Can I afford this 2.3 million dollar home?

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SQRT
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Re: Can I afford this 2.3 million dollar home?

Post by SQRT » Tue Jun 11, 2019 4:48 pm

It certainly wouldn’t be unusual for someone in their mid 30’s to have a very high proportion of their net worth tied up in their principal residence. I would have been well over 100%. To wait until you have a much higher net worth, may be more prudent but by the same token, you end up forgoing a lot of utility which may be important to a young family. Was for me.

Broken Man 1999
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Re: Can I afford this 2.3 million dollar home?

Post by Broken Man 1999 » Wed Jun 12, 2019 2:02 pm

SQRT wrote:
Tue Jun 11, 2019 4:48 pm
It certainly wouldn’t be unusual for someone in their mid 30’s to have a very high proportion of their net worth tied up in their principal residence. I would have been well over 100%. To wait until you have a much higher net worth, may be more prudent but by the same token, you end up forgoing a lot of utility which may be important to a young family. Was for me.
Me, also. I certainly didn't have the high multiples of NW some suggest as necessary to have a mortgage.

What I did have was a growing family. I was 27 when I took out our first mortgage.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

cherijoh
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Re: Can I afford this 2.3 million dollar home?

Post by cherijoh » Mon Jun 17, 2019 2:04 pm

SQRT wrote:
Tue Jun 11, 2019 4:48 pm
It certainly wouldn’t be unusual for someone in their mid 30’s to have a very high proportion of their net worth tied up in their principal residence. I would have been well over 100%. To wait until you have a much higher net worth, may be more prudent but by the same token, you end up forgoing a lot of utility which may be important to a young family. Was for me.
Your utility argument holds up a lot better when you are talking about going from a rental apartment to a median price home or from owning a town house to purchasing a home ~2x the price of the condo/townhouse. OP talking about moving up from a $400K house to a $2.3M house. As far as true utility (not just "I want it and can afford it"), how much utility is increasing your home by almost 6x going to bring you vs. say increasing it by 3x?

If all goes according to plan (OP gets the 50% raise next year; job security is as good as OP thinks it is; house can be built at current budget without major cost/time overruns; they stay in the house a long time; couple doesn't end up getting divorced) then buying now will likely be viewed in hindsight as a good decision. If one or more of the items above doesn't go as planned, then they could very well have a much bigger mess than an ordinary income person who stretches to buy a better house in their mid-thirties - e.g., recouping far less (as % of cost) on selling the house and having it on the market a lot longer before it sells. And unlike a normally priced house, how much demand can there be to rent a $2.3M house?

I expect the OP will decide to go for it. I would be curious to here how the how building process goes and if the house lives up to the OP's expectations.

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gunn_show
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Re: Can I afford this 2.3 million dollar home?

Post by gunn_show » Wed Jul 10, 2019 4:37 pm

Just read all 6 pages of this, surprised it went that long and at the varied responses. Lot of good pros/cons. The true bogleheads-Corolla fans came out hardcore. Not surprising, that's what this forum is.

OP have you made any further decisions on this? After reading, I imagine you will move forward at least with the land purchase idea? It would make sense to lock that in for 2 years and then decide as you go.

FWIW I would probably vote in favor of the land idea or even the whole $2.3m plan, given your income and comfort and stability, and growing family. A couple of the last posts really hit on it - doing this in 15 years when you're a multi-millionaire but kids are closer to HS/college age simply would not have the same utility. It's kind of like these HGTV pool shows we've been binging - I see all these 60s and 70s aged folks spending hundreds of thousands on elaborate backyard pool setups, and their kids are all grown and I'm positive at 60-70yo even the owner's won't get the same fun they would have decades earlier from a pool grotto and BBQ and fire pits. Don't be those folks buying the pool when you have a walking cane. Buy the house now if you want it, clearly after 6 pages of discussion and your responses, you know all the risks.
"The best life hack of all is to just put the work in and never give up." Bas Rutten

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TomatoTomahto
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Re: Can I afford this 2.3 million dollar home?

Post by TomatoTomahto » Wed Jul 10, 2019 5:51 pm

SQRT wrote:
Mon Jun 10, 2019 1:01 pm
It’s very difficult for most people to put themselves in someone else’s (who has much more) financial shoes. Just human nature.
Imo, a few years ago, people either made the effort (from which I benefitted) or stayed out of the thread. I don’t know why it has changed, but I have restricted the extent to which I’ll disclose my assets (other than my safe fixed income portion).

