Upgrading instead of downgrading - can you talk us out of it?

[diffusate]

Quick details: Me, 38, phasing out of non-profit consulting, don't want to push myself to earn any more than $5-10k in years to come. Her, 29, quit FAANG software engineer job earlier this year, never wants to work full time again, wants to stay current though and plans on earning $30-50k/year part time remote.

Joint NW: $1.35m, 220k of which is home equity in a $470k condo, the rest invested.

Current annual spend: taking out housing expenses, around $25k. Might want to inflate that to $30k in the future for additional travel. Not planning on kids.

Looking to buy a house. Our original thinking was to move laterally, or even downgrade. Calculating in taxes and insurance, we could purchase a house around $330k and live comfortably off 4% forever, never earning another penny. We're both feeling like this is selling ourselves short - she, in particular, feels like she has some work left in her. She wants to continue to challenge herself with coding, and work on some projects she's excited about.

We are also not feeling ready to move away from our hcol area. We have friends and networks here, and lots of opportunities for personal and professional exploration.

We found what feels to some extent like our "dream house" (an idea I hate, feels like it was invented by the real estate industrial complex). We think it will go for $750k.

There are lots of ways to do the math, but this would require something like $15k additional earning per year indefinitely or something like $40k earning for 10 years.

On one hand it feels like this is an awesome opportunity to live a crazy luxurious life, and we might as well go for it. On the other hand, we would have more than half our NW in a house (we will get a mortgage for some, but that's really an investment decision. We still own the asset).

So what do you think? Crazy or no?

[bacchi]

Does your wife know how she'll work part-time? Go to indeed and look for part-time jobs in her field. There aren't many and most of the ones you'll find are for college students. Or does she plan on picking up a short-term contract once a year?

Will your wife care if she's doing most of the additional work? I.e., you'll be sleeping in and she'll be in a stand-up at 9am.

Why does buying a $330k house feel like selling yourselves short? That's an odd barometer. Can you instead make additional income and donate it?

[rothwem]

Usually, whenever I want to/have to make a financial decision, and the reasons I come up with are:

1) Because luxury

2) Because I might not be able to do this later

Those are signals that I probably shouldn’t spend the money and I should try to come up with a smarter way of doing things.

The first reason, “because luxury” is usually no good because of the old hedonic adaptation. The second reason “we might miss out!” is usually artificially created by some salesperson.

Just something to think about.

[six-car-habit]

 Can you even buy a house for $330K in your HCOL area that is not a fixer / rebuild-remodel needed / small yard / undesirable neighborhood ?

 If not, that plan certainly doesn't seem compatible with wanting to stay in the same area.

 For me a desirable house has a good floorplan, relatively close to services [ health / food shopping / hardware store ] , decent neighborhood , 1/2 acre plus so that neighbors house exterior footprint is not 15 feet away from my own. A dream house for me is a european castle, and thats why it'll remain a dream.

 What are the taxes in that area on a $750K house - they probably won't be going down from current levels...

[diffusate]

She's already doing a part time remote contract and getting bombarded by recruiters offering part time remote work.

We've talked about the inequality part - as long as she's only doing 15-20 hours, she feels good about it. This is the amount that's actually fun for her, and she wants to keep her skills sharp.

I know that $330k is a huge amount for a house for most of the world. In our area, this is basically a tear-down. Or we would have to move an hour away to a rural area. We could possibly get something in the 500k range that would be decent. Moving up to $700k is absolutely about luxury - views, open kitchen, good architecture, nice yard, etc.

Moving away or living in substandard conditions rather than just doing work we might want to do in any case is what feels like selling ourselves short.

[diffusate]

Usually, whenever I want to/have to make a financial decision, and the reasons I come up with are:

1) Because luxury

2) Because I might not be able to do this later

Those are signals that I probably shouldn’t spend the money and I should try to come up with a smarter way of doing things.

The first reason, “because luxury” is usually no good because of the old hedonic adaptation. The second reason “we might miss out!” is usually artificially created by some salesperson.

Just something to think about.

Thank you for this perspective! We definitely don't feel the pressure of #2, but are struggling with #1. It's a tough one, as it is totally arbitrary what level of luxury we "want." I agree with MMM that a basic place with running water , central heat, and a small yard is an astounding level of luxury. That, and we only get one shot at life, and building in beauty and comfort is an amazing privilege.

