Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-27-2006, 05:18 PM   #1
Recycles dryer sheets
 
Join Date: Jun 2005
Posts: 223
HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

So me and my lovely lady are looking to upgrade our house (currently in a 1200 square foot place that's great, but too small).* We've fallen in love with a place that we know we'd be content and happy in for the next 10-20 years.* Problem is, we can only barely afford it.* If we bought it, I'd only be able to save about 15% of my gross yearly salary toward retirement.* We wouldn't be living below our means in this place, we'd be living the high life.* We'd be trapped in a high-cost lifestyle, imprisoned by our mortgage.

Here are some of the ways I'm trying to rationalize it:

1. Everybody says buy as much house as you can reasonably afford.* This house is it.* It simply means we'll enjoy more appreciation than cheaper houses, and it'll give us something to grow into.

2. This will force us not to waste money on nice cars and other frivolities.* In fact, I'll sell my current nice car to help pay for it.

3. This house is actually one of the cheaper houses in the neighborhood.* They say you should buy the cheapest house on the block, right?* Well, this is close.* It just happens to be one of the most expensive neighborhoods in town.*

4. Location, location, location.* Sure, we're paying through the nose, but you can always safely bet on location.* People will always pay a premium for the best locations, so it's a good investment.

5. I'm a lawyer, and other lawyers tell me, you've got to be near money to make money.* Meaning, you want to rub shoulders to rich people if you want rich people to give you work.* I can entertain in this house.* The neighborhood oozes prestige.

6. Although I can only barely afford it now, my salary is constantly rising, and in a few years it will be a lot more manageable.*

So, everyone, please help.* If I were giving myself advice, I'd tell myself that if I can only barely afford it, it's probably too expensive.* But I sort of have "gotta-have-it-fever."* I've seen others similarly afflicted, and I know it isn't pretty.

Before you ask, no I don't live in one of the many localized real estate bubbles in this country.* I live in Utah, where the real estate appreciation has been among the lowest in the country for the past few years, and is only recently starting to accelerate.* I'm quite confident that barring a major terrorist attack or 70's-style oil shocks, we'll see steady, continued appreciation.

__________________

__________________
SLC Tortfeasor is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-27-2006, 05:25 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Dec 2002
Posts: 3,875
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

Quote:
Originally Posted by SLC Tortfeasor
So me and my lovely lady are looking to upgrade our house (currently in a 1200 square foot place that's great, but too small).* We've fallen in love with a place that we know we'd be content and happy in for the next 10-20 years.* Problem is, we can only barely afford it.* If we bought it, I'd only be able to save about 15% of my gross yearly salary toward retirement.* We wouldn't be living below our means in this place, we'd be living the high life.* We'd be trapped in a high-cost lifestyle, imprisoned by our mortgage.

Here are some of the ways I'm trying to rationalize it:

1. Everybody says buy as much house as you can reasonably afford.* This house is it.* It simply means we'll enjoy more appreciation than cheaper houses, and it'll give us something to grow into.

2. This will force us not to waste money on nice cars and other frivolities.* In fact, I'll sell my current nice car to help pay for it.

3. This house is actually one of the cheaper houses in the neighborhood.* They say you should buy the cheapest house on the block, right?* Well, this is close.* It just happens to be one of the most expensive neighborhoods in town.*

4. Location, location, location.* Sure, we're paying through the nose, but you can always safely bet on location.* People will always pay a premium for the best locations, so it's a good investment.

5. I'm a lawyer, and other lawyers tell me, you've got to be near money to make money.* Meaning, you want to rub shoulders to rich people if you want rich people to give you work.* I can entertain in this house.* The neighborhood oozes prestige.

6. Although I can only barely afford it now, my salary is constantly rising, and in a few years it will be a lot more manageable.*

So, everyone, please help.* If I were giving myself advice, I'd tell myself that if I can only barely afford it, it's probably too expensive.* But I sort of have "gotta-have-it-fever."* I've seen others similarly afflicted, and I know it isn't pretty.

Before you ask, no I don't live in one of the many localized real estate bubbles in this country.* I live in Utah, where the real estate appreciation has been among the lowest in the country for the past few years, and is only recently starting to accelerate.* I'm quite confident that barring a major terrorist attack or 70's-style oil shocks, we'll see steady, continued appreciation.

You're only 29. Go for it!