I think the forum is diminished by it.

FWIW, I think OP can afford it, but we would have been slower to crank up the speed on the hedonic treadmill.
Okay, I get it; I won't be political or controversial. The Earth is flat.

fru-gal
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Re: Can I afford this 2.3 million dollar home?

Post by fru-gal » Wed Jul 10, 2019 5:59 pm

This is an old thread, and I haven't had time to read all the replies, but the OP does not seem to have saved much given the household income. That says to me that they are not managing their money well, and should not be buying a very expensive house until they have a lot more in savings as a cushion.

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gunn_show
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Re: Can I afford this 2.3 million dollar home?

Post by gunn_show » Wed Jul 10, 2019 6:40 pm

fru-gal wrote:
Wed Jul 10, 2019 5:59 pm
This is an old thread..
Thread was started nearly the last day in May 2019. It is early July 2019. Presumably OP has still not taken any action, curious where his mind sits currently ...
"The best life hack of all is to just put the work in and never give up." Bas Rutten

Hustlinghustling
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Re: Can I afford this 2.3 million dollar home?

Post by Hustlinghustling » Wed Jul 10, 2019 7:35 pm

I'm based out of Hong Kong and sadly many people here have to own a home near that value while earning only 1/8 of your income. The market here is that astronomical, so from my vantage point YES you can afford it.

milktoast
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Re: Can I afford this 2.3 million dollar home?

Post by milktoast » Wed Jul 10, 2019 8:46 pm

I have an income similar to your projected. Imagine I'm living 3 years in your future - very similar income, income ramp, net worth, and also built a fully custom home (not builder customized).

One difference is we live in a higher cost area than you do. So our home is in the top 10-15% of metro area not top 5%.

Couple things I'll share. First expect the actual costs, especially after landscaping and furnishing to add 20-30% over your current estimate. So more like 2.8M. And it takes twice as long to permit and build as you expect.

Second, that level of mortgage doesn't feel good even at high income. You ramped fast - are you sure you can't ramp fast the other direction?

To keep things under control, we switched our savings strategy during the build to pay as much as we could in cash and minimize construction draw. This is especially important if it is true custom construction rather than semi-custom because you carry the finance risk rather than the builder.

Maxed out 401k, deferred comp, and saving in post tax to hit 1.5x our pre-construction spend rate. That came out of check first. Split the spending budget into housing expenses and living expenses - living was not allowed to grow more than 10% from prior.

During the construction, 100% of remaining funds went to construction. And it wasn't unusual to need to carry $250k-$350k of costs between builder wanting money vs bank releasing money. After construction, built up 1yr total spending in cash (marcus). Now we paying down mortgage with all excess comp. Target is to finish paying it off at year 4 of the 7/1 construction loan (2.5 yrs after completion).

Given our credit rating the mortgage rate is very low. So in theory we should put the money into the market instead of the mortgage - but you can't think like that when dealing with amounts that cannot withstand a forced change in career. Get it off your books so you can live on the income that you had 4 years ago.

Our house value at the end is roughly $2.3M on $2.8M cost. Just expect that $500k of lost value to be the cost of getting exactly what you want.

If that sounds awful... well it is a beautiful house.

bltn
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Re: Can I afford this 2.3 million dollar home?

Post by bltn » Thu Jul 11, 2019 5:40 am

milktoast wrote:
Wed Jul 10, 2019 8:46 pm
I have an income similar to your projected. Imagine I'm living 3 years in your future - very similar income, income ramp, net worth, and also built a fully custom home (not builder customized).

One difference is we live in a higher cost area than you do. So our home is in the top 10-15% of metro area not top 5%.

Couple things I'll share. First expect the actual costs, especially after landscaping and furnishing to add 20-30% over your current estimate. So more like 2.8M. And it takes twice as long to permit and build as you expect.

Second, that level of mortgage doesn't feel good even at high income. You ramped fast - are you sure you can't ramp fast the other direction?

To keep things under control, we switched our savings strategy during the build to pay as much as we could in cash and minimize construction draw. This is especially important if it is true custom construction rather than semi-custom because you carry the finance risk rather than the builder.