[diffusate]

Oh and I should add that $750k is the median home price in the area, so the "luxury" is relative.

[tyrannostache]

With questions like this, I think it's worth taking a hard look at how much the added luxury will improve and detract from your quality of life. To me, it is worth paying a premium for things like great views, access to outdoor recreation, and a great neighborhood. But just being surrounded by nicer things... meh.

There's a big jump from owning a $470k condo to owning a $750k house. Have you accounted for a pretty massive increase in maintenance costs, taxes, etc? Intangibles like pressure to keep up with the neighbors? How much will that move detract from your ability to travel or try new things? Are there ways you could make your current home more attractive for the long term?

[bacchi]

Since you'll effectively be ER, can you do some of the remodeling yourself?

Are you committed to the area? Your spouse works remotely. Moving to a MCOL city could take care of both concerns -- ER for both and a nice(r) house.

[MonkeyJenga]

Oh and I should add that $750k is the median home price in the area, so the "luxury" is relative.

It is a luxury to live in such a desirable location in the first place. :P

[Laura33]

So, basically, right now you can give up any kind of work forever and continue to live exactly the way you want to live.  You can buy a nicer house and live a fancier life, which will increase your costs significantly (it's not just the purchase price, btw -- taxes, maintenance, repairs, electricity/gas, lawn care, etc. etc. etc.) and force you to continue working.  So, fundamentally, the question is whether you want to trade permanent financial freedom for nicer things that tie you to another decade of work.  You're the only one who can answer that question -- just be aware that working because you want to often inspires very, very different feelings than working because you have to.

I would also suggest looking at what other priorities you might have.  Most specifically, are kids in your future?  They can be costly little buggers -- they don't have to be the $250K over 18 years that the media portrays, but when your 4% calculation requires sticking to your current budget, any increase can be problematic.  So if that is the case, then you might already have to work a little longer to build your 'stache to cover those future expenses, which means a new house will push out your working life even longer.

In the end, I'd be a little concerned that cutting your earnings and increasing your expenses at the same time is pretty damn risky.  So why not do one or the other?  Quit now, see if there is part-time work that you guys both want that is bringing in what you want to, see how happy you are in your current place and with the amount/type of work you're getting.  And if the plan is working and you still want a bigger place in a year or two, well, your 'stache will be in even better shape to help you get that -- and your decision will be grounded in the knowledge that you're still happy to work that much and will be able to cover the increased costs without any problem.  Or decide the house is a higher priority, buy it now, and then plan to stay at your current jobs for another couple of years while you figure out how much your expenses actually increase -- and use those full-time salaries to keep socking away massive amounts of $$$ until you reach the new level that you need.

[affordablehousing]

I think you should go for it. That isn't that expensive compared to the coastal HCOL areas, and it might help you feel you aren't pulling the plug on culture. I would say that in general, it's hard to not slide downhill once you've settled on nicer housing and I don't think your $30K budget will last for long. Why don't you just keep plugging away and save up some more money so you have a bit more cushion?

[diffusate]

With questions like this, I think it's worth taking a hard look at how much the added luxury will improve and detract from your quality of life. To me, it is worth paying a premium for things like great views, access to outdoor recreation, and a great neighborhood. But just being surrounded by nicer things... meh.

There's a big jump from owning a $470k condo to owning a $750k house. Have you accounted for a pretty massive increase in maintenance costs, taxes, etc? Intangibles like pressure to keep up with the neighbors? How much will that move detract from your ability to travel or try new things? Are there ways you could make your current home more attractive for the long term?

Pretty much the same questions we have been asking ourselves! The things we love about this place are the view, small but beautiful yard, efficient layout, and light-filled space. 1600 sqf, all of which feel "nice"

We've thought about our current space, but with our new free time we are wanting to do hobbies and projects that we just can't do in a 600 sqf condo.

[affordablehousing]

laura33 said it better. I think you're trying to decide whether to keep trucking or not. Only you can know what to do....

[diffusate]

Since you'll effectively be ER, can you do some of the remodeling yourself?

Are you committed to the area? Your spouse works remotely. Moving to a MCOL city could take care of both concerns -- ER for both and a nice(r) house.

