Author Topic: What are the upsides/downsides (besides cost) to buying a very expensive house?  (Read 6992 times)

forummm

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I am rich. I used to post on here a lot before while living the frugal life and getting to FIRE through frugality and savings. Fast forward and I made a ridiculous amount of money recently and likely a lot more is coming soon. We can easily afford to pay cash for very fancy houses in fancy areas and still have more than enough money left over to do what we want to for the rest of our lives. We are currently in a small apartment and are thinking about where to live permanently. We value waterfront views. We have an affinity for the Bay Area (but are also looking at other coastal locations). So we are thinking about substantial and unnecessary luxury. I generally like to hang around at home so it would be a useful luxury. And it would probably be the only real luxury. We don't even have cable or eat out. We get free clothes for the kids and wouldn't buy fancy cars.

We are trying to decide if we want to spend that kind of money. It's much more than we would need. We probably would enjoy it more than something cheaper (but how much more is unclear of course). But there are consequences besides cost. Things I worry about include: our families finding out we are rich and wanting/expecting more from us, the neighbors maybe not being the kind of people that it would be good for my kids to grow up around (or in school with), giving the kids unrealistic expectations/views of life, having non-rich friends feel weird coming to our house or act differently, etc. There are probably upsides too that I'm not thinking about.

So what are the upsides/downsides (besides cost) to buying a very expensive house?

This might be the wrong place to ask this kind of question. But when I was active here years ago there were a lot of thoughtful people who would provide good insights. So I figured I'd give it a shot.

Morning Glory

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Increased time cleaning, mowing, etc (unless you are maid-and-gardener rich)

Increased property tax, insurance, heating, cooling, etc

Environmental cost of more energy spent for heating, cooling, lights, etc. If I had unlimited money to spend I would build a net-zero house!!!

If you are in a fancy neighborhood then other services such as gym, vet, dentist will be more expensive

GizmoTX

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We've chosen to live in homes that are works of art and have inspiring views. For us, this soothes the soul.

Our neighbors are & have been great people, smart, kind, helpful, and they aren't into one-up-manship.

While DS was growing up, we concentrated on values and avoided entitlement. We taught self sufficiency and personal management from an early age. The peer group matters. DS has turned out to be an excellent judge of character and very frugal.

Some family members will always expect what they can get from others instead of doing for themselves. Teach them to fish. We've lost a few so-called friends who couldn't handle our journey, but that's their problem.
 

forummm

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Increased time cleaning, mowing, etc (unless you are maid-and-gardener rich)

Increased property tax, insurance, heating, cooling, etc

Environmental cost of more energy spent for heating, cooling, lights, etc. If I had unlimited money to spend I would build a net-zero house!!!

If you are in a fancy neighborhood then other services such as gym, vet, dentist will be more expensive

I have budgeted for property tax difference. And grocery stores and whatnot would be more expensive that is true.

If the houses are about the same size (just more expensive for the view/location), there isn't extra time cleaning. And while I could afford a maid or lawn mowing service (they are pretty cheap actually, like a couple hundred bucks a month for limited service) I would do it myself anyway.

The house already exists though, so someone would be using energy to heat/cool it. And I would probably be using less energy than someone else there since I don't need to jack the heat up. And the coastal area is a pretty moderate climate.

forummm

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We've chosen to live in homes that are works of art and have inspiring views. For us, this soothes the soul.

Our neighbors are & have been great people, smart, kind, helpful, and they aren't into one-up-manship.

While DS was growing up, we concentrated on values and avoided entitlement. We taught self sufficiency and personal management from an early age. The peer group matters. DS has turned out to be an excellent judge of character and very frugal.

Some family members will always expect what they can get from others instead of doing for themselves. Teach them to fish. We've lost a few so-called friends who couldn't handle our journey, but that's their problem.

Thanks. We're thinking "would we rather look at mountains or trees or ocean" type of thoughts. We stayed at a ranch by a national park once and the mountains were amazing to look at. While I don't want to live in rural Montana, I could visit sometimes and spend the rest of my time looking at the water/sea creatures/whatever, listening to the waves.

Perhaps the properties with views are more appreciated by people who value it for its own sake and less as a trophy piece (like a 10k sqft mansion would be) for the one-uppers. I've never spent a lot of time around rich people so I'm not sure what the different varieties of them are like.

Since we won't be extravagant in the rest of our life, there is still opportunity to teach frugality and value of money to the kids.

AnnaGrowsAMustache

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What about the fact that house values fluctuate? It may be a very expensive house today, but only half as expensive in 10 years time.

happy

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I like my house to be aesthetically pleasing, so I get where you are coming from.
Maintenance and refurbishing are likely to be more expensive in a fancy house - more high end finishes etc. Of course if plan to live there forever and aren't worried about resale value, you could choose to not spend so much.
I wonder how you tolerate dissonance, or at least how much dissonance you can comfortably tolerate? I see that you've expressed quite a lot of values and habits that could well be at odds with those in your potential community. Is it possible to rent in the area you are looking at before you buy? There are definitely rich folk who will ostracise you for not spending up: of course we know these are people not worth knowing but being surrounded by them might be unpleasant. On the other hand in some well to do places people are less judgemental about appearances as long as you demonstrate good character.

