Author Topic: Do I have too much house now?  (Read 1457 times)

TheAnonOne

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Do I have too much house now?
« on: July 02, 2019, 09:09:53 AM »
Numbers-

HHI - 250k
Stache - $550k
Old House - $1000/mo (no lawn care needed)
New House - $2700/mo (lawn care needed)

Story-

Hey Everyone!

So we went house shopping and fell in love with the priciest of homes we saw, go figure... Am I insane for wanting this house? We make around 12k (after tax) a month, and it would be about 20-25% of that in a 30 year payment with 15-20% down. The house is around 500k. It is architecturally designed, and in a prime quiet spot with privacy which is rare. It has room for guests and entertaining spaces, something we THINK we will value.

I am nervous about having an obligation around 2.5X larger but am exploring ways to make it work that hurt less on a cash basis. We could aggressively pay it down for 2 years and refinance.

Other consideration. We are 3~ years from FIRE and buying this will push that back 2~ years. We would want to hit our FIRE # and shift to mortgage payoff after we hit our investing goals. I think we could knock this thing out (or mostly) in those 2-3 years given our salaries. We would FIRE around 32-33 without this house and around 35 with it. Still very early, I think, either way.

I think an important note is that our current situation is not a long term option. We are in 900~ sq ft and simply do not have room anymore. Even with aggressive spring cleaning yearly. Options in the middle do exist but, you do lose the privacy, quiet nature, and drop 20-30% in square footage.

What is the general mood here in spending this type of cash on a house? I have always lived in a smaller place and frankly, got rich, in part, because of it.

zolotiyeruki

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Re: Do I have too much house now?
« Reply #1 on: July 02, 2019, 09:43:49 AM »
You take home $12k/mo after taxes?  Sure, you can afford it, but do you need it?  I'm not going to tell you yea or nay, but I'll post a few questions that might help you clarify your thoughts:

By "need," I mean:
1) do you frequently miss out on opportunities to host overnight guests because of your current limited space?
2) do you frequently opt not to entertain because of your space? or...
3) do you frequently entertain, and find yourself squeezed when you do?
4) similarly, with regards to lawn care, do you currently engage in activities that would benefit from having your own green space, but you have to go elsewhere to do it?

How big is your household? 900 sq ft can be plenty for two people if it's used efficiently.

What's the overall outlook on real estate in your area?  Are more of this type of home being built?  If you pass up this opportunity, how likely is it that a similar house will come on the market in the future?  Are there really no in-between homes in your area that come with nature and privacy?

Is it worth two extra years of working, plus aggressively tightening down on your expenses for those 5 years, in order to live in that house, now?

And finally, "will buying this home bring me the maximum happiness per dollar?"  That's kind of the central tenet around here.  Could you spend $1700/mo (about $60/day!) in ways that would bring more happiness than living in a larger home?

I have a very narrow view into your world, but to me, this whole situation screams "IMPULSE PURCHASE" to me.

TheAnonOne

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Re: Do I have too much house now?
« Reply #2 on: July 02, 2019, 10:40:26 AM »

By "need," I mean:
1) do you frequently miss out on opportunities to host overnight guests because of your current limited space?
2) do you frequently opt not to entertain because of your space? or...
3) do you frequently entertain, and find yourself squeezed when you do?
4) similarly, with regards to lawn care, do you currently engage in activities that would benefit from having your own green space, but you have to go elsewhere to do it?


It probably is an impulse purchase. Not sure if it's the "Wrong" one or not. We have not seen any houses like this but, in reality we have not looked in this price range before. It is around 100k more than the other options.

We have definitely skipped hosting events because of our current location, though, that is a poor justification because more 'reasonable' homes will host as well, just not our current one.

Conflicting....

BlueHouse

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Re: Do I have too much house now?
« Reply #3 on: July 02, 2019, 10:49:35 AM »
I bought a house that is "too much" for me.  But I love it, and in this stage of my life (still working), if I make a mistake, it's easily un-do-able. 

The unexpected pluses:  I've had many more visitors than I ever thought I would have (or want).  These experiences have been VERY GOOD for me and my life.  my house is in a walkable area in a touristy place, so yes, people WANT to come here and I'm fortunate that I can offer them a place to stay. So far, I've had:
Nephews and nieces for longer term stays -- helping them launch into adulthood and get jobs. 
Strangers for protest marches and events -- I would NEVER have done this without this much extra room and guest privacy. 
Opening my house to extended family and strangers has been one of the best things I've ever done in my life. 