JG
__________________

__________________
MRGALT2U is offline   Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-27-2006, 05:38 PM   #3
Recycles dryer sheets
 
Join Date: Jun 2005
Posts: 223
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

Quote:
Originally Posted by MRGALT2U
You're only 29.* Go for it!

JG
Are you serious?* I didn't expect that response from you.* I expected to be reprimanded for allowing myself to be dazzled by the prospect of living in luxury.*

Does the fact that I'm 29 make failing to live below my means less bad?
__________________
SLC Tortfeasor is offline   Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-27-2006, 05:56 PM   #4
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,212
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

I'm a lawyer, and other lawyers tell me, you've got to be near money to make money. Meaning, you want to rub shoulders to rich people if you want rich people to give you work. I can entertain in this house. The neighborhood oozes prestige.

I think entertaining in your home to get clients is much more rare then it used to be. Join what your clients join and rub shoulders with them there. Frankly, returning phone calls the same day you get them and doing timely competent work will result in far more clients than having a place to entertain.
__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-27-2006, 06:11 PM   #5
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,081
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

I don't think there is anything outside of prison that is more confining than being "house poor".* *A close friend fell in love with a mansion years ago and moved heaven and earth to buy it.* Don't think he got a good nights sleep for two years afterward.* His house payment was like an albatross around his neck.

But you only live once...just depends on how you define "living"

__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-27-2006, 06:16 PM   #6
Thinks s/he gets paid by the post
tryan's Avatar
 
Join Date: Mar 2005
Posts: 2,449
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

Quote:
we'd be content and happy in for the next 10-20 years.
If you're planning to work for the next 20+ years .... go for it. Home appreciation in that time span will make you happy. If not, your taking a huge risk.
__________________
FIRE'd since 2005
tryan is offline   Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-27-2006, 06:22 PM   #7
 
Posts: n/a
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

That is exactly what I did, although I made very good money, the payments on the House were like forced savings.

Quality Real Estate in the right neighbourhood will hold its' value, plus your kids get to grow up with kids from other ambitious families.

The idea is that when you retire, you release the equity and downsize, not always true as we are now empty nesters in the biggest house we owned, but we are enjoying it.

Go for it, is she is on board, that's all that matters.
__________________
  Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-27-2006, 06:44 PM   #8
Thinks s/he gets paid by the post
 
Join Date: Dec 2002
Posts: 3,875
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

Quote:
Originally Posted by SLC Tortfeasor
Are you serious?* I didn't expect that response from you.* I expected to be reprimanded for allowing myself to be dazzled by the prospect of living in luxury.*

Does the fact that I'm 29 make failing to live below my means less bad?
Look, I (we?) spent more than we made for decades. *Certainly, at 29
(or 39) I never gave this ER thing a thought. *And, we made "The Joneses"
look frugal. *Anyway, if you buy it right the real estate will bail you out.
Besides, at 29 you can bob and weave and start over if necessary.
I don't have those advantages any more. *You should be spending more
time getting laid.

The answer to your question is.........yes!

JG

__________________
MRGALT2U is offline   Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-27-2006, 06:45 PM   #9
Thinks s/he gets paid by the post
JPatrick's Avatar
 
Join Date: Jun 2005
Posts: 2,494
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

Well you are saying you will still be able to save 15% of your pay for retirement. That's pretty good.
Sounds like a great house --location --price-- appreciation potential.
So you can't buy the luxo car--that's good too!
I'd say review your research to insure it is as good as you say--then if it is, go for it!
__________________
JPatrick is offline   Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-27-2006, 06:49 PM   #10
Moderator Emeritus
laurence's Avatar
 
Join Date: Feb 2005
Location: San Diego
Posts: 5,234
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

I second that thought, if you can still put away 15% that doesn't sound too house poor to me. Have you already saved up a bit in retirement savings? It's compounding that's really going to be working for you, since your only 29. As long as the payment isn't going to keep you awake, you do need to balance the dreams of today with the dreams of tomorrow.

Caveat: Are children in your future? Thoughts of going from two income to one income? For that matter, can you make the mortgage if one of you loses your job?
__________________
laurence is offline   Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-27-2006, 06:52 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

I think if you can afford it, and its what you want, give it a go. I think if I'd never lived in a really, really nice house I would have wished later in life that I had. It was nice. I dont need it anymore.

Other than that, almost everything you said comes from two sources:

- realtors selling points
- a smart managers selling points. First thing I did when I hired a new sales rep was to convince them to a) get married to a spend crazy spouse; b) buy a huge house; and c) buy a mercedes or equiv.

