Reader Case Study - Buy a new house or reach $1M

[minimalistgamer]

Reader Case Study - Buy a new house or reach $1M

Life Situation: Married (filing jointly), no kids, wanting to start a family. I am 36 years old, wife is 30 years old.

Gross Salary/Wages: $90,630

Adjusted Gross Income: $90,630

Taxes:
Federal - $7486
State - $3441

Current expenses:

2018 expenses - $18,302
2019 expenses to date - $5,957

Mortgage payment - None
PT - $2,069
HI - $1,170

Assets:
Checking - $3,959.92
Joint - $1,000.00
Checking - $200.00
Online Savings - $26,635.80 (job loss fund - $10,000; Roth IRA 2020 - $12,000; PT & HI - $4,000)
CD - $22,657.15
401k - $102,715.51
Roth IRA - $38,929.00
Brokerage - $81,293.57
HSA - $5,274.03
HSA Investments - $1,481.71
401(K) - $21,416.07
Roth IRA - $18,736.99
Cash - $20.00
Overseas - $431.31
Total -  $324,751.06

House is worth around $180,000 according to Zillow.

Liabilities: None

Specific Question(s):

Background - We always wanted space. We are introverts, and we do not really go out much. We like to spend a lot of time at home. Our vacations generally involve staying home too. This is where our happiness lies. We want to live in a large house, 2000+ sqft. In my area, these cost anywhere between $200,000 - $300,000.

My plan is to rent out this house and move into a bigger house. 

Our other goal is to reach a million dollars net worth.

My questions are this -

1. Should we become millionaires first and then buy a second home?
2. Should I save up the money and buy with cash or should I take out a mortgage?
3. What would you do in my situation?

I just want to make the most out of my situation. Any advice is much appreciated.

[ChpBstrd]

1) We just made a decision to sell a 2700sf house and downsize to about 1400sf so that we could become millionaires sooner and for other reasons. Some downsides of big houses you don’t hear so much about include:
-Having to constantly yell at each other to be heard from far away. As stupid as this sounds, constantly being yelled at erodes the relationship.
-Draftiness. Even a well insulated warehouse has cold pockets and air currents simply because the interior volume is so big.
-Property taxes. Holy sheet!
-Insurance bill. Holy sheet again!
-Desperate people knocking on the door offering to mow grass, save your soul, etc. because they assume you’re rich. Piles of junk mail.
-$18k to replace the HVAC.
-45 minutes to vacuum the place. Dust and cobwebs just appear everywhere.
-2.5 minutes for the first bit of warm water to make it to the shower in winter.
-Accumulation of stuff to the point that downsizing is painful.
-Leaving for work and thinking about how having a big house instead of a little house means you will have to work a few extra years. Remember, at a 4% WR, if you decide to spend just $1,000 more per year on housing, you now have to save up another $25,000 to retire. If your costs rise $3k, how long will it take to save up $75k?
-Anxiety over whether the market will go up or down, because so much of our NW is tied up in real estate.

2) Mortgage. Rates are 4% for 30 years! Consider paying it off upon retirement to mitigate sequence of returns risk.

3) Fortunately, different people want different things. As someone who’s “been there done that” I have no desire to purchase and work for a large house. But maybe you are a different person coming from a different perspective. My six year big house experience probably cost me $40-60k in transaction costs and higher expenses plus opportunity costs. So it probably set back my retirement a couple of years just to do the experiment.

Consider if there are ways to make your current space more introvert-recreation friendly. Can you finish out the attic or basement to make a hobby space? How about building a backyard shop? Can the guest bedroom double as a fun hangout area if you change out or rearrange furniture?

BTW your expenses are super low! Great job in that department. FIRE Is the art of being happy despite spending far less than others. I’d recommend hitting FI first and then deciding if more square footage is worth additional years of your life working.

[Blue Skies]

Really think about what you would do with all that space.  What can you not do in your current house that you need more room to accomplish?

I agree with the previous suggestion to think about the associated expenses.  Not only does your house cost more to buy, you pay more every year for property taxes, insurance, and also all of your utilities will go up.  Your initial cost includes not only the house itself, but likely more furniture to fill up the extra space. 

My take on house size - the smaller it is, the faster I can clean it each and every week.  I don't need to spend more time cleaning...  I have two full and one half bath right now.  I hate cleaning toilets.  I hope to never, ever have a house with more than three.  Once the kids leave I will downsize.

[minimalistgamer]

Thank you very much for your perspective. I appreciate it. Let me respond to the very specific down sides that you mentioned.

Having to constantly yell at each other to be heard from far away.

This is really not a problem for us. We hang out in the office most of the time and we are like a few feet away from each other. We are a gamer couple.

Draftiness. Even a well insulated warehouse has cold pockets and air currents simply because the interior volume is so big.

This is a valid point.

Property taxes. Holy sheet!

Will be around $3000-$4000. Considering our expenses are so low, this is not really a problem for us.

Insurance bill. Holy sheet again!

This is not a problem for us.

Desperate people knocking on the door offering to mow grass, save your soul, etc. because they assume you’re rich. Piles of junk mail.

I lived in the United States (in a so called bible belt state) and this never happened to me.

$18k to replace the HVAC.

Good point.

45 minutes to vacuum the place. Dust and cobwebs just appear everywhere.

Wife and I do not mind the chores. This is not a problem for either of us.

2.5 minutes for the first bit of warm water to make it to the shower in winter.

This is not a problem for us.

