Buy home? If so how much?

[duyen]

We both are around 40. Two kids one in elementary and another starting middle. Combined income 300k now. This might fall down to 150k after say 3 years (depends on how long I will be able to keep my high pay job). We have a combined invested networth of 1.15M.

We currently live in a VHCOL and are renting (3k rent per month). Non rent expenses run about 3k per month.

Since most of my networth is invested, I have set myself up to the fastest path to FIRE. I like it this way but recently my wife is pushing more on buying a home (as few friends and relatives have already bought).

I am debating if buying is a good idea or not. If I buy how much home should I buy and when should I buy (now vs wait for few years). A decent home in our area costs atleast 1.2M. Condos or townhomes go for 600-850k.

Appreciate your thoughts on this.

[marty998]

Do you want to FIRE in the current area that you live in?

No real point buying a big ass home and spending huge $$$ on buying and selling costs if you're going to up sticks in 5 years to a different area when you FIRE.

Perhaps buy in that area and move in down the track?

[ixtap]

Have you run a rent/buy calculator for your area?

What are your FIRE plans?

How important is this to your spouse? Kids?

[ysette9]

We live(d) in VHCOL area also and the rent vs buy calculator told us it made sense to buy if we stayed put for at least ten years. With numbers you are quoting I expect you are in a similar situation and likely would also benefit from buying only in the case you stay there long term. 3k for rent is just so much more affordable than the $4-5k/month you’d pay to buy, plus maintenance and all of that.

[Laura33]

In most cases, buying a home is a consumption decision, not an investment.  The exception is if your mortgage and various expenses are less than your rent -- but that is rare, and very likely not true there.

It sounds like you are happy renting but your wife wants to buy a place, so this is an emotional decision, not a financial one.  In that case, the answer of how much to spend on a house is "as little as you can that will make your wife happy."

[affordablehousing]

ditto what laura33 said. buying a house is something that would have to make sense for your family, not just your fire timeline. Could you get something for $800K you'd be happy with? That's about the most I'd want to spend in your shoes.

[dougules]

If you bought a place, would it be an apples to apples comparison with the place you're currently renting? 

If buying would mean getting something bigger or fancier, then renting is better from a strictly financial POV.   

Would it be in the same neighborhood?  If not would it be in a place that's more expensive?  Would it increase your commute time?  Would it have the same quality of life as your current neighborhood?

[duyen]

great points there everyone. yes for me house doesn't make sense from an investment point. If I continue renting, I can be FIREd once I hit 1.8m - 2m

Once I start adding a house to this then required FIRE target grows like this

2.5m --> get 200k house
3.0m --> get 500k house
3.5m --> get 1M house
4.0m --> get 1.5M house

May be move to a LCOL after a few years and try buying there while continue working there or work in the HCOL till I am done working and then decide buying

I also feel stuck buying a home. If I rent, I am free to move and do whatever; stay in a new state each year / slow paced international travel / stay near kids helping them with childcare etc..

[ericrugiero]

If I continue renting, I can be FIREd once I hit 1.8m - 2m

Once I start adding a house to this then required FIRE target grows like this

2.5m --> get 200k house
3.0m --> get 500k house
3.5m --> get 1M house
4.0m --> get 1.5M house

I wouldn't think that buying a house would increase your FIRE target more than the cost of the home.  If you buy a $1M home it would increase the target by $1M max because once it's paid off then your cost of living drops.  (This assumes you are buying a home somewhat similar to what you rent.  If you buy a mansion then the cost of upkeep and taxes throw this out the window.)  The bigger issue is buying a home can increase your cost of living NOW which means you are slower to reach your FIRE target. 

Are you planning to stay in the HCOL area once you reach FI?  The longer you stay the more it makes sense to buy.  A $1.2M home will typically cost you at least $6000/mo by the time you figure in taxes, insurance, upkeep, etc.  If you can find something your wife will be happy with in the 600-800K range it makes more sense to buy. 

I'd also be concerned if you really think your income might drop by 50% in a few years.  You could still have a pretty good savings rate with a $1M home while making $300K.  That drops a ton at $150K.