Paul der Krake

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Welcome back!

Upside is never worrying about what's going to happen to the neighborhood, because it's filled with organized and politically influential people. Ride off their coattails, for free (property taxes may apply)!

secondcor521

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You might feel pressure to upgrade the rest of your lifestyle so you blend in with your neighbors.  For example, if you buy a $3M SF condo and drive a 2001 Toyota, it will stand out a bit when parked amongst the Lexuses and Porches and whatnot.  Same goes for clothes, kids activities, vacations, holiday spending, etc.

EscapeVelocity2020

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Hi Forummm, many folks will probably comment from a Lower COL area, as I would be doing from Houston.  An expensive house is huge and comes with lots of downsides here.  In CA it might turn out to be a worthwhile investment.  All that being said, there are also really interesting ideas for spreading real estate purchases out as opposed to one expensive investment.  I think of it like those people that buy sports cars - you can buy one, treat it like an investment (not enjoy it fully, pay all the extra costs, then cash out and brag about all the money you made) or you buy two pretty good cars that you enjoy fully while making more money, have money left over for other areas like travel and investments, and do just fine when you sell while actually enjoying your good fortune.

Or you are so close to ridiculously rich that you speculate on a tony property in a fantastic location and make a bunch of money because only the 1% can afford it in 10 years and they really don't care what it costs when you come around to parting with it.

Villanelle

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You mention school and kids and neighbors.  I grew up in a mustachios household, but when I started junior high, we moved into a wealthy neighborhood.  I still recall the sting of humiliation as we, as a family, weeded the front yard when everyone else in the neighborhood had a gardener.  Our driveway had used Toyotas and Nissans and everyone else's had Mercedes or other luxury cars.  Everyone wore Guess jeans to school and I wore perfectly fine off-brand jeans.  And was teased mercilessly for that.  It was really difficult.  And no, I don't think that in the end it was worth it for the life lessons and blah blah. I could have learned frugality and that the brand of your jeans don't matter while not being crushed socially. Actually, I think I would have learned those things more/better/faster if it hadn't been so clear to me that in fact the do matter as fas as not having food thrown at you at lunch.  For a tween/teen struggling to find friends in a new area, it was awful, to the point that self-harm and even suicide were considerations. 

And if this ends up being the situation for you and your kids, resisting the urge to give in and buy them expensive clothes, enroll them in expensive activities, put them in expensive cars when they start to drive, etc., maybe be more challenging than you think.

obviously, this will vary by kid and location, but don't downplay how hard that can be on kids, especially at a time when they are going to need to find all new friends because they've just moved, and more especially if they are older.  (Six years old generally value the label on jeans less than 12 year olds.)

BicycleB

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I wish I had better insight to offer. Personally the main concerns that I would think of are exactly the ones you mentioned in your first post, except that @Villanelle's testimony illustrated the possible problems for kids much better than we could imagine.

That said, whether bad stuff would happen is IMHO a dice roll... the kind best handled by thoughtful exploration (as you're already doing) and and wise situational responses. There's no way to be sure beforehand which choice is better, but my guess is that you go for what you want.

I do think that if you live in an exceptionally wealthy area, it's important to give children experiences of other areas, not just verbal teaching. It's tricky enough and important enough that IMHO you should budget time for such things.

If you have habits, enthusiasms, etc that put you in touch with different social strata, that would help, whether they be camping buddies, hiking clubs, Habitat for Humanity builds. Are things that would get you out of the neighborhood and give the kids familarity with other levels of society a part of your life that would continue if you moved to the place with the best view?

I have known several children from wealthy backgrounds. They varied widely in what they know about life, and how they explored the world. Some developed wise values, and used their familiarity with the upper crust in creative ways that greatly increased their positive impact as adults. So there's potential upside for the kids, as well as downside.

On average, it's unclear that money helped most of them a lot, but I don't think it hurt the ones I've known. I think whether it hurt or helped particular cases was very individual. So I suggest broadening the kids' experience as thoughtfully as possible, and going for your dream view.

Dave1442397

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Tell the relatives you've been hired to house sit :)

If I had the money, I'd own a house on the Nevada side of Lake Tahoe.

When this one came up for sale, I thought it was just about perfect - not huge, but stunning views.
https://www.zillow.com/homedetails/1709-Lakeshore-Blvd-Incline-Village-NV-89451/117612990_zpid/?mmlb=g,14

For something a bit more secluded, but still with nice views, this would be high on my list - https://www.zillow.com/homes/905-Tyner-Way-Incline-Village,-NV,-89451_rb/7323992_zpid/

And if you want to go crazy, there's these:
http://www.laketahoebestproperties.com/sierra-star/
https://www.zillow.com/homedetails/580-Gonowabie-Rd-Crystal-Bay-NV-89402/7323087_zpid/


forummm

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Dave, Tahoe is nice. But I think I'd go Puget Sound or Possession Sound (Kingston, Shoreline, Edmonds, Mukilteo, etc) instead. Much better values IMO. And certain CA oceanfront too. No skiing, but I don't like skiing.