Accumulation of stuff to the point that downsizing is painful.

Absolutely not a problem for us. We do not buy things.

Leaving for work and thinking about how having a big house instead of a little house means you will have to work a few extra years. Remember, at a 4% WR, if you decide to spend just $1,000 more per year on housing, you now have to save up another $25,000 to retire. If your costs rise $3k, how long will it take to save up $75k?

If I am not concerned about actually retiring early, and I wish to work until I cannot work anymore, do I need to take this into account?

Anxiety over whether the market will go up or down, because so much of our NW is tied up in real estate.

If I am not interested in selling the house and if I consider it as a home first and investment second, then do I need to worry about the market dipping?

Mortgage. Rates are 4% for 30 years! Consider paying it off upon retirement to mitigate sequence of returns risk.

Can you elaborate on this a little bit more? I am not quite sure I understand this.

But maybe you are a different person coming from a different perspective.

I came from a third world country. Space is a luxury to us. The fact that I can even dream of owning a big house is still unbelievable to me.

Consider if there are ways to make your current space more introvert-recreation friendly. Can you finish out the attic or basement to make a hobby space? How about building a backyard shop? Can the guest bedroom double as a fun hangout area if you change out or rearrange furniture?

I am claustrophobic, so an attic area is out of question for me. But the other ideas as very interesting. I will definitely consider those.

BTW your expenses are super low! Great job in that department.

We have very few needs. We dont't really do much in life other than work and relax at home. This is how we want to live our lives.

[minimalistgamer]

Really think about what you would do with all that space.

We just like the idea of having the space, and living in the space. I asked myself this question many times, and this is the best answer I could come up with.

What can you not do in your current house that you need more room to accomplish?

The thing I want to accomplish is to live in a big house. One of the reasons I want to own a big house is that this world is going to get over crowded, and we are going to have space problems in the future. I know this because I came from a third world country. Unfortunately, there is a mad rush in the United States to import more people. I do not quite understand the reason for this. At times, I question my own existence here., but regardless, given that I have the opportunity to buy a lot of land, and own a big house...I feel like I should go for it because in the future, this is going to be really tough to accomplish for a middle class person. Like in my home country, its quite impossible for someone like me to own a house because I would not be able to afford it. The best I can hope for is a small condo. Due to over population, the dream of home ownership is not possible.

I agree with the previous suggestion to think about the associated expenses.

 

This is a very good point and I need to think about it.

Your initial cost includes not only the house itself, but likely more furniture to fill up the extra space.

I understand why you would say this, but this does not apply to us. We haven't furnished our house yet, and we bought it nearly 4 years ago.

My take on house size - the smaller it is, the faster I can clean it each and every week.

Agreed. This is definitely something to consider.

Once the kids leave I will downsize.

This is an interesting perspective. I still haven't quite figured out how I want to spend my retirement. I will think about it tonight.

[Rdy2Fire]

I have about 2500 sqft and wonder why. My goal is to sell but no kids etc and sounds like you aren't planning to FIRE so I'd say if early retirement isn't a concern, which you touched on above, and you really want space, then go for it.

My only advice is your perspective on early retirement could change in the future, you could end up out of work or not doing as well and all those associated expenses that come with a home are increased with the size, as previously suggested.

[Blue Skies]

So, you have not furnished your current home and spend most of your time together in an office space.  I guess I am just really confused by why you WANT a larger house?  If there isn't any furniture would you even use those rooms for anything?  You just want open space so you can... have open space?  That you have to clean, and pay extra to own/heat/maintain.

Dig for the motivation here.  If it really means a lot to you, and you can afford it, go for it.  I personally just don't understand the reasoning.

[minimalistgamer]

So, you have not furnished your current home and spend most of your time together in an office space.  I guess I am just really confused by why you WANT a larger house?  If there isn't any furniture would you even use those rooms for anything?  You just want open space so you can... have open space?  That you have to clean, and pay extra to own/heat/maintain.

Dig for the motivation here.  If it really means a lot to you, and you can afford it, go for it.  I personally just don't understand the reasoning.

This is correct. We haven't really furnished our current home. The reason for this is simple, we spend a lot of time in our office, and there is no real need to have furniture in the rest of the house and clutter things up. I see no value in doing so. However, I do like the idea of having a extra rooms...

I will definitely do some digging for motivation, but really the core of it all is a thirst for more space. That's it. I doubt I will find anything else, but I will have a conversation with my wife, and see if this is something we really want or if this is just a phase. I honestly wish I could give you a better answer, but I can't at the moment.

I have about 2500 sqft and wonder why. My goal is to sell but no kids etc and sounds like you aren't planning to FIRE so I'd say if early retirement isn't a concern, which you touched on above, and you really want space, then go for it.

My only advice is your perspective on early retirement could change in the future, you could end up out of work or not doing as well and all those associated expenses that come with a home are increased with the size, as previously suggested.

You are absolutely right. There are some risks to be had when increasing lifestyle, which is essentially what this is. I just have this dream of living in a big house, and calling it my mansion, sparse as it might be! I know it sounds very silly.

As for being able to afford it...well, that's the part I am a little confused about, because I obviously can't pay cash for the house. So can I really afford it?

[2sk22]

As for being able to afford it...well, that's the part I am a little confused about, because I obviously can't pay cash for the house. So can I really afford it?

I think you have made a persuasive case that you could really enjoy the extra space. But why pay cash for a house - surely you can get a mortgage? or am I missing something?