Maxed out 401k, deferred comp, and saving in post tax to hit 1.5x our pre-construction spend rate. That came out of check first. Split the spending budget into housing expenses and living expenses - living was not allowed to grow more than 10% from prior.

During the construction, 100% of remaining funds went to construction. And it wasn't unusual to need to carry $250k-$350k of costs between builder wanting money vs bank releasing money. After construction, built up 1yr total spending in cash (marcus). Now we paying down mortgage with all excess comp. Target is to finish paying it off at year 4 of the 7/1 construction loan (2.5 yrs after completion).

Given our credit rating the mortgage rate is very low. So in theory we should put the money into the market instead of the mortgage - but you can't think like that when dealing with amounts that cannot withstand a forced change in career. Get it off your books so you can live on the income that you had 4 years ago.

Our house value at the end is roughly $2.3M on $2.8M cost. Just expect that $500k of lost value to be the cost of getting exactly what you want.

If that sounds awful... well it is a beautiful house.
I m so old fashioned. That home value , considering cost, does sound awful. Particularly when home values of 2.3 million often mean 2.0 million realized on a sale, or less.

Bacchus01
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Re: Can I afford this 2.3 million dollar home?

Post by Bacchus01 » Thu Jul 11, 2019 5:51 am

gunn_show wrote:
Wed Jul 10, 2019 4:37 pm
Just read all 6 pages of this, surprised it went that long and at the varied responses. Lot of good pros/cons. The true bogleheads-Corolla fans came out hardcore. Not surprising, that's what this forum is.

OP have you made any further decisions on this? After reading, I imagine you will move forward at least with the land purchase idea? It would make sense to lock that in for 2 years and then decide as you go.

FWIW I would probably vote in favor of the land idea or even the whole $2.3m plan, given your income and comfort and stability, and growing family. A couple of the last posts really hit on it - doing this in 15 years when you're a multi-millionaire but kids are closer to HS/college age simply would not have the same utility. It's kind of like these HGTV pool shows we've been binging - I see all these 60s and 70s aged folks spending hundreds of thousands on elaborate backyard pool setups, and their kids are all grown and I'm positive at 60-70yo even the owner's won't get the same fun they would have decades earlier from a pool grotto and BBQ and fire pits. Don't be those folks buying the pool when you have a walking cane. Buy the house now if you want it, clearly after 6 pages of discussion and your responses, you know all the risks.

This is a very important component. I can't imagine $2.3M house, but that's beside the point. If there is one thing I wish we would have done sooner in our lives it would be to buy more house than we thought we could afford. This is very anti-boglehead, but I don't care. I wish we had bought more house at every step of the process and enjoyed it more. I wish we would have stretched into more because we would have grown into it on the income.

My income has risen at a CAGR of 13.5% since I left college 22 years ago. Along the way there have been a few decent windfalls and of course a bull market run of nearly 10 years. I didn't know any of that, of course, and hindsight is 20/20. I don't resent not buying nicer cars, or clothes, or such. I do regret not buying up in housing earlier. We are now thinking of building a new house and are probably NOT going to because our oldest just graduated from HS and we are concerned we won't get the same family utility out of it that we would have if we had done it 5 years ago.

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TomatoTomahto
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Re: Can I afford this 2.3 million dollar home?

Post by TomatoTomahto » Thu Jul 11, 2019 7:22 am

milktoast wrote:
Our house value at the end is roughly $2.3M on $2.8M cost. Just expect that $500k of lost value to be the cost of getting exactly what you want.
That applies to renovations also, and probably belongs in a “What extravagant thing did you do that you don’t mind having done” thread.

Examples: installed geothermal because of supreme quiet and comfort. Installed extreme sound minimization during renovation. Installing lights in guest rooms that track Circadian needs of our guests (many of whom are jet lagged on arrival).

None of those expenditures will be recouped when the house is sold. And, the best part of living within our means, is that it’s a good trade off for us.
Okay, I get it; I won't be political or controversial. The Earth is flat.

SQRT
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Re: Can I afford this 2.3 million dollar home?

Post by SQRT » Thu Jul 11, 2019 8:04 am

TomatoTomahto wrote:
Thu Jul 11, 2019 7:22 am
milktoast wrote:
Our house value at the end is roughly $2.3M on $2.8M cost. Just expect that $500k of lost value to be the cost of getting exactly what you want.
That applies to renovations also, and probably belongs in a “What extravagant thing did you do that you don’t mind having done” thread.

