was stronger though. Alas primarily due to my age and work experience in startups without 401ks, most of my NW is in taxables.
Understood. I would approach it backwards then. Earmark certain amount of the taxable as retirement ( untouchable) funds depending on where do you want to be with that at your age. Then the rest is money available for down payment. And go from there - you might want to keep saving for a few more years or not. But I would definitely prioritize being on schedule with retirement first. Good luck!

PS Agree with other posters - pay off the debt before anything else

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8foot7
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Re: Can we really afford $1.25M house?

Post by 8foot7 » Sun May 12, 2019 6:54 pm

I calculate a 30 yr fixed at 1MM at 3.25% with 1.4% tax and 1500/yr homeowners insurance to be $7,310 per month. Far cry from your quote of about 6k and I suspect my insurance estimate is low and my rate estimate is really low for your situation.

Topic Author
nacious
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Re: Can we really afford $1.25M house?

Post by nacious » Sun May 12, 2019 7:16 pm

OK thanks everyone for your advice.

Here’s the real question: The house we want is actually listed at $860k but we are prequalified for $1.25M. The house is underpriced and we expect multiple offers. Homes usually go 20%+ over asking around here.

If you don’t believe we can afford $1.25M, what do you believe we can afford?

Regattamom
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Re: Can we really afford $1.25M house?

Post by Regattamom » Sun May 12, 2019 7:32 pm

What does your monthly budget look like now based on your annual salary of $250k? How much is left over at the end of the month? And are you maxing your retirement savings?

Traveler
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Re: Can we really afford $1.25M house?

Post by Traveler » Sun May 12, 2019 8:34 pm

You can likely afford the $1.25M home but I'm impressed with spending $1000/month on pets. Do they go the spa for blowouts and manicures each week? Not sure I could spend that much on pets if I tried (exception being the occasional vet bill of course). And $1000/month for a car loan?

Topic Author
nacious
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Re: Can we really afford $1.25M house?

Post by nacious » Sun May 12, 2019 8:42 pm

We have 3 and we feed them natural food and they get walked by a dog walker once a week lol. Toys, bones, vets. Not that hard when you add it all up. We love them though, they are well worth it.

Bacchus01
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Re: Can we really afford $1.25M house?

Post by Bacchus01 » Sun May 12, 2019 9:16 pm

Traveler wrote:
Sun May 12, 2019 8:34 pm
You can likely afford the $1.25M home but I'm impressed with spending $1000/month on pets. Do they go the spa for blowouts and manicures each week? Not sure I could spend that much on pets if I tried (exception being the occasional vet bill of course). And $1000/month for a car loan?
Seems like a series of “can we afford this?” Is turning into a situation of no, you can’t.

Regattamom
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Re: Can we really afford $1.25M house?

Post by Regattamom » Sun May 12, 2019 9:17 pm

nacious wrote:
Sun May 12, 2019 8:42 pm
We have 3 and we feed them natural food and they get walked by a dog walker once a week lol. Toys, bones, vets. Not that hard when you add it all up. We love them though, they are well worth it.
No, it actually would be hard for most people. That's more than most people spend on their kids' food, toys and clothing.

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Cycle
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Re: Can we really afford $1.25M house?

Post by Cycle » Sun May 12, 2019 9:25 pm

I'd probably just buy that which I can afford with cash or rent. The sellers fees on a 1.25MM home if u need to move would be insane. Even if u sell in 10 years, that's $625 a month allocated to realtor fees.

I own my home outright, so my monthly home costs are $494 for my .145MM home I purchased in 2015 in Minneapolis.
Never look back unless you are planning to go that way

HornedToad
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Re: Can we really afford $1.25M house?

Post by HornedToad » Sun May 12, 2019 10:05 pm

8foot7 wrote:
Sun May 12, 2019 6:54 pm
I calculate a 30 yr fixed at 1MM at 3.25% with 1.4% tax and 1500/yr homeowners insurance to be $7,310 per month. Far cry from your quote of about 6k and I suspect my insurance estimate is low and my rate estimate is really low for your situation.
It's probably pretty accurate. Tax is most likely more like 1.2-1.3% and my homeowner's insurance is right around ~$1200/mo for original house price of ~$1.35M. You don't have to insure the land value.