The big island of Hawaii has some stunning cliffside oceanfront properties around 3k sqft for <$1M, such as old plantations with a fair bit of land too. Not sure I want to move that far away. But may consider it.

I may have to take up surfing.

FIREstache

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I consider $200,000 to be very expensive.  I'm used to LCOL as far as home prices but with high property taxes.  Just because you can afford it, doesn't mean it's a good idea.  I can't see myself doing it as I won't even buy the $200,000 house that I could afford.  But you have to do what fits your values.

bognish

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Having an expensive house can be like handing someone your investment statement as soon as you meet them. Anyone who comes over to your house will immediately know that you are rich. If they are rich too it won't be an issue beyond a comment like "nice view". If they aren't rich there can be a pause and recalibration of the relationship as they take in the new information.
My house is maybe 1.5 to 2 times the value of the normal family home in our town and is big for our family size. We bought in 2008 as a foreclosure, so we probably paid less than lots of my kids friends parents have. It can be weird when kids friends come over for play dates or we have families over for dinner & parties. I guess it can depend how much you hang out with financial peers vs people who aren't rich.
Also expensive houses values can go up or down a lot more in real dollar value during housing boom & busts. A $100k house can only lose so much value before you hit land and material cost, but a $1m house is buying views and location so it can drop alot more.

Roots&Wings

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Forummm!!! It's nice to see you here again, congrats on the continued good fortune!

As others have pointed out, you're not just buying an expensive house, you're buying into a community and life. The overall "vibe" of an expensive area can vary dramatically, depending on location.

Finding your ideal spot is about so much more than a pretty view (though that can be pretty nice, and is sometimes available without great cost). Ideally rent and get to know the area very well first before buying anything. Good luck!

ReadySetMillionaire

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I agree with others that you should not underestimate the impact your community will have on you.

I live in NE Ohio, and I've always taken for granted how low key and down to earth 95% of people are around here. I just went to an engagement party with an Ohio State polo and tennis shoes, and I fit right in.

On the other hand, I used to love the Bay Area to the point that I considered moving there. I am generally not very concerned about what people think about me, but man, within about a week of being out there I felt like a fish out of water. I was like the only person who had your classic midwestern buzz cut (a #1 all the way around). I didn't have an Apple Watch or Fitbit, and I was literally the only person in a 15 person group without the newest iPhone. I wore the same jeans I wore in college while everyone else had these jeans that probably cost more than everything in my suitcase. I wore Nike tennis shoes (like I always do) while everyone else had casual Allen Edmons and Sperrys and all this fancy stuff. And man, when I went out with friends, I just felt so out of place.

I obviously resisted it, but I can see living there and this absolutely permeating you. It's easy to say from a distance that you would not get sucked in, but it's different when you are there.

To your bigger question, my wife and I also have in our FIRE budget to buy a second home like this. But likely it will be an extremely small studio in Portland, Maine that requires extremely little furnishings and maintenance. To me, that's luxury.

And I've already decided, if I ever had money the way you're describing, I would give it away in spades. I've always said that if I won the $500 million jackpot, I would probably give my hometown, high school, and local businesses 80% of it. And I would use the rest for modest generational wealth.

To each his own -- I'm not right and you're not wrong. Best of luck on this nice little adventure you have going -- hopefully I have a similar predicament in 20 years.

Jon Bon

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See I would say buying an expensive house is actually a value.  I could buy a (much) larger house for < 1/2 of what my house is worth.

I really value the environment in which I live. Our neighborhood is extremely walk-able. We have front porches and sidewalks. I know all my neighbors and speak with them regularly. I live walking distance to nearly everything I would want to do. We go for months at a time without going outside of our circle freeway. We live <3 miles from downtown, and my spouses job. paying to live in the heart of it is 100% worth it for me and my family. Heck my school district does not even have buses most of us walk our kids to school. 

So I would encourage you to buy a reasonable sized house in an awesome area. The benefits far outweigh the costs. You are not trying to save money, your are trying to enjoy life.

skiersailor

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Having lived in Southern California, San Francisco, Colorado and the Upper Midwest, if I were in your position I would be more concerned about the culture of the community you choose rather than the house.  California is off the charts when it comes to social pressures around status and consumption.  In comparison, the Midwest is much more relaxed.  Colorado is somewhere in between.

Someone above mentioned Tahoe.  Resort communities can be beautiful places to live, but they may not be great places to raise kids.  Again, I think the culture of a location is more important than the real estate.  There are lots of beautiful locations in the Pacific Northwest, but I'd want to try an area out and get a better feel for the community before purchasing a house.

