Author Topic: My BIL's new house  (Read 33128 times)

Undecided

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Re: My BIL's new house
« Reply #50 on: December 01, 2016, 03:33:27 PM »
I don't know if I will ever be able to relate to the United States home prices...

380K at an annual salary of 120K seems incredibly reasonable to me.  I have friends with half the salary (in cdn $) that have put 5% down on shoe-boxes for that price.

I don't know where in Canada you live, but it's not like the Vancouver/Toronto housing markets stand for all of Canada.

http://www.crea.ca/housing-market-stats/national-average-price-map/

I'm new to this forum but I'm already sick of this attitude. I speak from my experience. No shit if I wanted to live in North Battleford I could get a house for less...

Edit: Undecided, did you even read your own link? Average home price in Canada is $481K. I guarantee you that is not for a 5 bed 3 bath house that op is describing. What is the point of your comment?

Yes, I read it; I didn't mean to push your buttons, I was just focused on your phrase about not being able to relate to "the United States home prices"---they vary significantly across regions, as they do across regions in Canada. San Francisco housing is more expensive than any market in Canada, but the OP's BIL is buying on the outskirts of a tertiary city; maybe it's like buying near Halifax. It seems like that---housing prices outside major markets---is what you can't relate to. My point was just that the national comparison was misplaced, vs. a type-of-market comparison, for example.

Kansas Terri

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Re: My BIL's new house
« Reply #51 on: December 01, 2016, 09:47:11 PM »
Every person has the right to spend their hard-earned money on things that will bring them joy. For many of us, early retirement brings them joy. For this man, it well may be a big house. Personally, I would rather work on my oversized back yard instead of doing housework, and he and his family may prefer to do the extra housework. So my house is small but my yard is large, and his house is large.

It brings me joy to rebuild my home made greenhouse with my own 2 hands this winter. It may bring him joy to keep up a large house. IT IS HIS OWN CHOICE!

GoingConcern

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Re: My BIL's new house
« Reply #52 on: December 01, 2016, 09:53:04 PM »
$120k salary for a $380k home doesn't sound bad at all. 


Tjat

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Re: My BIL's new house
« Reply #53 on: December 02, 2016, 06:44:04 AM »
We bought a $400K house on a combined salary of $140K at the time. All depends on where you live. Also, the price is probably less significant to affordability than the monthly payment (homes are the only expense where this is probably relevant) as your price is often restricted to what's available in your location. Assuming a 30 year loan and 3.5% interest, that works out to a monthly payment of $1,706, which is only 17% of his gross income. Seems fine.

talltexan

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Re: My BIL's new house
« Reply #54 on: December 02, 2016, 07:13:12 AM »
So I am convinced that some part of a house is an investment, but some part of it is definitely just consumption.

Mississippi Mudstache

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Re: My BIL's new house
« Reply #55 on: December 02, 2016, 07:43:24 AM »
Point of reference: I just got pre-approval for a mortgage based on a household income of $76,000. I was pre-approved for $444,000: 5.8x my annual salary. Effing insane.

But $380,000 on a 120K salary seems reasonable to me. I bought my first house for $126,000 on a $42,000 salary, and that's when interest rates were 6-7%. Granted, it turned out to be a horrible decision, but that was because of the financial crisis, not because I couldn't afford the mortgage. I was never under any financial duress until I left the house and tried to sell the damn thing (it eventually sold for $79,000).

Chris22

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Re: My BIL's new house
« Reply #56 on: December 02, 2016, 08:08:49 AM »
We bought a $400K house on a combined salary of $140K at the time. All depends on where you live. Also, the price is probably less significant to affordability than the monthly payment (homes are the only expense where this is probably relevant) as your price is often restricted to what's available in your location. Assuming a 30 year loan and 3.5% interest, that works out to a monthly payment of $1,706, which is only 17% of his gross income. Seems fine.

That's a good point too; assuming escrow of property tax, a $380k house could cost anywhere from, say, $200/mo to more than $1k/mo in property taxes.  That could wildly swing the affordability, and I'm guessing this guy is on the low end of that scale given his geography.

TheGrimSqueaker

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Re: My BIL's new house
« Reply #57 on: December 02, 2016, 08:47:54 AM »
For perspective:

http://www.crackshackormansion.com/

How does a normal person actually live in Vancouver?

