Author Topic: Should I Buy A Bigger House (like a consumer clown!) ?  (Read 2353 times)

familyFIguy

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Should I Buy A Bigger House (like a consumer clown!) ?
« on: February 15, 2020, 06:46:30 PM »
Hey all,

Ok. I've ran the numbers, and I don't see why I shouldn't buy a 600k house...

I know that this sounds nuts -- trust me. I have three small kids and we live in a <1,200 sq. ft. house. We are a very minimal family and I invest such a large portion of my paycheck that I have to be careful when writing checks because our bank account balance is always very low.

My options are either:
  • Sell my 450k home and buy a 600k home
or
  • Keep my current house and rent it out and buy a 600k home

Looking at the estimated return on cash and real estate (a conservative 4% annual return), I'm seeing that we'd actually be positive overall due primarily to returns on real estate.

A few details. We live near Seattle so real estate is nuts right now. It wont be forever, but for the foreseeable future I estimate that it will be.

Additionally, moving will reduce my 44 mile RT commute to 16 miles RT.

Can someone check my math for me and make sure I'm not nuts, or missing something?

https://docs.google.com/spreadsheets/d/18HJQ9KP-J50v74qv1AOI99ZMIiQzQIfj0Cs55oX5178/edit?usp=sharing

Thanks all!

lhamo

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Re: Should I Buy A Bigger House (like a consumer clown!) ?
« Reply #1 on: February 15, 2020, 08:07:23 PM »
What's the estimated time savings on the commute?  In some parts of Puget sound you might move closer but have WAAAY worse traffic to deal with.  Does moving closer make public transit or biking an option in the new location?

Besides the reduction in distance to work, what else does $600k get you compared to your current $450k house?

Most houses in Puget sound dont currently pencil out well as rentals, unless you bought during the recession and got a steal, or bought 20-30 years ago.  If you can't get $4500/month for your current house it isnt a great investment property.  Unless maybe you are in an area with rapid growth and have a lot that is big enough to eventually subdivide. 

Gremlin

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Re: Should I Buy A Bigger House (like a consumer clown!) ?
« Reply #2 on: February 15, 2020, 11:24:15 PM »
You've presented this as a binary choice.  There are lots of other choices you could make.  Why are these not in your consideration set?

norajean

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Re: Should I Buy A Bigger House (like a consumer clown!) ?
« Reply #3 on: February 16, 2020, 03:51:49 AM »
How about moving to an even smaller house to cut the commute to biking distance?

wellactually

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Re: Should I Buy A Bigger House (like a consumer clown!) ?
« Reply #4 on: February 16, 2020, 06:55:17 AM »
I donít like the premise, BUT...

Where are you getting the 130k down payment and 5k upgrade costs if you buy new and rent the current house? If youíre taking that out of the market, then you technically need to factor in that opportunity cost since youíre doing that on the other tab with the excess from the sale.

TomTX

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Re: Should I Buy A Bigger House (like a consumer clown!) ?
« Reply #5 on: February 16, 2020, 07:47:35 AM »
Long commutes suck. Presuming you intend to stay with that employer, I fully support moving in closer to somewhere with a decent house, neighborhood with great amenities(library, parks, grocery, etc) and excellent schools, preferably with easy transit to work. Unless you WANT to be a landlord or the numbers pencil out unusually well, just sell the old house.


trollwithamustache

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Re: Should I Buy A Bigger House (like a consumer clown!) ?
« Reply #6 on: February 16, 2020, 10:43:47 AM »
How good is your family at moving? Seriously as like a skill how good are you at packing up your stuff?

Its not clearly stated, but it sounds like you've got some decent gains on the current house that are under your tax free cap right? As a strategy to move every now and then is a strategy to lock in gains as they occur.

Plus with 3 kids, its not unreasonable to go up in house size for bedrooms when everyone is in HS. Then later you can cash out of that house. It sounds like you are giving yourself a long enough runway such that could be a reasonable assumption.

RFAAOATB

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Re: Should I Buy A Bigger House (like a consumer clown!) ?
« Reply #7 on: February 16, 2020, 08:42:59 PM »
I take it youíve got more money than time or sanity, and with three kids, time and sanity are worth more than numbers on a spreadsheet.  While youíre cutting your commute, have you considered how much your utilities cost will be, also who will be cleaning the bigger house.  Are you willing to pay a housekeeper to help out so you can spend your time off relaxing or being with kids instead of cleaning?

Our biweekly housecleaning is $225 which is a big hit to our cashflow, but a clean house is a happy house. 