[MrThatsDifferent]

I get that you both are introverts and staying inside is your happy place, but you’re thinking about having kids and they may not be introverts or enjoy being inside, not having things or not going on holiday. You have a place now and I’d imagine more than enough space, so I’d get my million first, start the family, then decide what you really need. Just try to be flexible in the needs of your kids and not so stringent on how you and your wife currently live.

[Rdy2Fire]

As for being able to afford it...well, that's the part I am a little confused about, because I obviously can't pay cash for the house. So can I really afford it?

I think you have made a persuasive case that you could really enjoy the extra space. But why pay cash for a house - surely you can get a mortgage? or am I missing something?

Based on the information you provide I am guessing the answer to 2sk22's questions is you could get a mortgage. I understand not wanting to be in debt but then back to my point, if you don't plan to FIRE and really want a larger house it seems the answer is to take a mortgage and just keep working to pay off your space and furnish over time. 

[mistymoney]

Unfortunately, there is a mad rush in the United States to import more people.

what? where are you getting this? there is no such thing.

[ChpBstrd]

Here’s my rationale for keeping a mortgage until retirement and then paying it off:

https://earlyretirementnow.com/2017/10/11/the-ultimate-guide-to-safe-withdrawal-rates-part-21-mortgage-in-retirement/

[ChpBstrd]

The thing I want to accomplish is to live in a big house. One of the reasons I want to own a big house is that this world is going to get over crowded, and we are going to have space problems in the future. I know this because I came from a third world country. Unfortunately, there is a mad rush in the United States to import more people. I do not quite understand the reason for this. At times, I question my own existence here., but regardless, given that I have the opportunity to buy a lot of land, and own a big house...I feel like I should go for it because in the future, this is going to be really tough to accomplish for a middle class person. Like in my home country, its quite impossible for someone like me to own a house because I would not be able to afford it. The best I can hope for is a small condo. Due to over population, the dream of home ownership is not possible.

 

The US is in a strange situation where 90% of the land is a vast open space - fields, forests, mountains, and deserts - and most of the other 10% is urban/suburban. This geographic reality is hard to observe if you live in a place where it takes an hour or more of driving to reach undeveloped areas. From an airplane, it’s easier to see the scale of the emptiness. All those small towns and country roads are places where it is relatively cheap to own a massive home - far cheaper than even a small apartment in a city. One fifth of states are losing population. The reason everyone clusters in cities, driving up the costs, is the requirement to be physical present at most jobs.

I suspect the trend toward pricey mega cities could be ended by any of the following technological developments:
1) Software that allows effective management of employees who work from home. Somehow no one has accomplished this yet, but such a development could eliminate the traditional office and commute for tens of millions of workers.
2) 3D printing has the potential to reduce the cost of construction dramatically.
3) The shift toward renewable energy has led to lower electricity prices, which could make it affordable to heat/cool very large places.
4) Drone delivery (or even more expansive non-drone delivery networks) could put even the most remote areas within a few-hours delivery of almost any product in the world. So no need to live near shopping centers.

Put these factors together and the future looks like more people working from their elaborate 3,000 sf 3D printed home in the mountains. It won’t be an aspirational thing for long. Having a fat investment portfolio, however, will still be rare.

Immigration to the US is about the same as it has been for a very long time, and the country’s population growth is under 0.7% and falling. A situation of negative population growth as seen in Japan and parts of Europe could occur unless immigration increases.
https://www.brookings.edu/blog/the-avenue/2018/12/21/us-population-growth-hits-80-year-low-capping-off-a-year-of-demographic-stagnation/

[minimalistgamer]

what? where are you getting this? there is no such thing.

I am getting this from own life, and what I have seen in universities and software companies. In half of my Master's degree classes, there were exactly 0 American students. Lol. Even the professor was not an American. Nothing wrong with this. Its an observation.

The US is in a strange situation where 90% of the land is a vast open space - fields, forests, mountains, and deserts - and most of the other 10% is urban/suburban. This geographic reality is hard to observe if you live in a place where it takes an hour or more of driving to reach undeveloped areas. From an airplane, it’s easier to see the scale of the emptiness. All those small towns and country roads are places where it is relatively cheap to own a massive home - far cheaper than even a small apartment in a city. One fifth of states are losing population. The reason everyone clusters in cities, driving up the costs, is the requirement to be physical present at most jobs.

I suspect the trend toward pricey mega cities could be ended by any of the following technological developments:
1) Software that allows effective management of employees who work from home. Somehow no one has accomplished this yet, but such a development could eliminate the traditional office and commute for tens of millions of workers.
2) 3D printing has the potential to reduce the cost of construction dramatically.
3) The shift toward renewable energy has led to lower electricity prices, which could make it affordable to heat/cool very large places.
4) Drone delivery (or even more expansive non-drone delivery networks) could put even the most remote areas within a few-hours delivery of almost any product in the world. So no need to live near shopping centers.

Put these factors together and the future looks like more people working from their elaborate 3,000 sf 3D printed home in the mountains. It won’t be an aspirational thing for long. Having a fat investment portfolio, however, will still be rare.

Immigration to the US is about the same as it has been for a very long time, and the country’s population growth is under 0.7% and falling. A situation of negative population growth as seen in Japan and parts of Europe could occur unless immigration increases.
https://www.brookings.edu/blog/the-avenue/2018/12/21/us-population-growth-hits-80-year-low-capping-off-a-year-of-demographic-stagnation/

I appreciate your perspective. You have this image of a future with flying cars, drone delivery and clean renewable energy, and everyone living in peace in a mansion, sort of like the world envisioned by Isaac Asimov in his Robot series.