We are totally open to remodeling, but we haven't found a place yet in about a month of looking that is promising. That would be the fall back if we don't get this place. I would try to do a lot myself, but remodeling costs are obscene right now in the area.

[diffusate]

Oh and I should add that $750k is the median home price in the area, so the "luxury" is relative.

It is a luxury to live in such a desirable location in the first place. :P

I totally, completely agree.

[diffusate]

So, basically, right now you can give up any kind of work forever and continue to live exactly the way you want to live.  You can buy a nicer house and live a fancier life, which will increase your costs significantly (it's not just the purchase price, btw -- taxes, maintenance, repairs, electricity/gas, lawn care, etc. etc. etc.) and force you to continue working.  So, fundamentally, the question is whether you want to trade permanent financial freedom for nicer things that tie you to another decade of work.  You're the only one who can answer that question -- just be aware that working because you want to often inspires very, very different feelings than working because you have to.

I would also suggest looking at what other priorities you might have.  Most specifically, are kids in your future?  They can be costly little buggers -- they don't have to be the $250K over 18 years that the media portrays, but when your 4% calculation requires sticking to your current budget, any increase can be problematic.  So if that is the case, then you might already have to work a little longer to build your 'stache to cover those future expenses, which means a new house will push out your working life even longer.

In the end, I'd be a little concerned that cutting your earnings and increasing your expenses at the same time is pretty damn risky.  So why not do one or the other?  Quit now, see if there is part-time work that you guys both want that is bringing in what you want to, see how happy you are in your current place and with the amount/type of work you're getting.  And if the plan is working and you still want a bigger place in a year or two, well, your 'stache will be in even better shape to help you get that -- and your decision will be grounded in the knowledge that you're still happy to work that much and will be able to cover the increased costs without any problem.  Or decide the house is a higher priority, buy it now, and then plan to stay at your current jobs for another couple of years while you figure out how much your expenses actually increase -- and use those full-time salaries to keep socking away massive amounts of $$$ until you reach the new level that you need.

Thank you for your perspective! I think you're mostly right that we are deciding whether to trade away our financial freedom for luxury. In her case, she feels like she's only 29 and doesn't want to stop working forever yet, and would keep up with part time remote work even if she didn't have to financially.

Definitely decided no kids.

And just to clarify, both of us have already left full time work. It is ironic to be upsizing right when our income has gone down, but that's where we find ourselves. We have this amazing juncture when we get to decide what kind of life we want to lead, and are making a bet on the future. Worst case, of course, is that we sell and downsize in the future to a m- or lcol area and eat the transaction costs.

[diffusate]

Just wanted to share an update with you all: I think the reason I posed here was that I didn't really feel comfortable with spending $750k on a house. We kept looking, and actually found a place we are super excited about for $480k. Needs some cosmetic upgrades and has some minor issues and doesn't have a view, but has an awesome .25 acre lot, a huge shop, and a lot of charm. It's only 10-15 minutes from downtown.

We're super excited, and in final stages of negotiation. Wish us luck!

[John Galt incarnate!]

 I think you're mostly right that we are deciding whether to trade away our financial freedom for luxury.

I'm a FIREee.

My FIRE objective was always to have maximum free time as soon as possible.

Therefore, I would never  choose  to trade  financial freedom  for  luxurious things because the luxury of free time is most valuable to me.

[John Galt incarnate!]

Just wanted to share an update with you all: I think the reason I posed here was that I didn't really feel comfortable with spending $750k on a house. We kept looking, and actually found a place we are super excited about for $480k. Needs some cosmetic upgrades and has some minor issues and doesn't have a view, but has an awesome .25 acre lot, a huge shop, and a lot of charm. It's only 10-15 minutes from downtown.

We're super excited, and in final stages of negotiation. Wish us luck!

I think the house priced @ $480k is the better  choice.

The $270k price difference is significant especially if you can invest it.

Good luck!

[MonkeyJenga]

Thanks for the update! Glad you were able to find a cheaper house that you're happy with.

[DoNorth]

when confronted with this dilemma in 2014, we decided to sell our house in HCOL and build our own dream house in LCOL near family, many new friends and a lot more things that closely align with our values.  don't regret it for a second.