LOL. The last time that game was updated was 2010. For anyone playing it today, double the value of every property to get a 2016 estimate.

Normal people live in Vancouver the same way they do in NYC, Silicon Valley, Hong Kong, London, or any other large city. They live in very small apartments and don't have cars.

The great thing about Vancouver, though, is that you truly don't need a car even as a tourist. There's a badass bike-friendly public transit system and a reasonably well maintained system of sidewalks. You don't need a car even to get to the airport. I went adventuring there again a couple years ago and the city is still benefiting from the Expo 86 transportation infrastructure, which they have upgraded since. I didn't need a car at all, even with luggage. Schlepping groceries around would be a piece of cake compared to when I had to do it here several years ago.

Dicey

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Re: My BIL's new house
« Reply #58 on: December 02, 2016, 10:15:48 AM »
Hypocrite. You can't simultaneously try to claim the moral high ground while repeating tired insults. When I'm over the mild irritation caused by said insults, I'm just gonna be bored, so don't expect further replies.
Zephyr, you've been around long enough to understand that the comment that elicited MT"s rather eloquent response(s) was not particularly helpful. Frankly, to this long-time reader, it was far more of a rant than you're willing to accept responsibility for. Resorting to name calling does nothing to improve that impression.

If you're FIRE and spend your days at the beach and doing good works, you've clearly grabbed the brass ring. Why be so bitter?

Dicey

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Re: My BIL's new house
« Reply #59 on: December 02, 2016, 10:49:21 AM »
All the in-laws were visiting my house for Thanksgiving. Everyone else is sooooo excited about this new house my Brother-in-law is buying. It's a $380,000 house, about an hour south of DT St. Louis, for annual income of perhaps $120,000.

Does this sound like a stretch to anyone else here? They aren't really trying to sell their current house (worth perhaps $180,000), but I imagine they will soon. His wife is pretty spendy, doesn't seem to worry about things mustachian...
Now back on topic...I'm quoting the original post to refresh our memories:

tt, I have several problems with the questions you're asking:

- You do not know his actual income.
- You do not know how much down payment they have.
- What they chose to do with their existing home is irrelevant.
- It is entirely possible to achieve FIRE without slavishly adhering to a single rigid formula. (#askmehowiknow)
- It sounds like you might have a teeny, tiny bit of envy. Keeping up with the Jones, or wanting to, is frowned upon in these parts.
- It's really none of your business.

FWIW, our clown house in a HCOLA cost TEN times DH's salary. We bought it on a short sale and paid cash for it. We own three nice looking vehicles. They're all paid for. We're FI and I'm RE. I am fully aware that this might sound braggy (sorry, not sorry for what we are very grateful to have accomplished).

My point is that you cannot judge a book by its cover, nor should you attempt to.

talltexan

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Re: My BIL's new house
« Reply #60 on: December 02, 2016, 12:15:36 PM »
Diane C, thank you for these points. Indeed, I have attempted to NOT know my BIL's income, the figure I reported was taken as assumed by our other commenters, and the feedback useful with that understanding.

Envy: I do not envy the house, but I do envy the way the rest of the family is celebrating the purchase of this house as some kind of achievement, when it may simply be an act of extravagance that risks my BIL's future. I've seen some other commenters hint at this. I would like relatives to affirm my lifestyle choices as well. Perhaps part of he way of the mustache is in resolving to live without that. Would a true mustachian feel envy here?

Would a true mustachian allow a close relative to overspend on a house without some attempt at talking sense into him?




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talltexan

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Re: My BIL's new house
« Reply #61 on: December 02, 2016, 12:17:37 PM »
Diane C, I'd argue that--since you paid cash for your house--the more relevant comparison isn't value of house to your salary, but value of house to the rest of your assets. Salary matters mostly when it's servicing a mortgage.


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patchyfacialhair

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Re: My BIL's new house
« Reply #62 on: December 02, 2016, 12:23:58 PM »
Diane C, thank you for these points. Indeed, I have attempted to NOT know my BIL's income, the figure I reported was taken as assumed by our other commenters, and the feedback useful with that understanding.