My reality is much more grounded. I have seen extreme poverty, and experienced personal scarcity (both in this country and in my home country). I can tell you this, if you import a bunch of people from my country, it is far more likely that your country will become like mine (a third world country), than my countrymen embracing American values. This maybe considered racist in your circles, but that is the reality I live in and see everyday. All of this to say, I want to be ahead of the game when this is not America anymore. I understand that for some might celebrate that day. I am much practical in that regard, I am in this game to win. I do not necessarily concern myself with petty politics. So if someone wants to believe that mass immigration is a good thing...well...so be it.

Most are incredibly poorly designed and constructed.  Tons of wasted space that then needs to be heated/cooled.  Long commutes to get to/from them.  Can't walk to much.  I would take a well-designed condo closer in any day.  In fact, that is what we chose in Beijing and it paid off nicely for us (tripled in value from 2009-2016 and propelled us to fat-FIRE status back in Seattle).

Before you go sinking a whole lot of money into something that seems to be a vague status symbol for you, I would suggest two things:

1)  Check out the book "The Not So Big House" from the library and learn a bit about what makes a well designed house feel comfortable.  A well-designed house may cost more per square foot, but will cost less to maintain and probably will increase in value compared to a poorly designed mcmansion.

2)  If you REALLY crave the space, then rent a larger house for awhile (you can rent your current place out for up to 2+ years and still take the capital gains exclusion if you decide to sell).  This is especially important if you think you want to live in the country.  Many people who grew up in urban environments find they don't really like it, even if they thought they would.  Try it out on a rental basis for awhile before you sink your savings into a house that might not be what you really want.

There is a lot I don't miss about Beijing but I do miss being able to walk a short distance to do 90% of my errands.

This is an excellent post. Thank you. I know exactly what you are talking about. I am going to check out the book at the local library.

I grew up out in the country and while there are things I liked about it I would not choose to live that way as an adult --I value being closer to urban amenities.

My experience is the opposite. I grew up in an urban place, and I want to live out in the country, as long as there is good internet of course!

[minimalistgamer]

Again I would caution you to rent in the country before you buy -- you may not like it as much as you think you will.  It can be an expensive mistake.  There are even a few threads on here by people who thought they were going to be living the life of their dreams, but they ended up hating the rural lifestyle.

You could also try looking for properties that are closer in but have a rural feel.  That is what we settled on.  We are within the Seattle city limits, but in a heavily wooded area with nice views.  Our street doesn't get much traffic (and there are others near by -- dead ends -- that get almost none), but we are a 10 minute walk from a major arterial where we can catch the bus.  We have a good sized lot with room for a garden (and lots of deck space where I am growing lots of stuff in containers).  We are FIREd so we don't have to commute, and I try to group most of my errands so that I only drive 2-3 days a week.  I kind of feel like we have the best of both worlds -- a slower paced, quiet life surrounded by lots of nature, but also just a short distance from urban amenities.  I just wish we were a LITTLE closer to the grocery store, etc. so that it was more convenient to walk more while still being in this neighborhood.  But this was the location/house that was available when we were looking, so this is where we ended up.

Thank you, kind stranger. This is very good advice. It can indeed be a very costly mistake to jump into this.

I need to spend some time thinking about my life and where I want to go with it. Appreciate the insights.

[ChpBstrd]

I know this thread probably comes across as telling you what you should want even after you have clearly stated what you want, but then again this forum is about achieving wealth and high housing costs work against that goal.

You are smart to seek out perspectives that disagree with your own. If more people were able to do so, the world would be a much more peaceful and prosperous place. Best of luck defining what you want out of life. That’s the hard part.

If you’d like to further explore the case against big houses, here are 2 fun blogs. The first is the story of a couple who were able to retire in their early 30s with $1M BECAUSE they avoided home ownership. The second makes fun of the tasteless and incoherent architecture of modern mansions, which might help reduce the yearning to own such a thing.

https://www.millennial-revolution.com/freedom/how-i-built-a-seven-figure-portfolio-and-retired-at-31

https://mcmansionhell.com/

[minimalistgamer]

You are smart to seek out perspectives that disagree with your own. If more people were able to do so, the world would be a much more peaceful and prosperous place. Best of luck defining what you want out of life. That’s the hard part.

This is exactly what I want. I want to hear the opinion of those that disagree with me because it will help highlight my own bias. Keep in mind though, a bias is not necessarily a bad thing, I mean we are human beings after all, we are all meant to be biased one way or another, therefore I see it as a learning opportunity for me.

That said, I read through the blogs and there are some interesting takeaways from both. I suspect I will have nothing in common with these people, they seem like typical bitter and arrogant millennial types.

[ysette9]

I have purchased real estate three times in my life and at least two of those times were a mistake. I second the idea others have presented of renting what you think is your ideal house for a while to test drive the idea with little financial impact. The transaction costs of buying and selling houses are high in the US so you really want to be sure of what you are doing.

