Poll

Original price (NOT current market value) of your HCOL area home that you will be FIRE-ing and living in

< 600K (Condo)
6 (20.7%)
500K - 700K
13 (44.8%)
700K-900K
5 (17.2%)
900K-1.2M
3 (10.3%)
Greater than 1.2M
2 (6.9%)

Total Members Voted: 29

Author Topic: HCOL area FIRE-ees I want to hear from you!  (Read 3797 times)

dinkhelpneeded

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HCOL area FIRE-ees I want to hear from you!
« on: July 13, 2017, 11:20:10 PM »
  • What did you do differently that enabled you to retire in a HCOL area?
  • How did you end up paying for your primary home? Did you live in flip, churn, or did you buy one home and pay down the mortgage?
  • Do you think the currently espoused MMM method (live frugaly, save the max) can work for a HCOL area? I find that even with a dual high income it probably wont work within a decade
  • What big bets/risks did you make that paid off?

I have searched high and low for a good HCOL area thread on the forums, but couldnt find one. If anyone knows of one please refer me to it. Thanks! Look forward to hearing from you!

ixtap

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Re: HCOL area FIRE-ees I want to hear from you!
« Reply #1 on: July 13, 2017, 11:49:42 PM »
It is only because we moved to a HCOL that we will able to pull this off. We receive the additional salary and minimize our spending probably even more than we used to. While we plan on leaving as soon as we can, we have set our budget based on current spending. That is our safety measure.

We have one highish income, one pretty low, and we fully expect to make it within 7 years of moving here, although we didn't start from zero.

For our home, we looked outside the box. We live on a boat, but there are other alternatives in other areas.

How, besides living frugally and saving the max, could one achieve these goals?

freya

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Re: HCOL area FIRE-ees I want to hear from you!
« Reply #2 on: July 14, 2017, 07:29:54 AM »
I'm in the mother of all HCOL areas (NYC), and I expect to be FI in the next couple of years.  I probably didn't lose much time compared to a LCOL.

The solution is to look for unusual opportunities to optimize costs that tend to be unique to HCOL areas.  I bought into a relatively inexpensive but lovely neighborhood that's walking distance to work.  No car and transportation costs are almost nil - biggest cost is getting my shoes resoled every year.  NYC affords lots of opportunities for free/low cost entertainment, opportunities to join CSAs and community gardens, low cost Costco deliveries via Google Express, etc.  The key is to make friends who don't spend money like water, which unfortunately describes most of the people I know - including ones who complain about how chronically broke they are.

Reading all those notes on life after FIRE...so alluring.  I have a position as tenured academic faculty, which should be remarkably pleasant, flexible, and sustainable, but the work environment has gotten incredibly toxic.  It's a combination of personalities and the increasing financial pressures on academic centers, and how it's filtered down to the rank and file.   Simply having the option to FIRE, as opposed to looking for another job in a place that may be only marginally better, is priceless.

Fancy Free

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Re: HCOL area FIRE-ees I want to hear from you!
« Reply #3 on: July 14, 2017, 09:32:59 AM »
We recently reached our FI number in San Francisco. It took us less than 10 years on one high income and one low income for the area. I haven't really looked into it, but I don't think the high income would've been possible in a LCOL area, especially taking into account the stock grants that probably shaved a year off our time to FI.

Buying our home before the recent increase in prices was a huge help - I don't think we would be looking to retire in SF at today's prices. We don't have a mortgage, so our expenses are very low. San Francisco isn't that expensive to live in once housing is covered and if you aren't eating at Saison or Benu every weekend. I know a lot of older retirees here who never made a lot of money so obviously it can be done.

We didn't do anything differently from what works in a LCOL area - just save a high percentage of income, keep expenses low, and invest. No real estate investing for us since the math doesn't work out here. I think the challenge of retiring early in an expensive area is being surrounded by people who make and spend significantly more.

mara

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Re: HCOL area FIRE-ees I want to hear from you!
« Reply #4 on: July 14, 2017, 11:59:30 AM »
We didn't do anything differently from what works in a LCOL area - just save a high percentage of income, keep expenses low, and invest. No real estate investing for us since the math doesn't work out here. I think the challenge of retiring early in an expensive area is being surrounded by people who make and spend significantly more.

This.

We considered moving to a LCOL area before we retired, but just kept cutting spending instead because we like it here. Then things loosened up a bit once we reached our FI goal.

seattlecyclone

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Re: HCOL area FIRE-ees I want to hear from you!
« Reply #5 on: July 14, 2017, 12:39:49 PM »
We achieved FI in Seattle in about seven years. We switched to part-time work a year ago and are not fully retired at the moment.