I originally assumed the cat costs were health/food related but from your explanation its kinda a wow....

KyleAAA
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Re: Can we really afford $1.25M house?

Post by KyleAAA » Sun May 12, 2019 11:03 pm

Yeah, you can afford it. That car loan seems a bit excessive even at your income. You aren't going to be a super saver but you can afford the house.
Last edited by KyleAAA on Sun May 12, 2019 11:19 pm, edited 1 time in total.

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Watty
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Re: Can we really afford $1.25M house?

Post by Watty » Sun May 12, 2019 11:09 pm

nacious wrote:
Sun May 12, 2019 7:16 pm
OK thanks everyone for your advice.

Here’s the real question: The house we want is actually listed at $860k but we are prequalified for $1.25M. The house is underpriced and we expect multiple offers. Homes usually go 20%+ over asking around here.

If you don’t believe we can afford $1.25M, what do you believe we can afford?
There is not one right answer since it depends on what tradeoffs you want to make.

For example If you want to spend a thousand dollars a month on your pets then your maximum home expenses would need to be a thousand dollars a month lower. That might mean that you would need to spend around $200K less on your house budget. You can afford either but not both so there is not a right or wrong answer it is just what tradeoff you choose. Economists call this the "opportunity cost" and you can Google that to read up on it.

That said here is how I would look at figuring out the maximum amount you can pay. These numbers are rough guesstimates so you may want to rework them with your real numbers.

1) Sell your $650K in stocks in your taxable account, you might have $500K left after paying taxes. If buying a house now is not important enough to you to sell the stock and pay the taxes then you should not buy a house now. It is all about your priorities.

2) With your cash after paying off the student loan you would have $550K.

3) Set aside $100K of that for an emergency fund, that leaves you with $450K

4) You need $100K for renovations so that leave you $350K for the home purchase.

5) Some of that will be needed for closing costs so you could make about a $325K house downpayment.

6) If you bought house for $1,025,000 you would need a $700,000 mortage which would be around $3,300 a month but you would also need to pay property taxes, insurance, maintenance, higher utilities, etc so you would be looking at a budget of maybe $5,500 a month which is around $66K a year. You could afford that with your base salary not including your bonus money.

If you cut something like your pet and car expenses buy $1,000 a month then you could better afford a house that is $200K more expensive. There are variations on an old saying, "You can afford to do anything you want but not everything you want." You may be in that situation and you may need to make some tradeoffs.

7) These are the proverbial "good times" for you so as you get your bonus I would use half of it(after taxes) to pay down your mortage and the other half to invest in your taxable account. I would not use any of your bonus money for your living expenses. When your wife starts working some of her income would also be used to build up your net worth. There will very likely also be lean times so now is the time to prepare for that.

8) If you waited to buy until next year you could easily save up more than $100K more if you get your bonus next year and your wife would know where she is going to be working so you would have to worry less about her commute.

You mentioned working for startups so there is always a risk that will be out of a job in a recession and it may take a long time to find your next job and it may not be as lucrative. In some fields you will start facing age discrimination by the time you are in your 40s so be prepared for that.

You can obviously tweak the numbers lots of different ways but there are lots of lottery winners, athletes, and performers who had a lot more money than you and they often get into financial trouble. You are really in an exceptional situation now that you cannot depend on lasting forever so you need to be a bit cautious.

FI4LIFE
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Re: Can we really afford $1.25M house?

Post by FI4LIFE » Wed May 15, 2019 7:20 am

If I worked in tech I would never buy. Too many boom and bust cycles. Obviously, you know the stability of your own situation better than I do. That being said, you are well compensated and can afford the home on your salary alone. If you are set on buying, I'd say go for it. You are not purchasing more than you can afford. If the large loan makes you uneasy, pay it off quickly...you have the cash flow to do so. Or, pay off the car and student loans. At a certain salary range, IMO, opportunity cost should be less of a concern.

S4C5
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Re: Can we really afford $1.25M house?

Post by S4C5 » Wed May 15, 2019 9:01 am

nacious wrote:
Sun May 12, 2019 12:02 pm
25000 student loans at a ~6% rate
50 months remaining on car loan at ~$1k/mo
Home we are considering will require up to $100k in renovations, which we can do quite a bit cheaper as wife’s father is a contractor
We spend approx $1k/mo on our pets (I know...)
None of this makes any sense at all. The stock market is at all time highs and the outlook is shaky. Sell some stocks and take care of the above nonsensical items.