Regarding the house, if you can find one that was built in the last ten years by a high quality custom builder you may find that the maintenance is very low.  Well constructed homes age much better than McMansions that are slapped together from cheap materials to maximize square footage.  I would prioritize location, views, design and quality of construction over size.
« Last Edit: June 24, 2019, 09:02:43 AM by skiersailor »

affordablehousing

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I think if you move somewhere with a good school district, even if you don't send your kids to public school, that is a good indicator that likely other value-oriented parents will be moving there. Another factor to check is how quickly homes have appreciated. In much of the bay area, you learn nothing of someone's wealth based on how big a home they have but you learn everything about someone's wealth based on WHEN they bought it. When prices quadruple in 10 years, you can have poor people and rich people living in similar houses on the same block with those on fixed income and tech bros as neighbors.

I think if you wanted to live in a nice house, I would spend ~$5MM on a neat loft in Tribeca or Dumbo in New York. You could always add a $1MM vacation house in the mountains or coast but I don't believe in spending more than that on a vacation house. You're not there much and the point is to be in not look at nature there.

mm1970

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Gosh, I think it depends a lot on where you end up living.  I mean, there are places where you are going to buy a really expensive house, and you are going to have the issues that others have talked about - snooty neighbors, annoying entitled kids.

Where I live in Coastal So Cal, you could easily get that if you bought in a particular coastal area.  But you could also buy an ocean view house in one of the worst school districts.  Or you could end up somewhere in the middle.  There are plenty of people here to interact with, so in some ways, you get to pick your cohort.  Having a great house here could mean you are renting, you are rich, you inherited, you got lucky, or you are living beyond your means.  So many options!!  But recognize that most of your friends will likely wonder from time to time which category you fall into.

I can't bring myself to spend money, but there's a slight fixer with ocean views (3BR, 2BA) built on the side of the hill for a million bucks.  It's the same school district that we attend, a bigger house, and that view!  But no real yard, so it's a no for me.  Tempting though.

NorCal

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Some of my wife's relatives bought a super-fancy house for retirement with waterfront views in Socal.  They ended up selling it a few years later because it was such a PITA.  Even with money, a lot of the big house problems sucked up time and energy.  Some things they ran into:

1.  Having a water feature run through the house looks great in the marketing materials and is very relaxing to listen to.  However, the amount of water that leaked or escaped from said water-feature more than offset the positives.  I think they had to do water-mitigation work multiple times a year.
2.  Being designed by a fancy architect, very little in the house was standard sized.  If something broke, there were no replacement parts at Home Depot.  Someone had to be called out to custom-design a fix.  And since everything was custom designed, things broke a lot.
3.  Waterfront views typically come with lots of exposure to saltwater.  This is bad for pretty much everything you own.

+1000 for the comments related to choosing a community over choosing a house.  Community and culture impact your happiness 100x more than a fancy house.  You might find the community best-fit in places you wouldn't expect.

Imma

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Welcome back!

Upside is never worrying about what's going to happen to the neighborhood, because it's filled with organized and politically influential people. Ride off their coattails, for free (property taxes may apply)!

I live in a working class neighbourhood right next to the historically most upper class area in my city - think factory owners, nobility, etc. Large amounts of inherited money. When you just walk from my area to theirs the influence of these people is visible, from the very big things to the little things. For example, they succesfully petitioned the local government for prettier, more in line with the historical character of the area street lights. They are nice but cost twice as much as the street lights in my as old but apparantly not historical street. Instead of ugly shrubs they have rhododendron and roses to the side of the road. If they have this amount of influence, imagine what kind of big things they have used their influence for, that we've never heard of because it has never happened.

I was the only working class kid in a relatively posh area (by my hometown's standard, we lived on a homestead on the edge of town and their parents went to university) and it wasn't always easy. The differences were big and many parents judged mine. Of course that depends on the area, but the other way around many poorer families might also treat you differently because you are clearly rich.

MrThatsDifferent

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Itís interesting that you say that youíre concerned that everyone will know youíre rich when it seems like thatís exactly what you want people to know. It seems thatís part of your identity now. You even opened with that. Maybe you want people to know youíre frugal cause you chose to be, but make no mistake, I can buy whatever I want, see this house!?!  Is this your ego guiding you? There isnít much less that a Iím ok House will give you than a rich house would. Rooms to eat, sleep, relax and go to the bathroom. It just seems like such a waste to think, Iíve got money to burn, so I will. How many lives could you make a difference with, if instead of burning it on ego, you built a school in an impoverished country? Or some other tangible benefit? Iím sure youíll reply that you give well to charity, but what more could you actively do? I just read about a woman who saves $500/year for a scholarship in her name to be given at her alma mater. You want people to know youíre rich, do something like that. You donít need a fancy or rich house to feel better about yourself or to have an easier life. Youíre smarter than that. MMM is rich too but he doesnít seem like he needs to showcase his wealth and heís living a healthy life, whatís truly motivating this for you?

ysette9

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Jumping in without having read the full thread so pardon if this is off topic or already covered. Just to comment on the original question about downsides or not of having a really expensive house.