Examples: installed geothermal because of supreme quiet and comfort. Installed extreme sound minimization during renovation. Installing lights in guest rooms that track Circadian needs of our guests (many of whom are jet lagged on arrival).

None of those expenditures will be recouped when the house is sold. And, the best part of living within our means, is that it’s a good trade off for us.
I’m facing something similar. Have owned our lake house for about 22 years. Love the lot and the lifestyle. But the actual house has some shortcomings. Have decided to tear it down and rebuild. Will be very expensive (really expensive) but the place will be fabulous. Once complete I estimate the market value will be well under my cost. I really don’t care. Will never sell but will gift the place to my daughter who loves it. Money is for spending (eventually).

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TomatoTomahto
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Re: Can I afford this 2.3 million dollar home?

Post by TomatoTomahto » Thu Jul 11, 2019 8:56 am

SQRT wrote:Money is for spending (eventually).
It seems almost anti-BH to say it. I still can’t pull the trigger on business or first class, but I just spent a silly amount of money on things that matter to me. Silence is not only golden, it apparently requires gold to achieve :D
Okay, I get it; I won't be political or controversial. The Earth is flat.

Admiral
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Re: Can I afford this 2.3 million dollar home?

Post by Admiral » Thu Jul 11, 2019 9:27 am

Bacchus01 wrote:
Thu Jul 11, 2019 5:51 am
gunn_show wrote:
Wed Jul 10, 2019 4:37 pm
Just read all 6 pages of this, surprised it went that long and at the varied responses. Lot of good pros/cons. The true bogleheads-Corolla fans came out hardcore. Not surprising, that's what this forum is.

OP have you made any further decisions on this? After reading, I imagine you will move forward at least with the land purchase idea? It would make sense to lock that in for 2 years and then decide as you go.

FWIW I would probably vote in favor of the land idea or even the whole $2.3m plan, given your income and comfort and stability, and growing family. A couple of the last posts really hit on it - doing this in 15 years when you're a multi-millionaire but kids are closer to HS/college age simply would not have the same utility. It's kind of like these HGTV pool shows we've been binging - I see all these 60s and 70s aged folks spending hundreds of thousands on elaborate backyard pool setups, and their kids are all grown and I'm positive at 60-70yo even the owner's won't get the same fun they would have decades earlier from a pool grotto and BBQ and fire pits. Don't be those folks buying the pool when you have a walking cane. Buy the house now if you want it, clearly after 6 pages of discussion and your responses, you know all the risks.

This is a very important component. I can't imagine $2.3M house, but that's beside the point. If there is one thing I wish we would have done sooner in our lives it would be to buy more house than we thought we could afford. This is very anti-boglehead, but I don't care. I wish we had bought more house at every step of the process and enjoyed it more. I wish we would have stretched into more because we would have grown into it on the income.

My income has risen at a CAGR of 13.5% since I left college 22 years ago. Along the way there have been a few decent windfalls and of course a bull market run of nearly 10 years. I didn't know any of that, of course, and hindsight is 20/20. I don't resent not buying nicer cars, or clothes, or such. I do regret not buying up in housing earlier. We are now thinking of building a new house and are probably NOT going to because our oldest just graduated from HS and we are concerned we won't get the same family utility out of it that we would have if we had done it 5 years ago.
Regret (in addition to comparison) is the thief of joy. You did what was prudent at the time. Hindsight helps you not a whit. If you now have the money, then do what you'd like to do. I assume you would not have rather had it the other way: spent too much on house, lost job, lost house? Correct?

I think that most Bhs understand one needs to make smart, sometimes difficult financial choices, and many of them are based on having enough money to live well later in life when the possibility of earned income is reduced or eliminated: this is something the vast, VAST majority of American's don't do.

I think you may be mistaken about the utility of the house. Presumably/hopefully you will have grandchildren who might like to come and visit. Having the extra space (either in this house, or a vacation house) might be a real plus. Money, as someone else noted, is for spending...especially after you've spent decades saving it.

SQRT
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Re: Can I afford this 2.3 million dollar home?