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Re: Can we really afford $1.25M house?

Post by KyleAAA » Wed May 15, 2019 1:50 pm

FI4LIFE wrote:
Wed May 15, 2019 7:20 am
If I worked in tech I would never buy. Too many boom and bust cycles. Obviously, you know the stability of your own situation better than I do. That being said, you are well compensated and can afford the home on your salary alone. If you are set on buying, I'd say go for it. You are not purchasing more than you can afford. If the large loan makes you uneasy, pay it off quickly...you have the cash flow to do so. Or, pay off the car and student loans. At a certain salary range, IMO, opportunity cost should be less of a concern.
What do you mean? Sure, 2000 was bad, but not as bad as 2008 was for most other industries. And 2008 for tech wasn't bad at all. Most in tech live off their base salary and bank their bonus/RSUs, so there is a built-in conservatism inherent in the compensation structure.

FI4LIFE
Posts: 149
Joined: Sun Apr 28, 2019 9:27 am

Re: Can we really afford $1.25M house?

Post by FI4LIFE » Wed May 15, 2019 3:01 pm

KyleAAA wrote:
Wed May 15, 2019 1:50 pm
FI4LIFE wrote:
Wed May 15, 2019 7:20 am
If I worked in tech I would never buy. Too many boom and bust cycles. Obviously, you know the stability of your own situation better than I do. That being said, you are well compensated and can afford the home on your salary alone. If you are set on buying, I'd say go for it. You are not purchasing more than you can afford. If the large loan makes you uneasy, pay it off quickly...you have the cash flow to do so. Or, pay off the car and student loans. At a certain salary range, IMO, opportunity cost should be less of a concern.
What do you mean? Sure, 2000 was bad, but not as bad as 2008 was for most other industries. And 2008 for tech wasn't bad at all. Most in tech live off their base salary and bank their bonus/RSUs, so there is a built-in conservatism inherent in the compensation structure.
I just mean that the hot new tech this year is obsolete a few years from now. My wife works in HR for tech companies and there is always tons of turnover. Maybe I'm wrong but this seems to be the case from my observations.

HEDGEFUNDIE
Posts: 3092
Joined: Sun Oct 22, 2017 2:06 pm

Re: Can we really afford $1.25M house?

Post by HEDGEFUNDIE » Wed May 15, 2019 3:33 pm

FI4LIFE wrote:
Wed May 15, 2019 3:01 pm
KyleAAA wrote:
Wed May 15, 2019 1:50 pm
FI4LIFE wrote:
Wed May 15, 2019 7:20 am
If I worked in tech I would never buy. Too many boom and bust cycles. Obviously, you know the stability of your own situation better than I do. That being said, you are well compensated and can afford the home on your salary alone. If you are set on buying, I'd say go for it. You are not purchasing more than you can afford. If the large loan makes you uneasy, pay it off quickly...you have the cash flow to do so. Or, pay off the car and student loans. At a certain salary range, IMO, opportunity cost should be less of a concern.
What do you mean? Sure, 2000 was bad, but not as bad as 2008 was for most other industries. And 2008 for tech wasn't bad at all. Most in tech live off their base salary and bank their bonus/RSUs, so there is a built-in conservatism inherent in the compensation structure.
I just mean that the hot new tech this year is obsolete a few years from now. My wife works in HR for tech companies and there is always tons of turnover. Maybe I'm wrong but this seems to be the case from my observations.
Turnover is high but not because the employees can no longer keep up. More like the companies can’t retain them.

New tech obsolescence is overstated. The fundamentals of computer science haven’t changed. Java, JavaScript, Python have been around for decades. In a typical software developer interview you can code in the language of your choice. What they’re looking for is whether you can solve a problem efficiently [i.e. algorithmically] not whether you are read up on the latest framework.

rj342
Posts: 431
Joined: Tue Apr 30, 2019 12:21 pm

Re: Can we really afford $1.25M house?