Envy: I do not envy the house, but I do envy the way the rest of the family is celebrating the purchase of this house as some kind of achievement, when it may simply be an act of extravagance that risks my BIL's future. I've seen some other commenters hint at this. I would like relatives to affirm my lifestyle choices as well. Perhaps part of he way of the mustache is in resolving to live without that. Would a true mustachian feel envy here?

Would a true mustachian allow a close relative to overspend on a house without some attempt at talking sense into him?




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Everyone has their faults, everyone feels envy and "sins" from time to time. We're a competitive species.

As folks have said before, your BIL is not making an obscene purchase. Sure, it may be out of line with your (or even my) values, but life is not all about absolutes. Just because someone isn't living the same "$24000 per year" budget as our lord and savior MMM, doesn't mean they're doomed to financial failure. Retiring at 65 after a professional career while saving 10-20% the whole time is something to be excited about. Only this community sees that as a failure.

Cassie

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Re: My BIL's new house
« Reply #63 on: December 02, 2016, 01:25:36 PM »
5 years ago we retired at 53 and 58 and downsized and paid cash for a smaller house. Some friends of ours that were 10 years older bought a much bigger house at 2700 sq ft with no pensions, small SS and both needing to keep working f.t. Their first house was underwater so they kept as a rental.  WEll they felt free to question our decisions and kept telling us we should not give up the bigger house or retire, etc.  We never told them we thought they were stupid. eventually we quit being friends because I got sick of it.

talltexan

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Re: My BIL's new house
« Reply #64 on: December 02, 2016, 02:56:48 PM »
Having to work longer than you want is not a disaster (although it is irksome). Financial stress decreasing quality of life and leading to resentment/financial stress/divorce/bankruptcy is the disaster.

What people on this thread have said in reaction to the #'s I posted makes me think I shouldn't worry about it in this case.

Dicey

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Re: My BIL's new house
« Reply #65 on: December 02, 2016, 07:56:47 PM »
...Would a true mustachian feel envy here?

...Would a true mustachian allow a close relative to overspend on a house without some attempt at talking sense into him?
1. No, true mustachians are impervious to envy and only bask in the praise of others once they've achieved FIRE.  Good mustachians try not to gloat, but it can be hard, because people can easily mistake all that happiness for gloating.

2. No, a true mustachian does not overtly prostheletyze to those who have not sought our help.

3. Gently now: True mustachians figure out how to remove the free advertising from their i-thingies before they post here. Just sayin' (softly, of course).

pbkmaine

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Re: My BIL's new house
« Reply #66 on: December 02, 2016, 08:35:47 PM »
Diane C is a better person than I am. When I see people buying stuff they don't need because of social pressure? I'm smug and I gloat.

pbkmaine

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Re: My BIL's new house
« Reply #67 on: December 02, 2016, 08:47:46 PM »
...Would a true mustachian feel envy here?

...Would a true mustachian allow a close relative to overspend on a house without some attempt at talking sense into him?
3. Gently now: True mustachians figure out how to remove the free advertising from their i-thingies before they post here. Just sayin' (softly, of course).

Diane C, why does this bother you so much? It's in tiny little print at the bottom of a post. Sure, it's free advertising, but so are the apples all over my devices. I don't put tape over them.

Dicey

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Re: My BIL's new house
« Reply #68 on: December 03, 2016, 12:04:11 AM »
...When I see people buying stuff they don't need because of social pressure? I'm smug and I gloat.

3. Gently now: True mustachians figure out how to remove the free advertising from their i-thingies before they post here. Just sayin' (softly, of course).

Diane C, why does this bother you so much? It's in tiny little print at the bottom of a post. Sure, it's free advertising, but so are the apples all over my devices. I don't put tape over them.
Because it's a really, really lame thing on the forum of a blog of this nature. Maybe that makes us more alike than not.

BTW, dagiffy01 has gone underground, but says via text he is alive and well. I'll pm if/when I know more.

Paul der Krake

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Re: My BIL's new house
« Reply #69 on: December 03, 2016, 12:15:44 AM »
Purely going by the provided numbers of purchase price and income, and assuming property tax of 1%, it doesn't unreasonable at all.