Post by SQRT » Thu Jul 11, 2019 10:03 am

TomatoTomahto wrote:
Thu Jul 11, 2019 8:56 am
SQRT wrote:Money is for spending (eventually).
It seems almost anti-BH to say it. I still can’t pull the trigger on business or first class, but I just spent a silly amount of money on things that matter to me. Silence is not only golden, it apparently requires gold to achieve :D
Well it took me a while to get there but I am 69 this month and don’t see the wisdom of leaving a huge legacy. I figured I can get a little of “ both worlds” by rebuilding our lake house. Daughter will get a fabulous place ( eventually) and we can also get enjoyment out of it while alive. We are involving her extensively in the planning of the new house.

Bacchus01
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Re: Can I afford this 2.3 million dollar home?

Post by Bacchus01 » Thu Jul 11, 2019 12:12 pm

Admiral wrote:
Thu Jul 11, 2019 9:27 am
Bacchus01 wrote:
Thu Jul 11, 2019 5:51 am
gunn_show wrote:
Wed Jul 10, 2019 4:37 pm
Just read all 6 pages of this, surprised it went that long and at the varied responses. Lot of good pros/cons. The true bogleheads-Corolla fans came out hardcore. Not surprising, that's what this forum is.

OP have you made any further decisions on this? After reading, I imagine you will move forward at least with the land purchase idea? It would make sense to lock that in for 2 years and then decide as you go.

FWIW I would probably vote in favor of the land idea or even the whole $2.3m plan, given your income and comfort and stability, and growing family. A couple of the last posts really hit on it - doing this in 15 years when you're a multi-millionaire but kids are closer to HS/college age simply would not have the same utility. It's kind of like these HGTV pool shows we've been binging - I see all these 60s and 70s aged folks spending hundreds of thousands on elaborate backyard pool setups, and their kids are all grown and I'm positive at 60-70yo even the owner's won't get the same fun they would have decades earlier from a pool grotto and BBQ and fire pits. Don't be those folks buying the pool when you have a walking cane. Buy the house now if you want it, clearly after 6 pages of discussion and your responses, you know all the risks.

This is a very important component. I can't imagine $2.3M house, but that's beside the point. If there is one thing I wish we would have done sooner in our lives it would be to buy more house than we thought we could afford. This is very anti-boglehead, but I don't care. I wish we had bought more house at every step of the process and enjoyed it more. I wish we would have stretched into more because we would have grown into it on the income.

My income has risen at a CAGR of 13.5% since I left college 22 years ago. Along the way there have been a few decent windfalls and of course a bull market run of nearly 10 years. I didn't know any of that, of course, and hindsight is 20/20. I don't resent not buying nicer cars, or clothes, or such. I do regret not buying up in housing earlier. We are now thinking of building a new house and are probably NOT going to because our oldest just graduated from HS and we are concerned we won't get the same family utility out of it that we would have if we had done it 5 years ago.
Regret (in addition to comparison) is the thief of joy. You did what was prudent at the time. Hindsight helps you not a whit. If you now have the money, then do what you'd like to do. I assume you would not have rather had it the other way: spent too much on house, lost job, lost house? Correct?

I think that most Bhs understand one needs to make smart, sometimes difficult financial choices, and many of them are based on having enough money to live well later in life when the possibility of earned income is reduced or eliminated: this is something the vast, VAST majority of American's don't do.

I think you may be mistaken about the utility of the house. Presumably/hopefully you will have grandchildren who might like to come and visit. Having the extra space (either in this house, or a vacation house) might be a real plus. Money, as someone else noted, is for spending...especially after you've spent decades saving it.
Nothing you said negates what I wrote. I am not mistaken about anything. And don't preach about regret.

It gets old when people on here jump all over people who don't follow exactly the BH way.

Admiral
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Re: Can I afford this 2.3 million dollar home?

Post by Admiral » Thu Jul 11, 2019 12:21 pm

Bacchus01 wrote:
Thu Jul 11, 2019 12:12 pm
Admiral wrote:
Thu Jul 11, 2019 9:27 am
Bacchus01 wrote:
Thu Jul 11, 2019 5:51 am
gunn_show wrote:
Wed Jul 10, 2019 4:37 pm
Just read all 6 pages of this, surprised it went that long and at the varied responses. Lot of good pros/cons. The true bogleheads-Corolla fans came out hardcore. Not surprising, that's what this forum is.

OP have you made any further decisions on this? After reading, I imagine you will move forward at least with the land purchase idea? It would make sense to lock that in for 2 years and then decide as you go.