  • What did you do differently that enabled you to retire in a HCOL area?

I don't know that we did anything too differently. We kept expenses low to get a high savings rate, invested the money, and here we are.

Quote
  • How did you end up paying for your primary home? Did you live in flip, churn, or did you buy one home and pay down the mortgage?

We moved to Seattle in 2009 when the housing market was about at its bottom. We spent our first year in town renting and saving for a down payment, then we bought a small house. We just sold that house for twice what we paid, and moved into one big enough to raise a family comfortably. The real estate market here is crazy.

Quote
  • Do you think the currently espoused MMM method (live frugaly, save the max) can work for a HCOL area? I find that even with a dual high income it probably wont work within a decade

Yes, it can absolutely work. With higher housing costs, you need more income than elsewhere to make a high savings rate work. My career (software development) happens to pay quite well in Seattle, and I found that the difference in pay here vs. a cheaper area is enough to make up for the higher housing costs and then some. If that isn't true for your career, you may find a quicker path to FIRE elsewhere.

Quote
  • What big bets/risks did you make that paid off?

As mentioned above, we got into the housing market at the right time. I also joined a late-stage startup that had an IPO a couple years after I started there. I had a good feeling about the company, and the stock options paid off handsomely. We might still be a year or two away from FI if I had worked for a bigger, more stable company during that time.
I made a blog! https://seattlecyclone.com/

The Roth IRA was named after William Roth, who represented Delaware in the US senate from 1971-2001. "Roth" is a name, not an acronym. There's no need to capitalize the final three letters.

dinkhelpneeded

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Re: HCOL area FIRE-ees I want to hear from you!
« Reply #6 on: July 18, 2017, 05:57:17 PM »
Thank you for the replies.

I agree that once housing costs are down to zero or low then living in a HCOL is not very different from a LCOL. The point is we missed buying a home during the recession as well as the recovery. We bought a home in 2014 however its tiny and has some structural issues, still livable though. Any dream of an upgrade is looking unlikely given the current market.

 - If you didnt buy at the bottom of the market would you still buy a home? or wait it out?

 - I am also hearing - in addition to high incomes, stock helped. I am considering a job change, and this has been on my mind lately.

 - Did you decide to keep your family small or not have kids based on your desire to be FI in a HCOL area? Daycare eats up a chunk of our take home, we still come out saving quite a bit so it is worth staying in the workforce as a double income family.

jim555

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Re: HCOL area FIRE-ees I want to hear from you!
« Reply #7 on: July 18, 2017, 06:47:53 PM »
Condo owned outright in suburb of NYC.  Very HCOL area.  But able to leanfire.  NY has good health plans and lots of doctors.  The extra costs are worth it to live in an area that can get me to NYC in under an hour.  I am surrounded by tons of stores and access to many buses and trains.
« Last Edit: July 18, 2017, 06:49:40 PM by jim555 »

jim555

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Re: HCOL area FIRE-ees I want to hear from you!
« Reply #8 on: July 18, 2017, 07:54:44 PM »
Quote
What did you do differently that enabled you to retire in a HCOL area?
Nothing, just save, save, save.

Quote
How did you end up paying for your primary home? Did you live in flip, churn, or did you buy one home and pay down the mortgage?
Bought for cash after the 2009 drop, before that rented.

Quote
Do you think the currently espoused MMM method (live frugaly, save the max) can work for a HCOL area? I find that even with a dual high income it probably wont work within a decade
It is pure math and will work if the numbers support it.

Quote
What big bets/risks did you make that paid off?
None, I don't like taking risks.

seattlecyclone

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Re: HCOL area FIRE-ees I want to hear from you!
« Reply #9 on: July 18, 2017, 08:32:52 PM »
Thank you for the replies.

I agree that once housing costs are down to zero or low then living in a HCOL is not very different from a LCOL. The point is we missed buying a home during the recession as well as the recovery. We bought a home in 2014 however its tiny and has some structural issues, still livable though. Any dream of an upgrade is looking unlikely given the current market.

Something to keep in mind is that if you already bought into the housing market, the amount that you're actually paying for an upgrade is equal to the difference in prices between your current house and the one you're moving into. In our case we paid $320k for a small house in 2010, and sold it for $630k to buy a large house for $875k. The delta between the small house and the large house was $245k. The delta in prices between a large house and a small one was a bit smaller in 2010 when we bought the first house, but it wasn't that much smaller.