Freedom Invested

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Re: My BIL's new house
« Reply #70 on: December 03, 2016, 01:23:59 AM »
Envy: I do not envy the house, but I do envy the way the rest of the family is celebrating the purchase of this house as some kind of achievement, when it may simply be an act of extravagance that risks my BIL's future. I've seen some other commenters hint at this. I would like relatives to affirm my lifestyle choices as well. Perhaps part of he way of the mustache is in resolving to live without that. Would a true mustachian feel envy here?

I know how you feel. My home is barely 125% of our yearly income. My wife and I are likely the most frugal in our families and no one quite gets us. Whether or not your family gets you, you won't be beholden to a job like many of them may or may not realize they are beholden to. That should dispel any envy, no?

Freedom Invested

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Re: My BIL's new house
« Reply #71 on: December 03, 2016, 01:42:22 AM »
Would a true mustachian allow a close relative to overspend on a house without some attempt at talking sense into him?

And as much as you want to help, they are proud, and supported by family, of a purchase that is not easily quickly resold, so they're likely not to be receptive. Best to encourage those that are receptive, IMHO.

pbkmaine

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Re: My BIL's new house
« Reply #72 on: December 03, 2016, 05:37:13 AM »
...When I see people buying stuff they don't need because of social pressure? I'm smug and I gloat.

3. Gently now: True mustachians figure out how to remove the free advertising from their i-thingies before they post here. Just sayin' (softly, of course).

Diane C, why does this bother you so much? It's in tiny little print at the bottom of a post. Sure, it's free advertising, but so are the apples all over my devices. I don't put tape over them.
Because it's a really, really lame thing on the forum of a blog of this nature. Maybe that makes us more alike than not.

BTW, dagiffy01 has gone underground, but says via text he is alive and well. I'll pm if/when I know more.

Thanks for checking!

talltexan

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Re: My BIL's new house
« Reply #73 on: December 05, 2016, 07:07:06 AM »
Update: the family moved in over the weekend. My in-laws (BIL is their son) flew back in last night, rode home from the airport with me. I've seen the house over video-chat, and it is impressive. Hard to criticize (aside from taking a perspective of consumption is bad, that is).

I did learn that my BIL's household income is lower than I thought, about $105 K. For the few of you who said it was borderline, affordable that might matter. They are also paying PMI, hoping to re-finance once they sell the other house.

infogoon

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Re: My BIL's new house
« Reply #74 on: December 05, 2016, 07:19:15 AM »
Yes, I read it; I didn't mean to push your buttons, I was just focused on your phrase about not being able to relate to "the United States home prices"---they vary significantly across regions, as they do across regions in Canada. San Francisco housing is more expensive than any market in Canada, but the OP's BIL is buying on the outskirts of a tertiary city; maybe it's like buying near Halifax. It seems like that---housing prices outside major markets---is what you can't relate to. My point was just that the national comparison was misplaced, vs. a type-of-market comparison, for example.

In some places there's also a reversal of the expected pricing, where it's far cheaper to live in the city proper (especially once taxes are accounted for) than it is in the suburbs. The city I live in (Buffalo, NY) is one such place.

Goldielocks

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Re: My BIL's new house
« Reply #75 on: December 05, 2016, 03:13:03 PM »
I don't know if I will ever be able to relate to the United States home prices...

380K at an annual salary of 120K seems incredibly reasonable to me.  I have friends with half the salary (in cdn $) that have put 5% down on shoe-boxes for that price.

Likewise, I've watched property shows that take place in Canada with things like "I'm a barrista, and my wife is an elementary music teacher, and we're budgeting $850-900k for our first home..." that make me say WTF??

Well, the barrista is making $17 per hour plus mini tips ($34k per year) if at starbucks, less at other locations, and the elementary teacher is making between $75 and $90k per year, depending on experience and degrees.

So...  $120k per year combined income is possible.. at 38% income debt ratio  is ... $3800 per month to pay for mortgage, insurance, property taxes, heat and condo fees.   The should cover an expensive place, especially if someone gifts them most of the $180k down payment to avoid PMI.