I think people automatically assume that a really expensive place to live is huge and fancy. I see downsides to that. The thing with HCOL areas like the Bay Area is that ďexpensiveĒ is not at all the same as ďbig and fancyĒ. So if what you really value is being close to the ocean or the great weather or culture or diversity or whatever that an area like this brings, I think you can do that without the risks that a big, fancy house would also bring.

Iím still in the beginning process of raising kids (2 & 5) so my hope is to instill a sense of normalcy in them and teach them that we donít always get everything we want, that there are trade offs to be made with a finite amount of money, etc. They see a small house and share a room and have no concept of whether the house is worth $100k as it might be elsewhere, or $1.2+M as it is here.

 Congrats on your comfortable financial position and good luck with future choices.

erutio

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Dave, Tahoe is nice. But I think I'd go Puget Sound or Possession Sound (Kingston, Shoreline, Edmonds, Mukilteo, etc) instead. Much better values IMO. And certain CA oceanfront too. No skiing, but I don't like skiing.

The big island of Hawaii has some stunning cliffside oceanfront properties around 3k sqft for <$1M, such as old plantations with a fair bit of land too. Not sure I want to move that far away. But may consider it.

I may have to take up surfing.

I'm sorry, this will come off as mean-spirited.  Congratulations on your wealth.  By your post count and some of the responses, it appears you were a long time and active contributor to this forum.   But your posts on this thread comes off as obnoxious and a little tone-death.  My own fault for clicking on the title and reading, I suppose.


Mr. Green

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It sounds like you are almost immaterially rich. If that's the case, and you truly value those views, but not a large house, there is nothing stopping you from buying one, tearing down the large house and building a smaller one. If I were immaterially rich this is exactly what I would do. I love waterfront views, but I would never want to deal with 3,000+ sq. ft. of house. Sure everyone will find it strange but it's no different than being frugal and saving lots of money because that's what you value.

In HCOL areas, the land value is a significant part of the cost, maybe even more than half. Often times a million dollar house is only 500k to build. The other 500k was the lot value.

Just a thought.
« Last Edit: June 24, 2019, 02:04:51 PM by Mr. Green »

affordablehousing

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To answer the original question, I think you should definitely buy an expensive house. It sounds like it wouldn't have a bearing on your budgeting. We have 3 friends who made good money in the last few years in the tech boom and retired. Most spent around $3.5MM on a house all told. One bought one that was already fixed up, another bought one for $1.5MM and spent another $2MM on renovations, and a third bought a shell for $2MM and is renovating it slowly and from afar but plans to completely rebuild it staying within the envelope. They all have been really satisfied with their home and projects and I think think it's worth it. Everyone is shy about admitting their success, but, who cares really?

One thing a family friend did, perhaps to allay your fears of being ungrounded, is that they lived in a large house in the Bay Area, then bought a home in the near suburbs that they went to on weekends. The kids growing up played in the street there and did "normal America stuff" and spent the week in the City where there are cultural offerings. That could be a good way to split the difference.

ReadySetMillionaire

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Itís interesting that you say that youíre concerned that everyone will know youíre rich when it seems like thatís exactly what you want people to know. It seems thatís part of your identity now. You even opened with that. Maybe you want people to know youíre frugal cause you chose to be, but make no mistake, I can buy whatever I want, see this house!?!  Is this your ego guiding you? There isnít much less that a Iím ok House will give you than a rich house would. Rooms to eat, sleep, relax and go to the bathroom. It just seems like such a waste to think, Iíve got money to burn, so I will. How many lives could you make a difference with, if instead of burning it on ego, you built a school in an impoverished country? Or some other tangible benefit? Iím sure youíll reply that you give well to charity, but what more could you actively do? I just read about a woman who saves $500/year for a scholarship in her name to be given at her alma mater. You want people to know youíre rich, do something like that. You donít need a fancy or rich house to feel better about yourself or to have an easier life. Youíre smarter than that. MMM is rich too but he doesnít seem like he needs to showcase his wealth and heís living a healthy life, whatís truly motivating this for you?

This is kind of what I was getting at with my post about giving money away if I won the lottery. Even if I don't win the lottery, which I won't, I will likely keep working after FIRE solely to be able to give money away in spades.

-I'm from a suburb of your classic rust-belt town (Youngstown, OH) that has suffered a steep decline but is slowly coming back. A couple million dollars of investment into the downtown would go such an incredibly long way to bringing the city back.

-My suburb has great schools but an incredibly small tax base (population of about 7,000). A couple million could fund athletic programs and extra-curriculars for decades and perhaps longer if properly invested.

-The park where I grew up playing baseball is always doing fundraisers to keep it afloat. A single six figure donation could change the entire landscape of kids playing there for generations.

I think my inspiration stems from the "My Little Hundred Million" podcast episode of Revisionist History. Basically, a rich philanthropist explains why he gave to an extremely small school in New Jersey (I think) instead of Harvard or Yale. The impact you can have on those smaller communities is so, so, so much greater. http://revisionisthistory.com/episodes/06-my-little-hundred-million

The smaller you target your philanthropy, the bigger difference you will make.