Quote
- If you didnt buy at the bottom of the market would you still buy a home? or wait it out?

The nice thing about buying a home is that you lock in your price. Whatever happens to the local housing market, you don't have to care very much because you agreed to a certain price when you took out your mortgage. Seems a bit easier to plan that way, eliminating most of the potential variance from a large portion of your expenses.

Quote
- I am also hearing - in addition to high incomes, stock helped. I am considering a job change, and this has been on my mind lately.

Stock in a small company is a risk. It could end up being completely worthless, or it could end up being worth quite a lot. In a larger company, there's a bit less risk, and a bit less potential reward.

Quote
- Did you decide to keep your family small or not have kids based on your desire to be FI in a HCOL area? Daycare eats up a chunk of our take home, we still come out saving quite a bit so it is worth staying in the workforce as a double income family.

We have one kid, trying for another shortly. I don't think we would have wanted to have more than two regardless of our location, so I don't think the cost of living has much to do with it even though child care is quite expensive here. We were close enough to FI when we had our first that any temporary child care expenses that we may incur weren't considered that significant over the long run. Sure, maybe we work an extra year to pay for a few years of day care. If having children is our goal, there are worse things people have to do to make that goal a reality.
I made a blog! https://seattlecyclone.com/

The Roth IRA was named after William Roth, who represented Delaware in the US senate from 1971-2001. "Roth" is a name, not an acronym. There's no need to capitalize the final three letters.

FINate

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Re: HCOL area FIRE-ees I want to hear from you!
« Reply #10 on: July 18, 2017, 08:44:15 PM »
Thank you for the replies.

I agree that once housing costs are down to zero or low then living in a HCOL is not very different from a LCOL. The point is we missed buying a home during the recession as well as the recovery. We bought a home in 2014 however its tiny and has some structural issues, still livable though. Any dream of an upgrade is looking unlikely given the current market.

 - If you didnt buy at the bottom of the market would you still buy a home? or wait it out?

 - I am also hearing - in addition to high incomes, stock helped. I am considering a job change, and this has been on my mind lately.

 - Did you decide to keep your family small or not have kids based on your desire to be FI in a HCOL area? Daycare eats up a chunk of our take home, we still come out saving quite a bit so it is worth staying in the workforce as a double income family.

We bought at $580 (house is now worth about $900), but that wasn't the bottom, was on the way up way back in 2003. We thought it was rather expensive at the time. Very intentionally bought even though the finances were tough initially. Did this because my sense was that our HCOL area chronically under builds housing so there is almost always a housing shortage - for us housing (primary residence) has never been an investment, rather it is a way of locking in a cost of living. Price went up, then down, then up again...doesn't matter, have to live somewhere. IMO, buy (or hold) a house in a HCOL area if you plan to stay there 10 years or longer and want to put down roots. We have since paid off the mortgage.

To your second point, yes, stock was the main component of reaching FIRE. Would not have remained in this area except that the core of my industry is here and the compensation more than made up for the HCOL. I *really* don't understand what keeps people here in other careers that don't pay a premium for this location (accountants, construction, cops, etc.).

Speaking of careers that don't pay much, and to touch on your third point, my wife was a teacher before we had kids. As a result of my stupidly high compensation, her stupidly low compensation, taxes/AMT, it was less expensive for her to quit her job and stay at home with the kids than pay for childcare. Don't know how people needing both incomes manage to pay for childcare in our area, super expensive, especially if income(s) are relatively average. 

Gyosho

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Re: HCOL area FIRE-ees I want to hear from you!
« Reply #11 on: July 19, 2017, 08:02:06 AM »
I moved to the HCOL Bay Area as a poor graduate student. Since I was an expert on frugal living, when I entered the work force I simply kept up my frugal ways. The Bay Area salaries exploded and my SAVINGS (not spending) exploded with them.

It is easy to be frugal in the Bay Area because there are so many free ways to entertain yourself - excellent libraries, countless well-maintained and breathtakingly beautiful parks within a 30 minute drive, clubs that cater to any arcane interest you care to develop.