FWIW I would probably vote in favor of the land idea or even the whole $2.3m plan, given your income and comfort and stability, and growing family. A couple of the last posts really hit on it - doing this in 15 years when you're a multi-millionaire but kids are closer to HS/college age simply would not have the same utility. It's kind of like these HGTV pool shows we've been binging - I see all these 60s and 70s aged folks spending hundreds of thousands on elaborate backyard pool setups, and their kids are all grown and I'm positive at 60-70yo even the owner's won't get the same fun they would have decades earlier from a pool grotto and BBQ and fire pits. Don't be those folks buying the pool when you have a walking cane. Buy the house now if you want it, clearly after 6 pages of discussion and your responses, you know all the risks.

This is a very important component. I can't imagine $2.3M house, but that's beside the point. If there is one thing I wish we would have done sooner in our lives it would be to buy more house than we thought we could afford. This is very anti-boglehead, but I don't care. I wish we had bought more house at every step of the process and enjoyed it more. I wish we would have stretched into more because we would have grown into it on the income.

My income has risen at a CAGR of 13.5% since I left college 22 years ago. Along the way there have been a few decent windfalls and of course a bull market run of nearly 10 years. I didn't know any of that, of course, and hindsight is 20/20. I don't resent not buying nicer cars, or clothes, or such. I do regret not buying up in housing earlier. We are now thinking of building a new house and are probably NOT going to because our oldest just graduated from HS and we are concerned we won't get the same family utility out of it that we would have if we had done it 5 years ago.
Regret (in addition to comparison) is the thief of joy. You did what was prudent at the time. Hindsight helps you not a whit. If you now have the money, then do what you'd like to do. I assume you would not have rather had it the other way: spent too much on house, lost job, lost house? Correct?

I think that most Bhs understand one needs to make smart, sometimes difficult financial choices, and many of them are based on having enough money to live well later in life when the possibility of earned income is reduced or eliminated: this is something the vast, VAST majority of American's don't do.

I think you may be mistaken about the utility of the house. Presumably/hopefully you will have grandchildren who might like to come and visit. Having the extra space (either in this house, or a vacation house) might be a real plus. Money, as someone else noted, is for spending...especially after you've spent decades saving it.
Nothing you said negates what I wrote. I am not mistaken about anything. And don't preach about regret.

It gets old when people on here jump all over people who don't follow exactly the BH way.
Friend, I'm not preaching, jumping on anyone for doing anything, or trying to negate anything you wrote. I'm simply suggesting you did what you thought was right at the time, and that now that you've been financially fortunate have the ability to spend the money you chose not to spend earlier. Whether you do, or don't, makes no difference to me.

Your post comes across as someone who is angry and resentful. Hopefully that's not you!

SantaClaraSurfer
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Re: Can I afford this 2.3 million dollar home?

Post by SantaClaraSurfer » Thu Jul 11, 2019 12:49 pm

We are not at that income level, but faced with VHCOL area we decided to rent at $4500/mo. versus purchase (comparable was above $1.15 million.)

Deciding factor for us was considering:

a) How far we would have to extend ourselves to make a down payment that would make buying work.
b) How long our dual income would have to be sustained and locked in over life of mortgage.
c) Ability to downsize / make location adjustments as a renter.
d) How we would feel if property values stayed level or declined. Esp. given exposure to our industry.

We opted to make a brokerage account as a stand in for our "house" and it's worked out fine so far.

When I look at how much that segment of our investments would have to grow to make a down payment we could truly part with freely (ie. not cut into retirement / college / life goals) and be sufficient to buy in this area, I think we made the right choice. (I feel we'd need to do something like $350K down, and we are just not there yet. Further, that's not even factoring in if we would WANT to buy here given that renting has turned out to be fairly pleasant so far.)

For those who may think $4500 rent is throwing money away, the answer is that the last dollars make the most impact. $3300 = 3 hr RT commute. $3800 = 30 minute commute, tiny, dark apartment. $4200 = 30 minute commute, nice apartment, less nice locale. $4500 = 20 minute commute, nice apartment, nice locale. If you can afford it, you pay the $4500 gladly because that last step makes a huge difference.

Either way, VHCOL makes pretty much every housing choice (renting/buying/commuting) seem ridiculous/"wrong" to someone not experiencing it.