Buy the house, pay the cleaners, and see how things go.  Right now my retirement savings goals are  on hold until daycare is over and the car is paid off.  I am probably moving soon which is why Iím not worrying about refinancing my house from a 15 to a 30 year loan to free up some cashflow for me.

With three kids how many aviation vacations can you fit in?  I dream of moving within walking distance of SeaTac and flying everywhere.  Of course that conflicts with my other dream of buying a house bigger than my parents.

ChpBstrd

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Re: Should I Buy A Bigger House (like a consumer clown!) ?
« Reply #8 on: February 17, 2020, 02:27:02 PM »
We went from 2800sf to 1300sf. Cut a full year off my time to FIRE, even after expenses.

How much will an extra $150k in debt set back your time to retire?

familyFIguy

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Re: Should I Buy A Bigger House (like a consumer clown!) ?
« Reply #9 on: February 18, 2020, 02:04:52 PM »
Ah, you guys are all great! This is really good info that I'll have to chew on.

Quick update: The house that we were looking at turned out to be a complete tear-down with flooding on wetlands. so.... it's a no-go.

We do have more cash than time right now though, so we're looking at purchasing some investment, rental RE with a friend. We'll still need to figure out what to do as the kids get older and our house feels smaller. Although, I'm not totally bought in to the necessity of a larger home just because that is typical for a family of five. We'll see.

Money Badger

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Re: Should I Buy A Bigger House (like a consumer clown!) ?
« Reply #10 on: February 18, 2020, 06:19:48 PM »
@familyFIguy,   With full disclosure that I'm in the "consumer debt is financial cancer" camp...

Another option... find a similar sized house closer-in at your current price range that may need work.   Negotiate both side (sell and buy) real estate and closing costs hard.   Live cheap in "less than optimal" house a year saving like Hell.   Then expand new house to add necessary living space (BR, bath or otherwise) for cash.

Commute reduced
No added debt
You learn skills
Kids learn skills (even if it's just work ethic watching you as the parents' work ethic)
Quality of life improved within 18 months
Updated house is likely worth near the $600K (growing equity for you, not interest)
And after all the above, you are a badass!

Sibley

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Re: Should I Buy A Bigger House (like a consumer clown!) ?
« Reply #11 on: February 19, 2020, 09:32:01 AM »
Also don't forget the impact that the "stuff" has on quality of life. Plenty of people have multiple kids in smaller houses, even teens. They have less stuff.

Declutter! Do a big purge, get rid of all the outgrown clothes and toys and stuff (grownups and kids), then see how it feels.

trollwithamustache

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Re: Should I Buy A Bigger House (like a consumer clown!) ?
« Reply #12 on: February 19, 2020, 05:29:03 PM »
Plenty of people have multiple kids in smaller houses, even teens. They have less stuff.


Sure, but at some point If OP has boys, they will go through the Kleenex heavy phase of life. So its separate rooms or a really big water bill from the extra long showers. The Kleenex costs can't be managed, but the shower time can be. 

familyFIguy

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Re: Should I Buy A Bigger House (like a consumer clown!) ?
« Reply #13 on: February 22, 2020, 01:00:15 PM »
Plenty of people have multiple kids in smaller houses, even teens. They have less stuff.


Sure, but at some point If OP has boys, they will go through the Kleenex heavy phase of life. So its separate rooms or a really big water bill from the extra long showers. The Kleenex costs can't be managed, but the shower time can be.

Haha! For the win!

Hirondelle

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Re: Should I Buy A Bigger House (like a consumer clown!) ?
« Reply #14 on: February 22, 2020, 01:33:30 PM »
Plenty of people have multiple kids in smaller houses, even teens. They have less stuff.


Sure, but at some point If OP has boys, they will go through the Kleenex heavy phase of life. So its separate rooms or a really big water bill from the extra long showers. The Kleenex costs can't be managed, but the shower time can be.

Europe here. Not impressed by 5 people in 1200 sqft. That's a huge house already.

Not sure why there's a problem with seperate rooms? 1200 sqft can have plenty of rooms and if there's isn't, make them yourself and problem solved :).

Regarding the commute; DEFINITELY move to get closer to work. That's an awful long drive each day. It just doesn't have to be a bigger house.

Sibley

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Re: Should I Buy A Bigger House (like a consumer clown!) ?
« Reply #15 on: February 22, 2020, 02:21:08 PM »
Plenty of people have multiple kids in smaller houses, even teens. They have less stuff.


Sure, but at some point If OP has boys, they will go through the Kleenex heavy phase of life. So its separate rooms or a really big water bill from the extra long showers. The Kleenex costs can't be managed, but the shower time can be.

I'm positive the teens would figure it out. Willful blindness is a thing.