Greystache

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Re: HCOL area FIRE-ees I want to hear from you!
« Reply #12 on: July 19, 2017, 08:42:36 PM »
I did not retire very early. I was 55 when I quit. I live in coastal SoCal. Last time I checked, my house was worth just north of $600K. I bought it for $200K near the bottom of the market in 1994. It rose to around $700K in 2007 and then crashed the following year. It is now close to where it was 10 years ago and over 3 times what I originally paid for it. I think the local market is over priced at the moment and any significant rise in interest rates will cause a major decline in home prices. But then, I am always a little too bearish about these things. I guess if you plan to hold on to property as long as I have, it does not matter much. It will always increase in value eventually. However, if I had bought in 2007, it would have been very difficult to watch my home's value decrease by 30 or 40 percent.

deborah

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Re: HCOL area FIRE-ees I want to hear from you!
« Reply #13 on: July 19, 2017, 09:40:24 PM »
  • What did you do differently that enabled you to retire in a HCOL area?
  • How did you end up paying for your primary home? Did you live in flip, churn, or did you buy one home and pay down the mortgage?
  • Do you think the currently espoused MMM method (live frugaly, save the max) can work for a HCOL area? I find that even with a dual high income it probably wont work within a decade
  • What big bets/risks did you make that paid off?

I have searched high and low for a good HCOL area thread on the forums, but couldnt find one. If anyone knows of one please refer me to it. Thanks! Look forward to hearing from you!
I bought a run down house. I put up with its problems for years, and as I got the money, I fixed up one room at a time - did a lot of the work myself. There is no use moving into a place and changing it immediately - you need to live in it for a year or so to find out the things you like and don't like about it in all seasons (something that drives you batty in winter might be perfect in summer).

When I had finished the front rooms (after about five years), I found an architect that I liked, and after three years of discussion, she gave me a renovation plan I liked for the back section that needed to be knocked down. I had saved up the money for the renovation, and already paid off the mortgage (I live in Australia where paying off the mortgage aggressively is about the best thing you can do with your money). For a few years I had a border - but that wasn't for long. It helped.

This was a high col area in a high col city. I don't live there any more, as I moved for health reasons, but although that house is a two bedroom wooden house, it is currently worth $1.5mill. Before I left, I was FI, although I didn't realise this for a few more years. I had become FI using the MMM formula, as a single person on a single wage. If I had known I could retire early, I would definitely have been able to do it in 10 years. I took no risks. I always lived on a very small portion of my wages. I've read a number of articles, and there was an interesting one from our stock exchange, comparing gains people made with and without gearing. Gearing made about 5% difference in the amount they had at the end - it really doesn't seem worth the risk!

When I moved, I bought my current house without a mortgage, with the money from the first one. It was slightly cheaper. It is now worth a lot less than the first house (that city's prices have increased much more than the prices in my current city), but that doesn't matter, because a house is just where you live - it's not part of your retirement stash. Although houses where I now live are somewhat cheaper than in the suburb of the first house, prices overall here are similar (because it was in an expensive part of the city), and the cost of living is actually higher. I have been retired for 7 years.

tonydomon

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Re: HCOL area FIRE-ees I want to hear from you!
« Reply #14 on: July 24, 2017, 10:05:10 PM »
What did you do differently that enabled you to retire in a HCOL area?
Had high incomes, saved a lot, lived frugal, and invested wisely

How did you end up paying for your primary home? Did you live in flip, churn, or did you buy one home and pay down the mortgage?
Down payment from exercising stock option. Bought one home and pay down mortgage

Do you think the currently espoused MMM method (live frugaly, save the max) can work for a HCOL area? I find that even with a dual high income it probably wont work within a decade
If your house is paid off, then it's OK.

What big bets/risks did you make that paid off?
None

MonkeyJenga

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Re: HCOL area FIRE-ees I want to hear from you!
« Reply #15 on: July 25, 2017, 11:34:26 AM »
I'm a single, early 30's renter in NYC, and I recently hit FI. I wouldn't be done this quickly in areas with lower salaries. My expenses were never that crazy, and right now they're lower than many people in "cheaper" cities. ($1,000-ish excluding charity.) The high salary was a necessary component, since my investing was mediocre.

I've always lived with roommates, taken public transit, and minimized restaurants and shopping. No need for a car, lots of cheap/fee entertainment options, and cheap groceries.

Renting is a risk, but I'm very flexible and don't have a lot of stuff. I only found my current place through a friend, and I'm willing to rent a room in less cool neighborhoods.

NYC has a lot of options for cheap housing if you're willing to look outside the norm. Even going a little further out on the subway makes things more affordable while still connecting you to public transit. If you bike, you can live in even less convenient areas and save more money, since you won't be tied to housing near a subway stop.
« Last Edit: July 25, 2017, 11:37:05 AM by MonkeyJenga »