In Canada, jumbo mortgages often get LOWER rates than smaller mortgages, too...

talltexan

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Re: My BIL's new house
« Reply #76 on: December 06, 2016, 06:41:53 AM »
Goldielocks' math is reasonable if you assume our couple pays zero in taxes (although I suddenly realize that some of that tax bill would be offset by a nice, healthy, $3,800 monthly mortgage payment in the US)

Goldielocks

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Re: My BIL's new house
« Reply #77 on: December 06, 2016, 11:44:20 AM »
Goldielocks' math is reasonable if you assume our couple pays zero in taxes (although I suddenly realize that some of that tax bill would be offset by a nice, healthy, $3,800 monthly mortgage payment in the US)

Ah, but don't bank formulas look at gross income for mortgages?   That is how they end up thinking we can all carry huge amounts...  even if we all don't have 22% average tax.

:-)

dougules

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Re: My BIL's new house
« Reply #78 on: December 08, 2016, 11:35:00 AM »
Every person has the right to spend their hard-earned money on things that will bring them joy. For many of us, early retirement brings them joy. For this man, it well may be a big house. Personally, I would rather work on my oversized back yard instead of doing housework, and he and his family may prefer to do the extra housework. So my house is small but my yard is large, and his house is large.

It brings me joy to rebuild my home made greenhouse with my own 2 hands this winter. It may bring him joy to keep up a large house. IT IS HIS OWN CHOICE!

I agree it's his right to do what makes him happy, but a lot of people buying luxury goods (which can definitely include real estate) aren't really going to get nearly as much happiness as they think they will from it.  It's entirely possible that 5 BR will be worth the money in terms of what it brings to his life, but most people who buy a house that big aren't going to get enough happiness to be worth it after the initial thrill wears off. 

It sounds like you get your money's worth out of your back yard, but there are plenty of people who spend hard-earned money on several acres and never even use it. 

talltexan

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Re: My BIL's new house
« Reply #79 on: December 08, 2016, 01:15:38 PM »
My in-laws bought a house on 3 acres in 1998. My FIL retired in 2004, then enjoyed a second career as a yard man (his own) for more than a decade.

talltexan

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Re: My BIL's new house
« Reply #80 on: April 17, 2017, 02:17:22 PM »
Thank you to all who posted. I have now finally been inside the house (over Easter weekend), and it is amazingly opulent.

Of course, the air conditioner for the second floor went out, which was unpleasant. Those south-facing windows are nice during the winter, but the heat really seems to build up in the late-spring in Southern Missouri. My BIL confided that he needs another $50,000 in progress to get rid of PMI, so I forwarded him some stuff from a different thread in this community. Baby-steps.

I'm back at home, although my wife and our children will be staying with them all week. I'm hoping living in that house for a week doesn't make my wife want to enlarge our housing sitch.

better late

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Re: My BIL's new house
« Reply #81 on: April 17, 2017, 03:31:00 PM »
Have they sold their prior home yet?

prognastat

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Re: My BIL's new house
« Reply #82 on: April 17, 2017, 03:31:42 PM »
Though our income is somewhat higher than your BIL and we could easily afford a similar or higher mortgage I would simply not want a 5 bedroom and 3 bathroom house due to the upkeep. With 2 DINKs working 40+ hours a week our 3 bedrooms 2.5 bathroom is already more than I can keep up with and if it were solely up to be I'd probably prefer 2 bedroom 1.5-2 bathrooms at most.

The amount of work and money spent on your home only increases as the size increases.

A Definite Beta Guy

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Re: My BIL's new house
« Reply #83 on: April 17, 2017, 03:56:52 PM »
I'd say no, that's too expensive, particularly if it's being spent on 5 beds. Beta household house was bought a bit north of $300k at a $150k annual salary...there's student debt that knocks that down to $130k. That seems like more than enough. I would've preferred spending even less, but we wanted 3 beds and 1.5 baths.

If I were your BIL, I'd downsize and plow the money into something else.

Definitely not INSANE spending territory, though.

talltexan

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Re: My BIL's new house
« Reply #84 on: April 18, 2017, 06:06:59 AM »
Have they sold their prior home yet?

They actually closed on the sale of the old house early in March, so only about three months of double-mortgage payments. Based on Zillow, they had a nice gain on that house, approx. 20% in five years.