The unexpected minuses:  Nothing unexpected.  yes, everything is more expensive and having multiple floors is kind of a pain. 

I think if this is something you really want, you should do it because you are young enough that it's very easily reversible and it adds almost nothing to your long term goals.  At this point in your life, you want to entertain, you want to be outside, yardwork is fun, etc.   

And just this:  instead of refinancing in a few years after some principal paydown, look to recast.  It's unlikely that you'll get a lower rate in the future and recasting costs nothing out of pocket -- just reamortizes with all existing terms (same length, same rate), just reduces the payment based on how much extra you've paid. 
Also, if the guest quarters are private (private entrance, separate floors, ensuite bath, etc) then that sounds fantastic!

Good luck and enjoy your accomplishments!

TheAnonOne

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Re: Do I have too much house now?
« Reply #4 on: July 02, 2019, 10:50:01 AM »

By "need," I mean:
1) do you frequently miss out on opportunities to host overnight guests because of your current limited space?
2) do you frequently opt not to entertain because of your space? or...
3) do you frequently entertain, and find yourself squeezed when you do?
4) similarly, with regards to lawn care, do you currently engage in activities that would benefit from having your own green space, but you have to go elsewhere to do it?


It probably is an impulse purchase. Not sure if it's the "Wrong" one or not. We have not seen any houses like this but, in reality we have not looked in this price range before. It is around 100k more than the other options.

We have definitely skipped hosting events because of our current location, though, that is a poor justification because more 'reasonable' homes will host as well, just not our current one.

Conflicting....

Also, I think comparing the old house to the new house is probably wrong in hindsight. I am moving either way.

Its probably more like

$(1,900 ->2,200) vs $2700

six-car-habit

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Re: Do I have too much house now?
« Reply #5 on: July 02, 2019, 11:01:59 AM »
In 3 years from now, when you are FIRE, and have much more free-time - you could be/ will be - pacing around your current house, wanting less neighbors, or better neighborhood, better yard, etc.   But you will be loath to go back to full time work, to effect the change of houses.  So you'll regret not getting the other house when you had the chance.

 When you are not working 40+ {?}  hours a week, you'll be spending probably at least an extra 20 hours a week [ plus non existent commute time] in your new house.   Age 32 or age 35 is still very young to fire. 3 more years "sacrifice" to own a nicer home, in a better location, worth I suppose twice the value of your current home doesn't seem horribly constraining.  Consider the neighborhood - one thing you cannot change alone- no matter your net worth, is the neighborhood layout, and the neighbors habits.

 We spent maybe more than we should have on our current house - but it is <10 minutes from stores / schools / etc. , quiet, I can see only one neighbors home, we have acreage, we have views, we have a large garage,we have an "attractive exterior/ architecture",  we have a spacious kitchen, we have nice landscaping/ flowers/trees/ gardens. All this stuff we would not have had we spent $50K less.  It was a short window opportunity to buy the place.  Several years later i have co-workers buying "cookie-cutter" homes for more than we paid, with few of the above listed amentities.  Sometimes you need to jump on an opportunity ?!!

 

habaneroNorway

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Re: Do I have too much house now?
« Reply #6 on: July 02, 2019, 11:40:30 AM »
My personal opinion is that housing should not be decided on pure maths. Everyone's priorities differ, but at the end of the day you are likely to spend an awful lot of time in your home. If having space, a mancave/womancave/whatever, being able to be a bit on your own etcetc is important to you I would argue that in QOL more space is worth it unless you go completely ballistic on it. So is living close to work/friends/family/whatever. Having a big house for the sake of having a big house is, at least for me, stupid. But I totally understand why people choose not to live in the smallest and cheapest space available even if it means FI(RE) being pushed a year or two into the future.

But as pointed out by others, it does not seem like you have done a lot of research or reasoning about this. Does not mean it will prove wrong at the end of the day, but at least think it through and consider the pros and cons. Also understand that living in a big house costs more than living in a small house everything else being equal. And it ain't just the mortgage payments.

honeybbq

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Re: Do I have too much house now?
« Reply #7 on: July 02, 2019, 12:44:35 PM »
Buy the house. Life is too short to not love where you live.

AMandM

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Re: Do I have too much house now?
« Reply #8 on: July 02, 2019, 01:22:47 PM »
Why did you fall in love with this house?  What does it give you that a $2000/month house doesn't? Are those features that you actually will use long-term?  (There's no point in working an extra two years or scrimping for 5 years if you're going to move somewhere else when you retire!)