It sounds like the primary driver of your want is simply that you couldn’t have that where you came from and now you can. I get that. Growing up it seemed like I always had crappy clothes that looked bad and made me feel self conscious at school. So I really wanted to be able to wear nicer clothes that fit well once I got some money of my own. So I did. Through outlet malls and other discount means, but I did it and scratched that itch. Now I can wear jeans and a T-shirt to work and feel totally okay with it because I know that if I really wanted to look amazing I have the means of buying a fancy wardrobe. Now I get as much satisfaction out of knowing I CAN do something as if I actually wear to DO it. If I dress like a bum it is because I choose to, not because I don’t have the money to dress otherwise. That makes all the difference.

My husband and his family came from a much poorer country when he was a kid and scraped their way up from very little. I might be projecting too much here, but to me it seems like that experience as a kid made my husband very frugal and made his sister want to buy All The Stuff. You’ve said it yourself already: some self reflection about what you really want and why would be a good exercise.

[mistymoney]

what? where are you getting this? there is no such thing.

I am getting this from own life, and what I have seen in universities and software companies. In half of my Master's degree classes, there were exactly 0 American students. Lol. Even the professor was not an American. Nothing wrong with this. Its an observation.

and my experience as citizen of the us since birth is that there is no "mad rush" to "import" people.

Lots of students come over on student visas. They are asking for temporary entry. Many do try to stay. Companies also sponsor visas for qualified workers.

But that is driven by people asking to be here, asking to stay here. Not the other way round for the most part.

How are you defining american? And what exactly did you know about the immigration status of your fellow students?

[minimalistgamer]

I have purchased real estate three times in my life and at least two of those times were a mistake. I second the idea others have presented of renting what you think is your ideal house for a while to test drive the idea with little financial impact. The transaction costs of buying and selling houses are high in the US so you really want to be sure of what you are doing.

It sounds like the primary driver of your want is simply that you couldn’t have that where you came from and now you can. I get that. Growing up it seemed like I always had crappy clothes that looked bad and made me feel self conscious at school. So I really wanted to be able to wear nicer clothes that fit well once I got some money of my own. So I did. Through outlet malls and other discount means, but I did it and scratched that itch. Now I can wear jeans and a T-shirt to work and feel totally okay with it because I know that if I really wanted to look amazing I have the means of buying a fancy wardrobe. Now I get as much satisfaction out of knowing I CAN do something as if I actually wear to DO it. If I dress like a bum it is because I choose to, not because I don’t have the money to dress otherwise. That makes all the difference.

My husband and his family came from a much poorer country when he was a kid and scraped their way up from very little. I might be projecting too much here, but to me it seems like that experience as a kid made my husband very frugal and made his sister want to buy All The Stuff. You’ve said it yourself already: some self reflection about what you really want and why would be a good exercise.

I think you are spot on. You may have talked me out of a big mistake...potentially :)

Can you perhaps elaborate a little more on why your real estate purchases were a mistakes?

[ysette9]

Can you perhaps elaborate a little more on why your real estate purchases were a mistakes?

In a nutshell I can summarize it by saying that I hadn't properly reflected on my motivations for WHY to buy. The first time was when I had first graduated from college and my mother convinced me that the right thing to do was 1) buy and 2) buy more by going in with family on the purchase. I mostly didn't know any better but I also had some personal/emotional stuff wrapped up in the decision to go along with that which I should have handled in a healthier manner (i.e. I was trying to fill a hole with a real estate purchase). Second time I bought was when I had just gotten married and my husband and I decided to buy because apparently that is what you do. We didn't think long and hard enough about that decision. Looking back on it we probably should have rented for a good while and continued to save, while figuring out exactly what it was we really wanted. We ended up buying a nice place in a bad location (good life lesson there - location, location, location) and moved after a couple of years when the commute got really bad. We were fortunate that housing prices appreciated a good amount in that time period so that canceled out the $ we lost in transaction costs, but we still would have been better off investing instead, though on paper we walked away with a nice chunk of cash from the sale.

[LifeHappens]

OP, you seem like a pretty logical-minded person, and yet you've stated:
1) You want a big house with lots of space
2) Currently you and your spouse spend all your time in a small office gaming and haven't even bothered to furnish most of the rest of your house.

Can you see why 1 and 2 don't seem to belong together to the people reading and commenting on this thread? It's almost as if you have the urge to live in an empty warehouse.

If you desire space, and I can understand why you do given your background, would owning a smaller house with a decent amount of land serve the same purpose for you? Land is cheaper and generally easier to maintain than lots of living space. It's taxed at a lower rate. Insurance is lower. You don't have to heat it or paint it.

In addition, owning a large lot would guarantee you will never have a neighbor building right next to you.

[MrThatsDifferent]

I have purchased real estate three times in my life and at least two of those times were a mistake. I second the idea others have presented of renting what you think is your ideal house for a while to test drive the idea with little financial impact. The transaction costs of buying and selling houses are high in the US so you really want to be sure of what you are doing.

It sounds like the primary driver of your want is simply that you couldn’t have that where you came from and now you can. I get that. Growing up it seemed like I always had crappy clothes that looked bad and made me feel self conscious at school. So I really wanted to be able to wear nicer clothes that fit well once I got some money of my own. So I did. Through outlet malls and other discount means, but I did it and scratched that itch. Now I can wear jeans and a T-shirt to work and feel totally okay with it because I know that if I really wanted to look amazing I have the means of buying a fancy wardrobe. Now I get as much satisfaction out of knowing I CAN do something as if I actually wear to DO it. If I dress like a bum it is because I choose to, not because I don’t have the money to dress otherwise. That makes all the difference.