So I'm not sure what kind of immaterial wealth we are talking here, but I'm pretty well aware that I've been dealt a great hand in life (even with $150k in student loans), and I plan to use that hand to make a difference in my hometown. So I too am in the camp that a downside on spending crazy money on a house is that it could have been used to turn around an entire town an entire generation of kids.


ETA -- not saying at all that one thing is right and another is wrong. This is just my personal opinion. If you've worked hard to become immaterially wealthy then do as you please, and good for you. It's easy for me to preach when I'm not sitting on that kind of wealth.
« Last Edit: June 24, 2019, 04:54:29 PM by ReadySetMillionaire »

forummm

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Itís interesting that you say that youíre concerned that everyone will know youíre rich when it seems like thatís exactly what you want people to know.

Just to be clear, I don't want people to know. This is an anonymous forum. I started with "I am rich" because I felt it would be helpful to clarify up front that buying an expensive house is not something that would keep me from FIRE (I'm already there). The desire to live somewhere with a nice view in a sentimental location (family from there, etc) is because I think I would like it. But I would have to come out of the closet as having a lot more money than people thought. Last year moved out of the house I bought for $72k. We currently have almost no furniture. So I actively don't want people to know that I have money. But I'm not sure how important that is. Although when FIL heard that we were considering moving to the Bay Area he immediately "joked" about asking for money even though he didn't know we were thinking maybe something 2x the price of what he was probably thinking.

forummm

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I'm not sure what kind of immaterial wealth we are talking here

I would still need to be very selective about a house. I can't just pick one out and say "that one Jeeves". And would still live frugally for it to be affordable. But it feels like a heck of a lot of money to me. My last house was $72k.

It's selfish. But I don't think I would give the money to charity if I bought a cheaper place. Not until I was old enough that I knew we would never need it. I'll probably volunteer and stuff later. My career was public service. I'm taking a break now but I imagine I'll jump back in (not as a job) later.

forummm

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I think people automatically assume that a really expensive place to live is huge and fancy. I see downsides to that. The thing with HCOL areas like the Bay Area is that ďexpensiveĒ is not at all the same as ďbig and fancyĒ.

Yeah. In the Bay Area we might be able to afford a 70 year old shack. Out of curiosity I did an open house nearby our apartment (not Bay Area, much cheaper) priced something like what we might spend in the Bay Area and it was 5800 sqft and felt like 3x the size I'd want. There's a huge difference in what expensive means.

forummm

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Several people mentioned community being important. We will be touring areas we are interested in. And in the Bay Area I have relatives that live close to one of the neighborhoods we'd be looking at. They can give input about that, what the people are like, how important it is to have the latest iPhone :) etc. I personally would not be affected at all by the FitBit/iPhone/car consumerism stuff. But maybe the kids would be. Hard to know since they are still small.

forummm

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In HCOL areas, the land value is a significant part of the cost, maybe even more than half. Often times a million dollar house is only 500k to build. The other 500k was the lot value.

I don't have the money or the wasteful nature to tear down a house and rebuild unless the house is not fit to live in. But I did look into buying a vacant lot and building from scratch (saving money doing a lot of the process myself and with my dad who is a contractor). But it isn't that much different financially (cost of building there is very high) and would be very much a full time job/headache that I don't want.

ysette9

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Several people mentioned community being important. We will be touring areas we are interested in. And in the Bay Area I have relatives that live close to one of the neighborhoods we'd be looking at. They can give input about that, what the people are like, how important it is to have the latest iPhone :) etc. I personally would not be affected at all by the FitBit/iPhone/car consumerism stuff. But maybe the kids would be. Hard to know since they are still small.
There are plenty of us on the forums from the Bay Area is you want some other perspectives as well. I read the above comments about the culture and found them pretty interesting as that isnít my experience, but maybe I am just a fish that doesnít recognize the water around me?

There is certainly a cultural difference between SoCal and the Bay Area, so things like fashion may matter more down south than here. Or maybe it is my engineer crowd that doesnít care. I get my clothes on ThredUP and that is perfectly acceptable. Yes, we tend to all have technology in our pockets, but it is a tool. Many of us have company-provides phones with the employer paying the monthly bill. Some people in my work group drink the kool-aid and get hyped up about the latest whatever we are producing, but the majority seem to treat it as just a way of staying connected and doing our daily tasks. Iím not going to recognize what model or year your phone is.

forummm

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Yeah, I've lived in LA too. Very different culture than SF. One of the things DW likes about SF is that it's a less image conscious place (in a lot of ways--but I'm sure there are pockets where that matters a lot). Like people not wearing makeup etc. In my Grandma's neighborhood there are people (like her) that have lived there for decades and people who have 20 year old Toyotas.