Will these features be worth not only the higher payment but the higher gas, electric, maintenance costs? Will they be worth the extra cleaning time?

Those are not rhetorical questions. They're to help you decide whether this house is better enough than the alternatives to be worth the extra costs, both monetary and non-monetary.

WSUCoug1994

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Re: Do I have too much house now?
« Reply #9 on: July 02, 2019, 01:40:38 PM »
We made a pretty drastic move 3 years ago to a lower cost of living but a more expensive house (go figure).  We have a lot of family and host a lot of family events and this house was designed for entertaining.  My parents also visit us 3-5 times a year from another state and they can stay with us and not stay in hotel like in our previous home.  For what is it worth, due to unforseen circumstance my in-laws live with us temporarily as they rebuild their house - which honestly was a life saver for the family.

We also have a pretty big lot - which the children love as we spend as much time outside as the sun will allow us.  I love that we can't see our neighbors but as my kids get older they likely won't have that same "neighborhood" feel that I did growing up.  We moved from a town house to a large lot which means I do a lot more maintenance work on the property.  I enjoy it but it does take time away from the family. 

I do struggle with the extra cost - but it feels like a push.  The pros equal the cons but we will need to work a little longer to cover the increase in expenditures. 

reeshau

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Re: Do I have too much house now?
« Reply #10 on: July 03, 2019, 03:57:54 AM »
I worry that you seem to have stumbled onto this house--your choice does not seem intentional.  Would you have built this house, if you had the lot?  Now that you are seeing the features, is this really the only one?  Could you take some of these features (privacy, guest space) and get them cheaper when not bundled with others?

I also wonder if privacy will still be your goal post FIRE.  Or, will you rename it "lonely"?  Peace and quiet is often the dream of those trapped in heavy traffic or a cubicle farm.  Will your privacy be causing you to need to drive to the things you want to do in retirement?

Other consideration. We are 3~ years from FIRE and buying this will push that back 2~ years.

In the midst of all these comments, I think this is a great way to quantify the test for what you care most about.  Again, I would also echo that testing this as *the only answer* to your current situation is not the right one.  Try to find a much cheaper place that still checks the most important boxes, and then look at your options.

Malkynn

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Re: Do I have too much house now?
« Reply #11 on: July 03, 2019, 04:51:16 AM »
I'm far more baffled by 900 sqft not being enough for 2 people.

You seem certain that you need substantially more space, and you seem okay with paying more than double your current housing expense for more space...so that says a lot about your priorities.

My instinct? Buy the house, sell it if it ends up being too much and then you can always go back to 900 sqft ;)

Seriously though, it's impossible to say because you haven't indicated what your retirement income will be.
500K is already ~3X your gross income.

It's a lot, but it is doable if this truly is your main priority above all other priorities.

Only you can decide how much of a priority this is to you.
For me, we make far more than you do and would never ever spend that much on a house even though that is a normal price for a mediocre house here.
When we want house guests, we rent a big, luxurious AirBnB, which ends up costing less per year than just the additional property taxes on a bigger house.

We are also totally comfortable in 800 sqft. We actually just recently downsized from 1500 sqft because it was too much space, and 3 floors is too much.

That's us though. Those are *our* priorities, and they are no better or worse than yours.

Want to know something hilarious?
Our recent purchase of a small, inexpensive apartment is actually a terrible investment compared to if we had spent 500K on a detached home.

I'm in Canada where real estate is nuts in urban centers. My particular neighbourhood is in the early stages of exploding in property values. Had we spent more on a detached home, we would see insane profits if we sold in 5 years.

Instead, we bought a small one bedroom in a dated high-rise that will cost us thousands in the coming years when the elevator needs to be replaced. The plumbing is set up so that no unit can install a dishwasher or washing machine.
This new place will never make us any money. We might even lose money if we sell in 5 years.

So why did we buy it?
Because we're minimalists, we LOVE a high-rise view with a huge balcony, we LOVE having an indoor pool, saunas, and a 24h gym, we SO LOVE having heated indoor parking in the winter, and DH could never give up his new indoor pressure hose in the heated garage where he can spray the salt off of his bike in the winter.

For us, this place is our forever home (or at least the place we will live 6 months of the year once we retire), and it doesn't matter what it's resale value is because the plan is to never sell.

I'm looking far into my senior years and thinking of my already nasty arthritis and seeing no stairs and a pool and that looks like a great long term home for 80 year old me.