My husband and his family came from a much poorer country when he was a kid and scraped their way up from very little. I might be projecting too much here, but to me it seems like that experience as a kid made my husband very frugal and made his sister want to buy All The Stuff. You’ve said it yourself already: some self reflection about what you really want and why would be a good exercise.

I think you are spot on. You may have talked me out of a big mistake...potentially :)

Can you perhaps elaborate a little more on why your real estate purchases were a mistakes?

I think this is a good reflection for you. Is your decision being driven by logic or emotion? What I like about the MMM mindset is that I’m choosing logic 90% of the time. Even when I chose emotion, like wanting to go on a nice holiday, I try to make logical decisions. Your desire for the house seems driven by ego, your desire to fix what you were unhappy about in your past. That’s not a good reason to make financial decisions that don’t serve you. That’s a good reason to seek counseling or therapy and not because something is wrong with you and you’re crazy, but because there’s something you need to work through that’s holding you back and you have the power to control it, instead of it controlling you. You are enough, you have everything that you need except security. That’s attainable. Overcoming our past doesn’t mean having now what you couldn’t have then, it means not letting our past dictate our lives beyond providing us with useful data that we shape for our advantage. That’s how you grow, not by adding more rooms, but adding more to who you are as a person.

[ysette9]

Well stated, @MrThatsDifferent

[minimalistgamer]

Your desire for the house seems driven by ego, your desire to fix what you were unhappy about in your past. That’s not a good reason to make financial decisions that don’t serve you. That’s a good reason to seek counseling or therapy and not because something is wrong with you and you’re crazy, but because there’s something you need to work through that’s holding you back and you have the power to control it, instead of it controlling you. You are enough, you have everything that you need except security. That’s attainable. Overcoming our past doesn’t mean having now what you couldn’t have then, it means not letting our past dictate our lives beyond providing us with useful data that we shape for our advantage. That’s how you grow, not by adding more rooms, but adding more to who you are as a person.

Thank you sir. This is excellent advice. While I do not believe in talking to a counselors in this country (or any western country for that matter), I will however seek counsel of some elders in my family, or kind strangers on the internet who tend to be brutally honest (which I appreciate).

What you said makes a lot of sense. I should not make financial decisions based on a scarcity mindset I had when I was growing up. You are absolutely right that overcoming the past does not necessarily mean that I should let it dictate my present. I do live a very good life...far better than I ever had growing up. Hence my sense of gratitude towards the American people. They have given me everything I have today.

Once again sir, thank you.

Can you see why 1 and 2 don't seem to belong together to the people reading and commenting on this thread? It's almost as if you have the urge to live in an empty warehouse.

If you desire space, and I can understand why you do given your background, would owning a smaller house with a decent amount of land serve the same purpose for you? Land is cheaper and generally easier to maintain than lots of living space. It's taxed at a lower rate. Insurance is lower. You don't have to heat it or paint it.

In addition, owning a large lot would guarantee you will never have a neighbor building right next to you.

Yes. No doubt, I see that contradiction. I suppose it is a personality flaw in me, what else can explain my desire? There is no logical reason for wanting it. Talking to the level headed folks here made me see things from a different perspective.

Can you perhaps elaborate a little more on why your real estate purchases were a mistakes?

In a nutshell I can summarize it by saying that I hadn't properly reflected on my motivations for WHY to buy.

When I asked myself the same question now, on why I bought our current house, the answer to it is very much the same. I believed it was the right thing to do. I did not run any numbers...I just went with it. I am glad it all worked out for me, but it could have so easily not have worked out as well.

You mentioned that your husband was from a poor country. May I ask what country is he from? And how he came to the United States? You do not have to answer if you don't want to. I was curious because I share a similar background.

I am going to give all this very serious thought over the weekend. Thank you everyone for taking the time out of your day to help a stranger.

[ysette9]

My husband is Chinese from Malaysia. Not dirt poor, but definitely less well off than we are here. He came as a kid so he has had a good while to adjust. I consider him fluent in both cultures and shaped by his past but not haunted by it, if that makes any sense.

[theskyisblue]

Perhaps I am naive, but I tend to think that most immigrants are like you -- productive, thoughtful, honest, hard working and grateful for the opportunities that America provides.  I agree that immigration can change a culture but America also changes the people who make it their home.  Ideally, both the immigrant and the native change for the better!  We have the worst math and science literacy in the industrialized world -- how could more math-literate Indian and Chinese immigrants possibly hurt us?  Isn't it better to import people who are committed to the United States and who will raise the standard here rather than to compete with the same people in another country?  I happen to live in a neighborhood full of the specific Latin American migrants from the specific countries under discussion at the national level and it is a very quiet place.  Everyone is working super hard (2 and 3 jobs), the families are always together, very little crime, every child speaks English.  I cannot see how making the kids in my neighborhood some kind of permanent economic underclass would serve me well.  Definitely I would not want to stay in the neighborhood if that's the case -- lack of hope for a better future tends to breed self-destructive behavior that will eventually hit me.  And if you come from a place where a small elite hoards all of the wealth and all of the opportunity and have the police and the army to do their bidding, why wouldn't you be profoundly influenced by a place that operates under different, hopefully better, rules?  There are at least two ways to protect oneself from the starving masses -- one is to build a big house with high walls and to make sure you have enough supplies and gold.  The other is to build really strong democratic institutions and an economy that serves more people than it starves.  I'm personally betting on Option 2.  Just another way to think about it.