A Definite Beta Guy

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Re: My BIL's new house
« Reply #85 on: April 18, 2017, 08:15:25 AM »
Have they sold their prior home yet?

They actually closed on the sale of the old house early in March, so only about three months of double-mortgage payments. Based on Zillow, they had a nice gain on that house, approx. 20% in five years.

Hehehehe, but who knows how much the money-pit took before that point!

Laura33

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Re: My BIL's new house
« Reply #86 on: April 18, 2017, 08:26:20 AM »
Have they sold their prior home yet?

They actually closed on the sale of the old house early in March, so only about three months of double-mortgage payments. Based on Zillow, they had a nice gain on that house, approx. 20% in five years.

Wow -- so how are they still $50K short on the PMI payoff? 

FWIW, I think you have sufficient red flags here to be a little worried about your BIL -- the big house for no apparent reason, the spendy wife, the fancy finishes, the buy-first-get-finances-straight-after approach, etc.  I can also see how it would be frustrating for him to be getting all of the family praise/attention, when you are saving more and not being showy with your money.  But it's also not your job to "fix" him, and you can't make your family value what you value.  He'll probably be just fine, since he has the support of the in-laws and apparently a job for life (or at least the length of the marriage).  And you can take pride in living your own life, independently, and most likely retiring decades before him.

talltexan

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Re: My BIL's new house
« Reply #87 on: April 18, 2017, 09:42:28 AM »
BIL has a generous helping of human capital (JD actually), but, yeah, the spendy wife could become a problem.

Between car, lawn mower, house, etc., I estimate their total debt load to be about $360,000, or about 3X annual income. But it's all non-callable and at super-low interest rates (the obvious exception being the PMI).

Dicey

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Re: My BIL's new house
« Reply #88 on: April 25, 2017, 12:30:19 PM »
Have they sold their prior home yet?

They actually closed on the sale of the old house early in March, so only about three months of double-mortgage payments. Based on Zillow, they had a nice gain on that house, approx. 20% in five years.
This is kind of funny. Say what you will about the cost of HCOLA housing, but 20% over five years would not be considered a nice gain here. I had a place more than double in four years and our current home has appreciated at at least 10% every year we'very owned it. Our properties in LCOLAs don't appreciate nearly as much. Strange.

mtn

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Re: My BIL's new house
« Reply #89 on: April 25, 2017, 12:34:02 PM »
Have they sold their prior home yet?

They actually closed on the sale of the old house early in March, so only about three months of double-mortgage payments. Based on Zillow, they had a nice gain on that house, approx. 20% in five years.
This is kind of funny. Say what you will about the cost of HCOLA housing, but 20% over five years would not be considered a nice gain here. I had a place more than double in four years and our current home has appreciated at at least 10% every year we'very owned it. Our properties in LCOLAs don't appreciate nearly as much. Strange.


talltexan

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Re: My BIL's new house
« Reply #90 on: April 25, 2017, 01:30:44 PM »
Yeah, the AC will apparently need an expensive new coil installed to get it working again...also, wife somehow got her iPhone (of course she has an iPhone) wet on her business trip, so there's that expense, too.

Mo' house, mo' problems.

Reynold

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Re: My BIL's new house
« Reply #91 on: April 25, 2017, 01:37:09 PM »
This is kind of funny. Say what you will about the cost of HCOLA housing, but 20% over five years would not be considered a nice gain here. I had a place more than double in four years and our current home has appreciated at at least 10% every year we'very owned it. Our properties in LCOLAs don't appreciate nearly as much. Strange.

Not a big surprise to me; LCOL areas are LCOL because people don't want to live there, through some combination of (1) poor weather and (2) poor local economy/lack of jobs.  Coastal California has the best combination of economy and weather in the country, so has the highest housing costs and appreciation.  Places like Seattle and Denver aren't quite as ideal a combination, but still pretty good, and affordable compared to CA, so they are appreciating fast.   I predict they will top out lower than CA because the weather isn't quite as nice.  Our place in CT appreciated about 25% in a little under two decades, not great on either front though a beautiful area to live so at least some appreciation.  Downtown Buffalo, where one earlier poster lives, has terrible weather and, like the rest of upstate New York, a very slow economy, if not going in reverse (I don't know it as well as some other upstate cities), so I suspect housing will stay very cheap. 