With the latter fully in place, all motivation to sell as much as they humanly could to keep the bills paid came completely from external sources. All I had to do was show up to close deals and submit my forecasts.

Your boss and your realtor will be thrilled!
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-27-2006, 07:02 PM   #12
Dryer sheet wannabe
 
Join Date: Nov 2005
Posts: 18
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

Just be sure to get an accurate assesment of what the new property tax rate will be. Many people under estimate property taxes but since your not in a rapidly appreciating market this may not apply. Also, if you haven't figured in the mortgage interest deduction it will help greatly come tax time.

I say go for it. From reading this forum, real estate has been a major player in achieving FIRE for a great many. Just don't get too hooked on the house because when you reach your 500K in tax-free capital gains it will become tempting to cash out and move on to the next one! We are in our mid 30's and 60% of our wealth has come from tax free capital gains on previous homes so that is why I am inclined to say "go for it". The risk can be very rewarding and unlike the stock market you get to enjoy it each and every day.
__________________
Targeting40 is offline   Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-27-2006, 07:24 PM   #13
 
Posts: n/a
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

Give us some numbers. What's your current house worth? The New House worth? - If you can still save 15% today after purchase, I'd say go for it - especially if you think it's the place you'd like to live for a long time/
__________________
  Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-27-2006, 07:34 PM   #14
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 4,005
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

maintenance, periodic remodeling, periodic capital improvements (new roof/carpets/flooring/paint), cleaning, landscaping, insurance, heating/cooling bills, taxes. All increase in proportion to house size and/or cost.

While your house appreciates, you are paying all if the expenses listed above. Remember that in the lux houses, you can't go el cheapo on stuff if you want to keep up the house value. Got to buy a new kitchen appliance? Better be stainless steel (those aren't cheap). Time to replace carpet? Forget that $0.79 per s.f. stuff, you're getting the upgraded $4/s.f. carpet. Everyone else on the block upgrading to solid granite countertops (or whatever the latest fad is)? Better reserve a few thousand more bucks for that.

Point is, a lot of the luxury neighborhoods go up in value because the owners improve their property (and spend plenty of money doing this).

As to entertaining clients, think about the added expenses. Gotta furnish that house with the nicest in furniture, linens, pots, pans, decorations, electronics, etc. Not gonna be cheap. You'll have to buy twice as much stuff to fill up a house twice as large. What is the expected marginal increase in your profitability as a lawyer due to your huge marginal increase in housing and entertaining-related expenses?

But if living in the nicest neighborhood in town is important, do it. Remember that the Joneses in that neighborhood are going to be much wealthier than in your old neighborhood. They'll be a lot harder to keep up with.

I almost got suckered in to the nice house/nice car/nice clothes deal when I almost became an attorney. Decided that lifestyle and career weren't as profitable as I thought.

But hey, it's your money. And I do need somebody to hang in there and fund my SS in a few decades.
__________________
justin is offline   Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-27-2006, 08:28 PM   #15
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

Quote:
Originally Posted by SLC Tortfeasor
We wouldn't be living below our means in this place, we'd be living the high life.* We'd be trapped in a high-cost lifestyle, imprisoned by our mortgage.

Here are some of the ways I'm trying to rationalize it:
Geez, SLC, how many alarm bells need to be ringing before you'll leave a burning building?!?

Advantage: You'll have a high-life house.

Disadvantage:
- You won't be LBYM.
- You'll feel trapped in a high-cost lifestyle.
- You'll feel imprisoned by your mortgage.
- This deal sucks so badly that you have to fantasize rationalize it to make the math work.

Listen to yourself, man. You're not happy. You're setting yourself up for the buyer-remorse hangover of all time...

What are the options for adding an extension or a second story to your current house?
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-27-2006, 10:30 PM   #16
Full time employment: Posting here.
 
Join Date: Jan 2006
Posts: 899
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

SLC,

A strategy that I have heard of to help people curb their spending inpulses is to figure out how many hours of work you need to put in to pay for something.

Why don't you do somethink like that. Sit down with FIRECALC and do the "trades." Look at comparable scenarios and calculate how many years the new house will delay FIRE. Then list the advantages of the house and sit down and determine what you value more.

I'll echo some comments from others that I think are important:

(1) I don't know if you have kids but assuming that that may be a possibility. Where would you want your kids to grow up? Is there any difference?

(2) I have the impression that you are doing this on one income. I would be much more concerned if you needed two incomes to do it.