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We live in SF. As an aside, with respect to your kids, if youíre wary of the rich-kid culture, Iíd strongly recommend sticking to public schools (or maybe parochial schools) in all nicer towns of the Bay Area. We were concerned about some learning issues with our daughter, and ended up switching to a private school from public during middle school, and this turned out to be a difficult culture shock, for both the kids and myself. Think having to listen to 6th graders brag about the size of someoneís wine cellar (!!!), fancy clothes and gadgets and camps, etc. The amount of wealth here distorts the whole culture, once you hit the ďupper middleĒ class and up. Your perfectly well-off kid starts feeling like the poor one, and there is already enough jockeying for status in middle school without that baloney.
That said, the public schools here remain diverse, although in SF they struggle with finding teachers that can afford to live here.
And it really depends on what youíre imagining - you can probably buy an ocean view 1,700sf home  in the outer sunset of SF for $2m, and still be in a middle class neighborhood - best of both worlds!

forummm

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Good anecdote. Yeah, we would live outside the city (no jobs so no concern about commuting time). My Aunt's house has a great water view, is larger than that but cheaper than that. It has a small town feel but is a short drive (without traffic) to big city. We're thinking something along those lines.

And we are leaning towards home schooling. My Aunt did that. And I was too. It might be convenient for custom learning and travelling since we aren't tied to jobs and school schedules. And lower concerns about keeping up with the consumeristic kids.

Roots&Wings

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Itís interesting that you say that youíre concerned that everyone will know youíre rich when it seems like thatís exactly what you want people to know.

Just to be clear, I don't want people to know. This is an anonymous forum. I started with "I am rich" because I felt it would be helpful to clarify up front that buying an expensive house is not something that would keep me from FIRE (I'm already there). The desire to live somewhere with a nice view in a sentimental location (family from there, etc) is because I think I would like it. But I would have to come out of the closet as having a lot more money than people thought. Last year moved out of the house I bought for $72k. We currently have almost no furniture. So I actively don't want people to know that I have money. But I'm not sure how important that is. Although when FIL heard that we were considering moving to the Bay Area he immediately "joked" about asking for money even though he didn't know we were thinking maybe something 2x the price of what he was probably thinking.

If the house is your one splurge, and you otherwise live your normal, frugal lifestyle of thrift stores, old car, library, etc, then moving to a new area really should not make a huge difference to the people close to you. The people who care about you will be pleased, though might like to visit more if you're in a great spot :)

Whatever you choose to convey about your move should help set any boundaries/expectations, whether it's something like "we got an unexpected windfall and moving is our one splurge, we still shop at thrift stores" or whatever. This is vastly different than "we're rich, we can afford anything now" as an open invitation for others to mooch off you. It sounds like your FIL was joking, though we obviously don't know details about your family/money dynamics.

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I understand your wish for living in a house with a great view. That is something we also prioritize above many other things. It is something you will enjoy every day as you look out of the window.

A pitfall can be if you buy a much bigger home (like we did). That is a lot of cleaning to do. I am totally convinced now that our next home will be a lot smaller.

The other thing is the risk of buying during a bubble. The really expensive houses might burst first and go down most in value. You could end up being under water with your mortgage (if you still need one).

You also risk that the rules for property taxes change whenever the local politicians need more money. You can't foresee this.

With a high end house, there is the issue that when you restore things or add new stuff to the home, that it should preferably be in style with the home (considering later sales). We have for example bought some extra cupboards for our house. We bought cupboard doors in the same style as the rest of the house. Turned out to be the most expensive type of doors that Ikea sells, like 6 times the price of a standard door. We had to repair a faucet and repair a folding door. Good that DH is quiet handy, so he could do the repairs himself. But buying a replacement would have been pricy. There are small, unnecessary expensive things.

As an investment, I think our money would have grown a lot more in the past 4 years if it had been in the stock market, instead of in the home. In general, homes tend to grow with inflation rate, while stock market does inflation + 7%.

Apart from this, I don't see why owning an expensive house is more problematic than owning a cheap house, giving they are equally big and giving that you don't need the money you spent on it.

forummm

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I am wary of buying anything, especially in the Bay Area now given that we are in the "extra innings" of a ridiculous everything bubble, and that area in particular has the most extremely overvalued real estate in the country. We would probably wait until next year to buy since I expect the recession to have started by then (we're already in one for housing, and possibly the entire economy). And we would only buy with cash, and keeping enough cash/assets in reserve to stay FIRE. So if the home valuation went down it would only mean that we possibly could have paid less by waiting longer.

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Part of the cost consideration is that it can become difficult to get your money out of a very expensive house, so you need enough money so that this is of little concern for the short term. An expensive house will appreciate less as a percentage than a house below the median in a neighborhood.

Some people have bought expensive houses as a way of retaining assets in a state that protects a homestead (primary house) in the event of bankruptcy.

affordablehousing

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It sounds like the OP is very anxious about lifestyle creep, and yet has a lot of money. The answer seems pretty obvious to just rent airbnbs with the views you want and see if that scratches the itch. if you need a house, buy a house that suits your needs. If you're trying to time the market to make an investment, then just don't buy a house. And then to isolate your kids even more with home schooling? That seems like a heck of a lot of effort to avoid living the comfortable lifestyle you're entitled to.