Why am I bothering telling you this?
Because these are the priorities that DH and I landed on after months and months of agonizing over what we should do. We had to buy a new place (long story), and the numbers favoured us buying a bigger more expensive place, but we just didn't want to.

We had A LOT of long walks and long talks where we worked the problem to death until we were both on the exact same page in terms of our values, priorities, and trade offs.

In the end, we chose our dream home.
As a compromise, we talked our dearest, recently divorced friend into buying a detached home/converted duplex that we agonized over not buying, and he's now living essentially rent free in a property that will rise precipitously in value.

The clincher for us was that at the end of the day, the move wouldn't speed up our FI date, it would just make the years until then less confortable, and we would just end up with way more money than we need. Our dear friend is much younger, and this move will change his life.

Figure out for yourself what real life trade offs your "dream home" is worth to you, decide from there.
Be realistic about the real life impact of the costs, and talk profoundly with your spouse about what they actually mean to your lifestyle.

What do the finances *really* mean to your lifestyle, what does the space and privacy *really* mean to your lifestyle, what do the extra years working *really* mean.

Only you can decide the value of these trade offs.
...but as I said before, you could always sell it in the future ;)

Dragonswan

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Re: Do I have too much house now?
« Reply #12 on: July 03, 2019, 06:57:27 AM »
I think you should look at a few other homes in this price range.  Then buy the one you want.  You can afford it and working two more years to have it seems like a small sacrifice at your ages.

habaneroNorway

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Re: Do I have too much house now?
« Reply #13 on: July 03, 2019, 07:01:46 AM »
When we want house guests, we rent a big, luxurious AirBnB, which ends up costing less per year than just the additional property taxes on a bigger house.

Respect!

TheAnonOne

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Re: Do I have too much house now?
« Reply #14 on: July 03, 2019, 12:34:48 PM »
Thanks for the replies everyone. I appreciate the vast range of views here and collective years of experience.

We are leaning more to the 'do it' side of things and then reevaluate in 2 years. If we fall off the FIRE track and that still is a main goal of ours, we will downsize.

A side note, I do a good amount of racing, (road/autox) and need* a garage with 12 ft ceilings. This is the ONLY place I have seen that has those, so far. Putting in a car lift for tire changes and general work.

*Need is a strong word, I don't even NEED to leave my current place.

FIRE 20/20

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Re: Do I have too much house now?
« Reply #15 on: July 04, 2019, 10:12:12 AM »
Thanks for the replies everyone. I appreciate the vast range of views here and collective years of experience.

We are leaning more to the 'do it' side of things and then reevaluate in 2 years. If we fall off the FIRE track and that still is a main goal of ours, we will downsize.

A side note, I do a good amount of racing, (road/autox) and need* a garage with 12 ft ceilings. This is the ONLY place I have seen that has those, so far. Putting in a car lift for tire changes and general work.

*Need is a strong word, I don't even NEED to leave my current place.

I used to autocross as well, so I definitely understand the "need" for a garage with a lift.  It sounds like you have made your decision, so I won't post most of the comments I had.  I will suggest a few things to look at as you're evaluating the costs.  I use a 1% of home value for annual maintenance, and 1% (actually 0.9%) is the median property tax rate (look up your state's rates).  Homeowner's insurance also varies a lot, but say 0.5% of home value to get somewhere in the ballpark.  Utilities also vary widely, but 1% is probably in the ballpark.  At $500k, 3.5% is $17,500 per year of extra cost you'll be taking on *after* you've paid off the house.  Even if those are high for your situation, you're easily looking at an extra $12k per year due to such an expensive purchase.   $12k * 25 (4% rule of thumb) means you'll need to account for at least $300k in your stash for taxes, insurance, utilities, and maintenance.  That's on top of the cost of the house itself, along with furnishings. 

I'm not trying to talk you out of it.  I would just suggest you keep a close eye on those costs as you spend the first few years in the house.  Maintenance will be very uneven - maybe zero for 3 years then $15k all at once - but I would definitely track and forecast those along with what they do to your FIRE date.  I suspect you'll find that this purchase will push out your FIRE date by quite a bit more than 2 years due to the ongoing costs of home ownership. 

six-car-habit

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Re: Do I have too much house now?
« Reply #16 on: July 04, 2019, 08:32:36 PM »
 DanMar "MaxJack"  lifts to 4ft high. the lift posts are moveable [ move them out of the way when not needed, set the units back on the 'Hilti' bolts when needed, 110VAC, 6000lb rating]  <$2000 , I think maybe $1700 at Garage Equiptment Supply Inc recently.    This would work if you end up in a place with lower than 12 ft ceilings.  I have 10ft so am considering it, but am still using normal floor jacks and rolling my body around on the concrete.  Just. Can't. Commit. To Comfort. Besides one of my rigs needs $1000 worth of tires soon....
  Anyhow if you're looking at a "drive-on" model car-lift , don't forget the cost of a "rolling bridge jack" to get the tires off , and cost of a 220V hookup if not already in the garage.