That is something I'm trying to persuade my DW of, if we retire to somewhere with decent weather and a good economy like Colorado or South Carolina, we should buy, if it is somewhere like Buffalo, we should rent. 

Just Joe

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Re: My BIL's new house
« Reply #92 on: April 25, 2017, 02:43:48 PM »
Good weather but gridlock traffic, endless sprawl, endless humanity, pollution, etc.... Hmmmm.... I stick with a LCOL area thanks!

Dicey

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Re: My BIL's new house
« Reply #93 on: April 25, 2017, 06:34:44 PM »
Have they sold their prior home yet?

They actually closed on the sale of the old house early in March, so only about three months of double-mortgage payments. Based on Zillow, they had a nice gain on that house, approx. 20% in five years.
This is kind of funny. Say what you will about the cost of HCOLA housing, but 20% over five years would not be considered a nice gain here. I had a place more than double in four years and our current home has appreciated at at least 10% every year we'very owned it. Our properties in LCOLAs don't appreciate nearly as much. Strange.


Oh, what a pretty picture!

Today, on another thread, I posted a timeline of my history of real estate ownership since the late '80's. All in CA, two of the four examples bought as short sales. The first one, in a LCOLA, gained less than 15% in about eight years. (It should be noted that I sold it back to the original owner, for slightly under market value. An unusual set of circumstances.) The HCOLA rest have gained far, far more than that over the last 20 years. That bubble is really a balloon, to which my string is firmly attached. It's lifting me higher & higher, all the way to FIRE.

Dicey

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Re: My BIL's new house
« Reply #94 on: April 28, 2017, 05:36:21 AM »
Here you go...in this thread, the OP is wondering whether to buy in a less expensive part of thhe Bay Area or rent in a nicer area with better schools.
I agree with the others who are advocating renting in the better school district once you actually need it. You could always start investing in some rental properties in more affordable areas in order to build equity or receive some passive income depending on your personal goals.
That's exactly how I started in real estate.  Here's my story in case it's helpful.

Bought a 3+2, 1612 sf SFH in Riverside (where I did not live, but I grew up there, so knew the market) for $101k, which I rehabbed on a dime and rented out. I continued to live in a rent-controlled apartment elsewhere. Eight years later I sold it for $115k.

Bought a 2+1 882 sf apartment conversion condo in Orinda for $120k on a short sale. I rehabbed and moved into it. Four years later, in 2001, sold it for $260k.

Bought a 4+2.5 1701 sf townhouse in Walnut Creek for 390k. I rehabbed and moved in. I sold it in twelve years later for $600k, 'cause I got married and we discovered MIL had ALZ and we decided to move her in with us.

Bought a 4+3.5 2627 sf custom home in Walnut Creek for $938k on a short sale. Spendy, but the layout was right for four adults and it needed little fixing, plus DH walks to work. Zillow says it's worth $1.3M. Based on recent comps, and current market insanity, I expect it would go for $1.4M, but we're not selling yet, so who knows what will happen?

In the olden days when CD's were paying decent returns, it was typical to keep EF's and DP money in CD Ladders. I used that model as an inspiration to create a Real Estate Ladder of sorts.

Hope a real-life example helps.

talltexan

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Re: My BIL's new house
« Reply #95 on: April 28, 2017, 07:40:23 AM »
Dicey-
congrats on the real estate success! I'm not sure my BIL has the skills or inclination to engage in the types of rehab you describe, especially since it sounds like your Riverside house may have been a wonderful way to absorb a lot of time without turning it into much money. Owning real estate for him is purely consumption. And He cannot walk to much of anything from it (in contrast to your current house).

And we can add to this consumption a new AC coil and freon refresh to fix his AC unit that was not working the whole time my family was visiting him.

401Killer

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Re: My BIL's new house
« Reply #96 on: May 02, 2017, 09:47:11 AM »
A $380K house on $120K salary is very reasonable.

Wow, I'm doing dramatically better than this then... By like, 3x!!!

Or everyone's definition of "reasonable" varies greatly... To me, a $380k home on only 120k income is absurd... Taxes, heat, energy, lawn... Eff that noise.