Personally I don't think that buying a "dream house" at age 29 and still being able save 15% is a bad thing if that house will help make you and your family happy for the next 10-30 years.

Let us know what happens,

MB
__________________
mb is offline   Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-28-2006, 09:14 AM   #17
Thinks s/he gets paid by the post
Helen's Avatar
 
Join Date: Oct 2004
Location: Portland
Posts: 1,343
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

SLC,

I think you should re-read, "The Millionaire Next Door" before you decide.

As someone else said it's not just the mortgage price, it's the furniture, property taxes, nice car in the driveway to fit the house.

OTOH, you do have to enjoy life while attaining your goals. It's that balancing act (at least for me) that is difficult.

Let us know what you decide.

Best of luck,

-helen
__________________
Helen is online now   Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-28-2006, 11:14 AM   #18
Recycles dryer sheets
template's Avatar
 
Join Date: Aug 2005
Posts: 175
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

Quote:
Originally Posted by SLC Tortfeasor
.. We've fallen in love with a place that we know we'd be content and happy in for the next 10-20 years. Problem is, we can only barely afford it. ... We wouldn't be living below our means in this place, we'd be living the high life. We'd be trapped in a high-cost lifestyle, imprisoned by our mortgage..
Recommend you buy a more affordable house.
__________________
Retired in 2001 at age 49.
template is offline   Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-28-2006, 11:26 AM   #19
Recycles dryer sheets
 
Join Date: Jun 2005
Posts: 223
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

Quote:
Originally Posted by Cut-Throat
Give us some numbers. What's your current house worth?* The New House worth?* - If you can still save 15% today after purchase, I'd say go for it - especially if you think it's the place you'd like to live for a long time/
As always, great advice from everyone. *

Here are some numbers:
Current house = $220K - $260K
New house = listed at $725K, we could probably get it down to $700K

I'd have to take out about $600K mortgage (this number is so big it just about makes my head spin)

The absolute bare minimum I'd save toward retirement would be 13%, but probably more like 15% of my gross salary.

I'm estimating the massive mortgage interest payments would result in about an $8k - $10k tax refund every year for the first few years. *Or, considered another way, the effective interest rate on the mortgage, if adjusted for the tax benefits, would be about 4.5%, which is not a bad price for getting more invested in what I believe will be a strong real estate market.

Answering another question: I couldn't afford it on one salary. *Our combined salary right now is $140K. *It will go up to at least $195 in a year and a half, when my lady returns to her other job (right now she's in a relatively low-paying government job to get interesting experience, but her old firm is holding her position for her and she's definitley going back).

So, in a year and a half, we'd be able to afford it just fine. *But for the next year and a half, it would be tight.

Nords: *You're right, alarm bells are going off. *That's why I'm writing to you guys. *But I just can't bring myself to run out of the building . . .
__________________
SLC Tortfeasor is offline   Reply With Quote
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!
Old 01-28-2006, 12:23 PM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Re: HELP! Willpower weakening! Yearning to buy barely-affordable luxury house!

Quote:
Originally Posted by SLC Tortfeasor
As always, great advice from everyone. *

Here are some numbers:
Current house = $220K - $260K
New house = listed at $725K, we could probably get it down to $700K

I'd have to take out about $600K mortgage
Answering another question: I couldn't afford it on one salary. *Our combined salary right now is $140K. *It will go up to at least $195 in a year and a half, when my lady returns to her other job (right now she's in a relatively low-paying government job to get interesting experience, but her old firm is holding her position for her and she's definitley going back).

So, in a year and a half, we'd be able to afford it just fine. *But for the next year and a half, it would be tight.
First, put the crack pipe down. Second, look at what I left up there in the quote. If you buy this house, you will be screwed if things don't turn out exactly perfectly. Is that really a gamble you want to make? I think this is nuts.

What if:

- you have kids and DW stays home? Screwed.
- One or both of you are out of work for some reason? Screwed.
- The higher paying job for DW doesn't come through? Screwed.
- The real estate market crashes when you need/want to move? Screwed.

Do yourself a favor: have fun with the fantasy and then set it aside. You can't comfortably afford this house.
__________________

__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Buy my first house? Deetso Young Dreamers 21 02-22-2007 02:33 PM
Buy House Now w/Low Down or Save Bigger Down? BigMoneyJim Young Dreamers 11 07-14-2004 05:23 PM

 

 
All times are GMT -6. The time now is 11:16 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.