  Anyhow, i found that when i had the smaller houses, with less utilities / taxes / etc , guess what,  I had more money $$ for car parts !!
   But those were a bigger perogative then [ parts / cars / going quick ]  , .... and i wasn't saving like i should have been for retirement.
 This house and the last house, the garage could not be seen from the street. This is a nice feature if you dont like showing off your vehicles and tools to any folks [+ Potential thieves]  who drive by.

zolotiyeruki

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Re: Do I have too much house now?
« Reply #17 on: July 04, 2019, 10:13:52 PM »
DanMar "MaxJack"  lifts to 4ft high. the lift posts are moveable [ move them out of the way when not needed, set the units back on the 'Hilti' bolts when needed, 110VAC, 6000lb rating]  <$2000 , I think maybe $1700 at Garage Equiptment Supply Inc recently.
Yeah, I want a two-post lift for working on our cars.  On their website, it's $2100, not $1700 :(  I might have to settle for a Quickjack, but a MaxJack seems really nice with the higher reach.

Finances_With_Purpose

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Re: Do I have too much house now?
« Reply #18 on: July 05, 2019, 09:34:36 PM »
You didn't say, but I'd wonder more what your plans are re: kids, etc.  That will be a huge cost driver/impact in addition to a house, if you're going that route.  Just something to keep in mind. 

We bought a place, we love it, and it was a little more expensive than I would have liked.  Other posters are dead on re: maintenance costs.  They will also drive up your ultimate goals/stash requirements.  Plan on more, especially with a larger place/more land.  And plan on a much larger amount in year one; it's often almost unavoidable.  Expenses will very likely end up higher than you're anticipating.

There's also the factor of having neighbors who can afford that house and other things, and, for some folks, that's a struggle.  E.g., one neighbor here buys a fun car, then the others do.  Or a new drill.  Etc.  It's almost amusing.  Though that part, at least, hasn't affected us.  And cost of services: they, vary, depending upon your area.

All of that isn't to say don't do it--if you value it enough, then it may well make sense, and it sounds like you're aware of the cost-increase issue.  As someone who's been through it, definitely plan for more costs than you anticipate on all fronts.

TheAnonOne

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Re: Do I have too much house now?
« Reply #19 on: July 05, 2019, 10:10:31 PM »
DanMar "MaxJack"  lifts to 4ft high. the lift posts are moveable [ move them out of the way when not needed, set the units back on the 'Hilti' bolts when needed, 110VAC, 6000lb rating]  <$2000 , I think maybe $1700 at Garage Equiptment Supply Inc recently.    This would work if you end up in a place with lower than 12 ft ceilings.  I have 10ft so am considering it, but am still using normal floor jacks and rolling my body around on the concrete.  Just. Can't. Commit. To Comfort. Besides one of my rigs needs $1000 worth of tires soon....
  Anyhow if you're looking at a "drive-on" model car-lift , don't forget the cost of a "rolling bridge jack" to get the tires off , and cost of a 220V hookup if not already in the garage.

  Anyhow, i found that when i had the smaller houses, with less utilities / taxes / etc , guess what,  I had more money $$ for car parts !!
   But those were a bigger perogative then [ parts / cars / going quick ]  , .... and i wasn't saving like i should have been for retirement.
 This house and the last house, the garage could not be seen from the street. This is a nice feature if you dont like showing off your vehicles and tools to any folks [+ Potential thieves]  who drive by.


Mainly looking at 2 post lifts because the lift will be used MOSTLY for tire changes between street and event tires.

Looking at maxjack, seeing $1600ish https://www.homedepot.com/p/Dannmar-MaxJax-6-000-lb-2-Post-Portable-Car-Lift-DMJ-6/204163445?cm_mmc=Shopping%7CG%7CHC%7CD25T%7C25-31_GARAGE/AUTOMOTIVE%7CNA%7CNA%7c71700000037147756%7c58700004942559535%7c92700042867443626&gclid=EAIaIQobChMIvvrN5LWf4wIVXbnACh1XLgUzEAQYASABEgLKwfD_BwE&gclsrc=aw.ds