BlueHouse

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Congratulations on your riches! 

One downside to buying into an expensive area is that others now think how you manage your home is their business.  I recently heard that I should paint my front steps because it could affect someone else's property value.  I happen to like the way things look when they are a bit "weathered", but now other people seem to think they have  as many rights as I do about my house! 

Another:  I recently had my seats to a sporting event upgraded to club level.  I was so excited, but really for nothing.  The food was limited. Yes, it was free, but it wasn't what I wanted to eat.  And during play itself, the surrounding crowd was subdued and quiet.  Lots of spoiled kids who wouldn't know the difference between a good seat or not.  Not like the real fans in the cheaper seats where I usually sit who are there for the game!  Next time I was offered an upgrade, there wasn't even a question -- I turned it down.

Not to harp on my dislike of rich kids, but have you looked at first class in an airplane lately?  A bunch of snot-nosed kids who go through life thinking they don't have to mingle with the common folk.  That part really bothers me.   


ysette9

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I am wary of buying anything, especially in the Bay Area now given that we are in the "extra innings" of a ridiculous everything bubble, and that area in particular has the most extremely overvalued real estate in the country. We would probably wait until next year to buy since I expect the recession to have started by then (we're already in one for housing, and possibly the entire economy). And we would only buy with cash, and keeping enough cash/assets in reserve to stay FIRE. So if the home valuation went down it would only mean that we possibly could have paid less by waiting longer.
Iím wary of being wary. My husband was totally convinced in 2010 that housing prices in our area were overinflated and wanted to wait to buy until things came down. Any look at a Zillow graph shows you that this was the start of a pretty spectacular housing boom and prices have increased dramatically since then.

There are different areas in the Bay Area in terms of real estate markets. If you are talking about true core areas lIke more desirable areas of SF, Palo Alto, Atherton, etc. these areas almost didnít have a housing crisis. Prices there flatlined for a few years while outlying areas saw 20-50% drops.

I wish I had saved the link because I havenít been able to dig it up again: a few years ago I read an article that was an analysis of SF housing appreciation going back to the late 1800s. The study author pieces together prices from old newspaper housing ads and whatnot and found that SF real estate has pretty much appreciated around 6%\yr on average for over 100 years.

Naturally that is no prediction of future behavior, but it appears that real estate here, especially in the core desirable areas and especially at the upper end of the market follows a different set of rules. Recessions donít matter as much if you arenít dependent on your 9-5 job to bring in a paycheck to make the mortgage payment.

affordablehousing

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@ysette9 and it stays impossible to build any new housing! I think this post was about the transition to being rich, and what that means for someone being very cautious. It's a slow process becoming comfortable with intergenerational riches.

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Kudos for your success, Forummm, and good for you for being thoughtful about this purchase before you make it.  I agree that you should go ahead and buy the house that makes you most happy, especially if money is of minor concern.  One thing I've noticed about expensive houses is that when you get contractors to come in and give you an estimate they tend to jack up the cost based on the estimate.  I think this can be overcome via multiple estimates/negotiating, but it is exhausting, especially over an extended period of time.  But this concern can also be overcome by either doing the work yourself or resigning yourself to paying the higher rate. 

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Realistically, there is no property you can buy, vacant or otherwise, in a HCOL area with Class A views that won't be a dead giveaway of your wealth. It simply doesn't exist, because of how limited it is and how many people can afford to pay big money. I'm talking waterfront, a place overlooking the mountainside for miles, or something equivalent. Hell I like in a suburb outside an MCOL area and a vacant waterfront 1/3 acre lot still costs half a million dollars. It's the land that is expensive. I could put a double-wide on that lot and everyone would still know I have money because I could afford the land in the first place. I don't know how you will get around that part.

forummm

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Part of the cost consideration is that it can become difficult to get your money out of a very expensive house

I would only buy a house with cash and enough money left over in safe stuff to not need to get the money out of the house.

It sounds like the OP is very anxious about lifestyle creep, and yet has a lot of money. The answer seems pretty obvious to just rent airbnbs with the views you want and see if that scratches the itch. if you need a house, buy a house that suits your needs. If you're trying to time the market to make an investment, then just don't buy a house. And then to isolate your kids even more with home schooling? That seems like a heck of a lot of effort to avoid living the comfortable lifestyle you're entitled to.

Moving is a pain. We'd like to settle somewhere. If we make a mistake then we could move if we needed to. And the homeschooling is something we have been considering for a long time regardless of housing. And the house wouldn't be an investment. I just think that housing is going to get cheaper soon, especially in high cost areas, so I am comfortable waiting a bit.

Congratulations
... I recently had my seats to a sporting event upgraded to club level.  I was so excited, but really for nothing. 

Thanks. I also worry about hedonistic adaptation. I think I'm pretty grounded though. But it's a risk.