[ChpBstrd]

^ +1,000,000

The breakthrough in human relations once known as the American Dream was the idea that through freedom, we could escape the finger-pointing and excuse-making that characterizes politics in lands where dictators use blame-divide-and-conquer tactics to hold onto power.

[Dragonswan]

I too am an introvert, or as I put it, an indoor woman.  I bought a large house because I too like space.  I like being able to do pirouettes in every room of my house without bumping into anything.  I also will be working until I'm 60 (golden handcuffs didn't buy the house until I was in my late 40s), but that's so I can get my pension.  Depending on the house you buy, some things will be more expensive, some things will be the same.  Mine is a new construction with all those fancy energy efficient ratings that keep the utility costs in check.  But the mortgage and associated costs are large, but not significantly larger than an apartment closer to and in the city.  People want what they want for whatever reason they want them.  If every choice you make is about optimizing money then when do you get to optimize happiness?  There needs to be balance.  So buy the big house if that's the dream and you and your wife will be happy (put 20% down- to avoid mortgage insurance- then carry a mortgage).  Just remember that it will take you longer to get to a million dollars, which by the way is not a magic number (unless this too is related to your poor beginnings and you just want to be able to say you're a millionaire).

As purchases go, buying a house for emotional reasons is not a bad one.  It is not usually a depreciating asset so it is not a wrong or disastrous choice.  Just don't let your poor background be the justification for going off the rails and becoming overly materialistic (new cars all the time, fancy clothes, etc).  Be content with the big house and the additional work you'll have to do to maintain it.  Also, you're young so in theory your salary will continue to increase for several years making the house payment less of your salary.  At that point you'll be able to increase your savings rate and accelerate to that million you want.   With all good cheer!

[minimalistgamer]

I too am an introvert, or as I put it, an indoor woman.  I bought a large house because I too like space.  I like being able to do pirouettes in every room of my house without bumping into anything.  I also will be working until I'm 60 (golden handcuffs didn't buy the house until I was in my late 40s), but that's so I can get my pension.  Depending on the house you buy, some things will be more expensive, some things will be the same.  Mine is a new construction with all those fancy energy efficient ratings that keep the utility costs in check.  But the mortgage and associated costs are large, but not significantly larger than an apartment closer to and in the city.  People want what they want for whatever reason they want them.  If every choice you make is about optimizing money then when do you get to optimize happiness?  There needs to be balance.  So buy the big house if that's the dream and you and your wife will be happy (put 20% down- to avoid mortgage insurance- then carry a mortgage).  Just remember that it will take you longer to get to a million dollars, which by the way is not a magic number (unless this too is related to your poor beginnings and you just want to be able to say you're a millionaire).

As purchases go, buying a house for emotional reasons is not a bad one.  It is not usually a depreciating asset so it is not a wrong or disastrous choice.  Just don't let your poor background be the justification for going off the rails and becoming overly materialistic (new cars all the time, fancy clothes, etc).  Be content with the big house and the additional work you'll have to do to maintain it.  Also, you're young so in theory your salary will continue to increase for several years making the house payment less of your salary.  At that point you'll be able to increase your savings rate and accelerate to that million you want.   With all good cheer!

This is very interesting.

If you don't mind my asking, how much did you spend on the house? And what is your income? Are you OK with having debt? I do not have any debt, but if I were to buy a house, I will be incurring mortgage debt...I don't know how heavily this is going to weigh on my mind. So this is something I wanted to know, do you feel weighed down by the idea of having debt?

[insufFIcientfunds]

minimalistgamer, I have enjoyed your postings in this thread. You seem very thoughtful in your responses and not whatsoever defensive about any opinions that are shared. I am from this country, but grew up poor. Poor is relative when talking about America versus other parts of the world, but nonetheless it sucks.

The duplex I grew up in was small. It's funny that now that I am an adult I don't like large homes. I feel like a little fish in a big pond. I find my 2k sq foot home cozy and warm. However, before that I did *live* out in the country. It was a 5 acre lot surrounded by farms. I got to see corn, beans, wheat (my favorite), but didn't have to actually farm. The mowing/maintenance was brutal. I had a 10k commercial mower and still moved a lot. When I sold the home I noticed the new owner had a 1.5k John Deere 42 inch deck mower. I kept my opinion to myself but I hear he is mowing for upwards of 6 hours each time. My house now is the prefect size (inside and out.) It took me a bit to find that balance. So good luck. Once you find it, I'm sure you'll be very satisfied.

[partgypsy]

How big is your current house, and how much bigger you want to go? you said 2K+

I do feel there can be quality of life changes going from 500 to 1K, 1K-1.5K (which is what I did) and also 1.5-2K. Beyond 2K I think the improvement in qol dramatically slows, while the costs of ownership do not.
Growing up our family lived first in a small urban apartment, then one side as a duplex, and then a large house (2.4 or 2.5K square feet). We had 7 people in our house and the last place was more than enough space for all of us and honestly didn't really need all the space. On the first floor we had a den, eat in kitchen, laundry room, office, and living room. We all used the den and kitchen. Only my mother used the office, and the living room was rarely used.
 
So some questions are, what square footage will make you happy, and honestly don't just buy a big house because it is "big". A lot of large homes are not designed well. Also, why keep the small house and rent? Do you want to transition to being  a landlord? Do you have relatives you need to house? Just sell and either buy the new house outright or with a small mortgage.

What someone else mentioned I also like. Whether having a similar size house on a larger lot would feel better to you. There are some large houses on tiny lots. I don't know if that would make you feel less or more crowded.