Good luck to them!

mtn

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Re: My BIL's new house
« Reply #97 on: May 02, 2017, 09:55:13 AM »
A $380K house on $120K salary is very reasonable.

Wow, I'm doing dramatically better than this then... By like, 3x!!!

Or everyone's definition of "reasonable" varies greatly... To me, a $380k home on only 120k income is absurd... Taxes, heat, energy, lawn... Eff that noise.

Good luck to them!

I have a, at last estimation, $355k house that is 1300SF, and costs less than $100 in combined electricity and gas monthly (on a 12 month average). It takes about 20 minutes to mow the lawn with an old-school rotary push mower. It is more house than we need, but legitimately the smallest we could find that was within our requirements (basically, it needed to fit a king bed and it needed to not flood, within a pretty specific area).

You got me on taxes though, but that is pretty insane across Chicagoland regardless.

jeromedawg

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Re: My BIL's new house
« Reply #98 on: May 02, 2017, 10:16:24 AM »
My BIL and his partner just closed on a $1M 4bed/2bath home in SF (south and outside of downtown). They actually paid $1.2M for it because they couldn't lose this place to another sucker so they bid up... you know, $200k: no biggie.

They have been living in a pretty nice loft up until this point since 2003 I think - they got that loft in downtown for around $400k and it would probably sell for over $900k now. It sounds like they want to try renting the loft out and seeing how much they can get for it. Of course, I'm pretty sure they're not taking into account the overhead from expenses and what not (the association for already is like $400-500). They still owe on that mortgage but being that it's pretty low, I think they would cash flow. I just don't know how much it would actually cash flow and if it's better than just selling the place. For that area, I would think it might be a better idea to sell the loft ASAP and use it to pay down the mortgage on the existing place so it's not as much of a burden - don't you benefit from a cap gains exclusions in doing this if you've lived in the place for 2/5 years? Their combined salary is probably close to $300k, so it's within target range of 'affordability' but them overbidding $200k plus certainly pushes it the boundaries.


I guess they got tired of the 'street noise' and area they live in where the loft is, even though it's within walking distance of everything. Not sure why they needed a bigger place for just the two of them. It seems like they want to host wine parties at their place or something. The other justification is "oh you guys and mom and dad can stay here when you visit" - I'm not sure how realistic that expectation is as I always stay with my parents on the other side of the bay and my in-laws barely ever go up to the Bay Area. Neither my wife nor I have the biggest desire staying with them when we visit either - they're just completely different people and I think we typically will get annoyed after only spending several hours with them. Whenever her brother comes to visit us, we feel like he expects us to cater to his every need (e.g. after 5 weeks of giving birth, my wife felt obligated to pick up a Starbucks coffee for him in the late morning while he was sleeping in - he didn't want to go get coffee on his own even though the Starbucks is a 5 minute walk from here but absolutely needed it because he can't go #2 in the morning without his coffee....?!?!?!). With a second LO now and him visiting again in several weeks, that's not going to happen ever again. My wife can easily have a pushover-mentality though. I generally try to stay out of her personal interactions with her family but maybe I should step-in and deny him this time around.

Anyway, back to OP's post - I posted something similar about a FB acquaintance who bought a $1M home which is slightly above the norm in my area (mid-HCOL). But it turns out, given their *estimated* salary, they might not be in over their heads after all. That said, as others have pointed out and what you know, there's much more than just the home and how much it costs at play here. It sounds like your BIL is a recipient of Economic Outpatient Care though, which is helping him afford this opportunity.
« Last Edit: May 02, 2017, 10:28:36 AM by jeromedawg »

The Money Monk

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Re: My BIL's new house
« Reply #99 on: May 08, 2017, 12:20:10 AM »
Interesting to see so many people say that the local market is what determines if it was a good buy or not.

 Whether a purchase is a 'bargain' or not has nothing to do with if it is a wise purchase based on your income, savings rate, etc.

Just because most houses in an area are 500K doesn't mean it's always ok for somebody to buy a 300k house. It could still be more than somebody can afford.

I'm not saying it is in this case (that depends on what their total financial picture looks like), but that is just the wrong way to evaluate a purchase.

You don't decide if you can afford something by seeing if it is a 'deal', you do it by seeing how much money you have.