(Side note: Are folks suggesting just moving to a new region aware that some companies will adjust your pay to the cost of living of your region?)

Carol88888
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Re: Can I afford this 2.3 million dollar home?

Post by Carol88888 » Thu Jul 11, 2019 1:30 pm

You can buy it but the real question is should you? I will probably sound like an awful Cassandra but I think you need to do an assessment of some other things. It seems like California is always beset by one natural disaster after another from the fires in the North, the mudslides in Malibu, the earthquake last week. It's a rotating disaster zone if you ask me.

And then there's the state finances. Several counties on the brink of bankruptcy because of unfunded pensions. And things will probably get measurably
worse with the new promises of paying for healthcare for undocumented immigrants. Taxes over 13% at the state level might be palatable to you now but what if the federal taxes get raised and you have to pay that 13% on top of say 60%?

If any of the bad stuff I see comes to pass you might have more trouble unloading that big house than you imagine.

But it's your money. Your life. Your call.

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Matahari
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Re: Can I afford this 2.3 million dollar home?

Post by Matahari » Thu Jul 11, 2019 2:54 pm

OP, my post may be repetitive of what others may have said but I have limited time and skimmed, for the most part, the preceding pages.

We designed and built our custom home when our child was in pre-K in 2002-3. It was $1.5M+ in 2002-3. I too was concerned about affordability -- not in the short-term in terms of whether we had the funds needed to complete the project, which was the case, but in terms of the decades we planned on living in the house and how that would affect our ability to save in the manner that I wanted to during that period. Fast forward 16 years, it has absolutely been possible for us, but that is because we have had consistent income and experienced no employment or income interruptions, including during the Great Recession.

In hindsight, given the amount of work required of my spouse and me to make decisions relating to building, choosing finishes and overseeing construction, I'm glad we proceeded when our child was still young enough that I did not feel too stressed out between the time I wanted and needed to spend on child's schooling and activities and the time I needed to spend on house matters. Furthermore, we have enjoyed the amenities of the house while child grew up here.

So, I recommend that you consider not only whether you can afford your house financially, but also in terms of the time that you and your spouse will need to devote to oversee its construction, in light of the time commitments you have and foresee having. The latter may determine when you choose to proceed with the project.

random_walker_77
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Re: Can I afford this 2.3 million dollar home?

Post by random_walker_77 » Thu Jul 11, 2019 9:34 pm

SantaClaraSurfer wrote:
Thu Jul 11, 2019 12:49 pm
(Side note: Are folks suggesting just moving to a new region aware that some companies will adjust your pay to the cost of living of your region?)
I think most are aware. However, are you aware that, at some companies, the cost-of-living adjustment is so small that your take-home pay can be higher? This is probably the most we should say in this thread, and it might deserve a thread of its own, as geographical arbitrage isn't so obvious.

But I can tell you that when I did an internal transfer from the bay area to central texas, my after-tax income increased. And it continued to grow as my career progressed. I've no idea how much I left on the table, in terms of reduced equity grants and/or career progression compared to if I'd stayed in silicon valley, but on the other hand I don't care -- things worked out so well, we've got "Enough"

SantaClaraSurfer
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Re: Can I afford this 2.3 million dollar home?

Post by SantaClaraSurfer » Fri Jul 12, 2019 2:57 pm

random_walker_77 wrote:
Thu Jul 11, 2019 9:34 pm
I've no idea how much I left on the table, in terms of reduced equity grants and/or career progression compared to if I'd stayed in silicon valley, but on the other hand I don't care -- things worked out so well, we've got "Enough"
That's awesome. And "enough" means you don't really need to quantify it!

Our "enough" probably means a sufficient amount in our dedicated housing account that we could purchase a residence outright somewhere more affordable someday if we choose. Very aware that other regions can still be plenty expensive.

We are in an odd "early empty nester, fairly high income but not high net worth" zone, though. My spouse has more than two decades career left, me a bit less.

Given that life is good, we might very well stay here, keep renting and see where that takes us.

Either way, there's definitely not a 2.3 million dollar single family house on our horizon.

Truth is, we couldn't afford a 1 million dollar home at this point. Which brings home your point: even if we did try to make buying a million dollar residence work, we'd be "leaving on the table" the kind of housing that same money could have afforded us outside our VHCOL zone.

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