[minimalistgamer]

minimalistgamer, I have enjoyed your postings in this thread. You seem very thoughtful in your responses and not whatsoever defensive about any opinions that are shared. I am from this country, but grew up poor. Poor is relative when talking about America versus other parts of the world, but nonetheless it sucks.

I appreciate the kind words, sir.

The mowing/maintenance was brutal. I had a 10k commercial mower and still moved a lot. When I sold the home I noticed the new owner had a 1.5k John Deere 42 inch deck mower. I kept my opinion to myself but I hear he is mowing for upwards of 6 hours each time. My house now is the prefect size (inside and out.) It took me a bit to find that balance. So good luck. Once you find it, I'm sure you'll be very satisfied.

I am sure the maintenance was very time consuming and hard on the body as well. I do not wish to live out in the country. I am still going to be within the city, and if possible, I would like to buy a bigger house with a smaller yard, just so that the maintenance is easier.

How big is your current house, and how much bigger you want to go? you said 2K+

This might sound bad, but my current house is 1850sqft.

I do feel there can be quality of life changes going from 500 to 1K, 1K-1.5K (which is what I did) and also 1.5-2K. Beyond 2K I think the improvement in qol dramatically slows, while the costs of ownership do not.

You have a good point here.

So some questions are, what square footage will make you happy, and honestly don't just buy a big house because it is "big". A lot of large homes are not designed well. Also, why keep the small house and rent? Do you want to transition to being  a landlord? Do you have relatives you need to house? Just sell and either buy the new house outright or with a small mortgage.

What someone else mentioned I also like. Whether having a similar size house on a larger lot would feel better to you. There are some large houses on tiny lots. I don't know if that would make you feel less or more crowded.

In my opinion, speaking strictly from an emotional standpoint, I think I would be very happy with anything over 2400 sqft. No, at the moment, I do not have relatives, but I suspect once we start a family, visitors will be around a lot more.

I do not particularly want a big yard...just a big house.

[partgypsy]

Think long and hard about investing a significant portion of your life energy (dollars) in the life you think you will have or should have, over the life you do have. You want to buy a bigger home not because your existing home is small, but because you are planning on having kids but before you have kids. You want to get a significantly larger home (go from 1850 sq feet to larger than 2400 square feet. AND you say once you have kids, you will also need to keep your smaller house as well, because most likely relatives will visit more once you have kids. First of all, even with kids, that's a big enough house to have one or more spare bedrooms for guests. 2nd you are trying to solve problems for a future nonexistent life. I know I am much better optimizing solutions when the problem is at hand, versus a vague hypothetical. I'm not trying to rain on your parade. I actually think with your numbers you can both have more room and save significantly. But the way you are thinking about it is not optiminal.

[Dragonswan]

I too am an introvert, or as I put it, an indoor woman.  I bought a large house because I too like space.  I like being able to do pirouettes in every room of my house without bumping into anything.  I also will be working until I'm 60 (golden handcuffs didn't buy the house until I was in my late 40s), but that's so I can get my pension.  Depending on the house you buy, some things will be more expensive, some things will be the same.  Mine is a new construction with all those fancy energy efficient ratings that keep the utility costs in check.  But the mortgage and associated costs are large, but not significantly larger than an apartment closer to and in the city.  People want what they want for whatever reason they want them.  If every choice you make is about optimizing money then when do you get to optimize happiness?  There needs to be balance.  So buy the big house if that's the dream and you and your wife will be happy (put 20% down- to avoid mortgage insurance- then carry a mortgage).  Just remember that it will take you longer to get to a million dollars, which by the way is not a magic number (unless this too is related to your poor beginnings and you just want to be able to say you're a millionaire).

As purchases go, buying a house for emotional reasons is not a bad one.  It is not usually a depreciating asset so it is not a wrong or disastrous choice.  Just don't let your poor background be the justification for going off the rails and becoming overly materialistic (new cars all the time, fancy clothes, etc).  Be content with the big house and the additional work you'll have to do to maintain it.  Also, you're young so in theory your salary will continue to increase for several years making the house payment less of your salary.  At that point you'll be able to increase your savings rate and accelerate to that million you want.   With all good cheer!

This is very interesting.

If you don't mind my asking, how much did you spend on the house? And what is your income? Are you OK with having debt? I do not have any debt, but if I were to buy a house, I will be incurring mortgage debt...I don't know how heavily this is going to weigh on my mind. So this is something I wanted to know, do you feel weighed down by the idea of having debt?

Sorry about not answering you sooner.  I spent 425K on a 2700 sq ft house.  I make a bit over 150K (although when I bought it I was making around 120K).  Debt has its place in my life.  Remember that pension I talked about?  I'm not afraid of the house debt so late in life because my pension will cover it in retirement (although I will downsize slightly when I retire and move to a nicer climate).  I have worked my retirement budget so that my pension and social security will cover my necessary expenses (house, utilities, health insurance, food, car and communications).  My investments and retirement accounts will cover the extras and irregular expenses (spa, travel, performing arts, donations, education for knowledge sake, major house maintenance, major dental work, etc.). If you're a homebody you can afford to spend on the home because you aren't spending on all the other things typical Americans spend on.  Yes it can impact your savings rate, so do the math about how much longer you'll have to work to handle it.  And just to irk the hard core Mustachians, I have a lawn guy cut the grass all summer, because I'm an indoor woman and that is most definitely a horrid outdoor activity I refuse to engage in.