Post by rj342 » Wed May 15, 2019 3:40 pm

HEDGEFUNDIE wrote:
Wed May 15, 2019 3:33 pm
Turnover is high but not because the employees can no longer keep up. More like the companies can’t retain them.
New tech obsolescence is overstated. The fundamentals of computer science haven’t changed. Java, JavaScript, Python have been around for decades. In a typical software developer interview you can code in the language of your choice. What they’re looking for is whether you can solve a problem efficiently [i.e. algorithmically] not whether you are read up on the latest framework.
IF the managers aren't idiots, and IF HR lets you get that far wo hitting their context-free list of buzzwords.

KyleAAA
Posts: 7303
Joined: Wed Jul 01, 2009 5:35 pm
Contact:

Re: Can we really afford $1.25M house?

Post by KyleAAA » Wed May 15, 2019 7:15 pm

FI4LIFE wrote:
Wed May 15, 2019 3:01 pm
KyleAAA wrote:
Wed May 15, 2019 1:50 pm
FI4LIFE wrote:
Wed May 15, 2019 7:20 am
If I worked in tech I would never buy. Too many boom and bust cycles. Obviously, you know the stability of your own situation better than I do. That being said, you are well compensated and can afford the home on your salary alone. If you are set on buying, I'd say go for it. You are not purchasing more than you can afford. If the large loan makes you uneasy, pay it off quickly...you have the cash flow to do so. Or, pay off the car and student loans. At a certain salary range, IMO, opportunity cost should be less of a concern.
What do you mean? Sure, 2000 was bad, but not as bad as 2008 was for most other industries. And 2008 for tech wasn't bad at all. Most in tech live off their base salary and bank their bonus/RSUs, so there is a built-in conservatism inherent in the compensation structure.
I just mean that the hot new tech this year is obsolete a few years from now. My wife works in HR for tech companies and there is always tons of turnover. Maybe I'm wrong but this seems to be the case from my observations.
Yeah, there's turnover because of the compensation arms race. It's easy to get a 30% bump by jumping ship after a year or two. The hot new tech issue is much less of a problem than commonly thought. Yeah, you need to continually refresh your skills, but experience with any specific technology tends to be at most 20% of what a given hiring manager is actually looking for. To a large extent, what we care about is a demonstrated ability to learn new things and general engineering ability, which is independent of technology. If you come from a C# background, I won't turn you away just because my stack uses java. And just because we are using hot new technology 1 doesn't mean you need to have it on your resume to be considered. At least, that is the case at the top 20% of companies. As mentioned above, when I give interviews I let the candidate code in any language they feel most comfortable in, or even pseudo code if they prefer. The engineers really hold most of the power.

bltn
Posts: 468
Joined: Mon Feb 20, 2017 9:32 pm

Re: Can we really afford $1.25M house?

Post by bltn » Wed May 15, 2019 9:27 pm

nacious wrote:
Sun May 12, 2019 8:42 pm
We have 3 and we feed them natural food and they get walked by a dog walker once a week lol. Toys, bones, vets. Not that hard when you add it all up. We love them though, they are well worth it.
And I thought we were overboard when we fed our last dog hot dogs and fried chicken every day. That s all he would eat reliably. I thought they tasted pretty good too. I don t know if that falls into your category of natural food, but compared to the other dogs in our neighborhood, I think ours was making out pretty well.
How big are your dogs? Do they eat a lot?
Oh, walking your own dogs is a great bonding experience for both you and the “kids”. I should know. Save the money on the dog walker.
Do a little price shopping for vets. My daughter had her cat put to sleep to have two teeth pulled in Manhatten for $1200. Six months later her cat was put to sleep again to have two teeth pulled by a vet a few blocks from the first for $800. Just saying.

My wife s first two cars after we we married were used cars, while I kept driving my same one. And we re car people. I can tell you that cars you pay cash for drive better than almost any car financed over 5 years.

In your position, I would make sure that any house I bought was likely to be home for at least a dozen years. And I would limit the price to 1,000,000.00. I d then put 400,000 into a down payment, and get a 15 year mortgage, looking to prepay it off in 12.

And I d get rid of the student loan and car loan in the next few months. Even if I had to trade cars.

My son in law is a manager of a group of senior software engineers at a major high tech company. He s two years older than you, and just got another advancement (promotion). But he s still not too sure about the longevity of his job with his company.
Without job stability, locking into a million dollar house is scary if this is too large a piece of your net worth.

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