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Can I Afford this vs Should I Buy it

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  • #31
    there's no such thing as a dream home, your dreams change fairly frequently. my dream home 5 years ago looks almost nothing like my dream home now.

    i have a hard time imagining that this house is going to be a good idea. That price drop in this market would make me really worried rather than feel like I was getting a deal.

    Is this the most expensive house in the area? $3M is quite a bit of house for a mid sized city. I sure as heck wouldn't want to own the most expensive house in town.

     

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    • #32
      Please buy the 3m house. Fatlittlepig loves when physicians snatch defeat from the jaws of victory.

      (there's no way Fatlittlepig would ever tolerate a 1 hr commute, strange that someone would consider doing that voluntarily)

      to each their own.

      Comment


      • #33
        Thanks again for everyone's comments, it really is helpful sometimes to have varying viewpoints

        I think my husband really took the comments to heart and we are likely backing off the purchase

        - The commute isn't as big a issue because he's already driving 45 mins to work. He figures what's another 15 mins? We realize the happiness literature states shortening the commute would be a great way to increase QOL but he works in a rough neighborhood. We like where we currently live and the school system so if it means a longer drive for a lucrative gig, he is willing to make it. I agree I would not tolerate a commute that long, we work in different hospital systems

        - We don't plan on "upgrading" or moving anymore as our current house is just fine.

        - The land value of the $3M house is only 600K. Incredibly, this isn't the most expensive house in the area. We were shocked at the prices of homes in this neighborhood too. I don't have a good answer as to why this $3M home lingers while others have sold. Like someone else mentioned, I did notice the cost of $2M+ homes in this area tend to linger on the market although some have sold within a few weeks of being listed. Our guess is that the super modern "white box" design doesn't appeal to the older buyers as it does to us.

        As a more theoretical question, is there ever a time that it would be a "good idea" to purchase a home like this? When you can pay for it in cash? Via market timing after the price has tumbled? If we have a good tip that this is an area ripe for appreciation? Or is a house in this price range just never a good idea for someone making a physician wage?

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        • #34




          Please buy the 3m house. Fatlittlepig loves when physicians snatch defeat from the jaws of victory.

          (there’s no way Fatlittlepig would ever tolerate a 1 hr commute, strange that someone would consider doing that voluntarily)

          to each their own.
          Click to expand...


          This was impressive. Talking in the 3rd person and then liking your own post. My husband likes your style (I'm being genuine, not sarcastic here)

          Comment


          • #35







            Please buy the 3m house. Fatlittlepig loves when physicians snatch defeat from the jaws of victory.

            (there’s no way Fatlittlepig would ever tolerate a 1 hr commute, strange that someone would consider doing that voluntarily)

            to each their own.
            Click to expand…


            This was impressive. Talking in the 3rd person and then liking your own post. My husband likes your style (I’m being genuine, not sarcastic here)
            Click to expand...


            He's in the minority.

            Comment


            • #36
              Perhaps fatlittlepig’s post just saved you a very large mortgage.

              Comment


              • #37




                Thanks again for everyone’s comments, it really is helpful sometimes to have varying viewpoints

                I think my husband really took the comments to heart and we are likely backing off the purchase

                – The commute isn’t as big a issue because he’s already driving 45 mins to work. He figures what’s another 15 mins? We realize the happiness literature states shortening the commute would be a great way to increase QOL but he works in a rough neighborhood. We like where we currently live and the school system so if it means a longer drive for a lucrative gig, he is willing to make it. I agree I would not tolerate a commute that long, we work in different hospital systems

                – We don’t plan on “upgrading” or moving anymore as our current house is just fine.

                – The land value of the $3M house is only 600K. Incredibly, this isn’t the most expensive house in the area. We were shocked at the prices of homes in this neighborhood too. I don’t have a good answer as to why this $3M home lingers while others have sold. Like someone else mentioned, I did notice the cost of $2M+ homes in this area tend to linger on the market although some have sold within a few weeks of being listed. Our guess is that the super modern “white box” design doesn’t appeal to the older buyers as it does to us.

                As a more theoretical question, is there ever a time that it would be a “good idea” to purchase a home like this? When you can pay for it in cash? Via market timing after the price has tumbled? If we have a good tip that this is an area ripe for appreciation? Or is a house in this price range just never a good idea for someone making a physician wage?
                Click to expand...


                Don't underestimate the effect that an extra 15 minutes can make on a commute.  I used to have a job with a 45 minute commute.  I convinced myself I didn't mind it.  I listened to podcasts, audible, etc., and thought it was ok.  Then the traffic pattern changed due to major road construction in the area.  The morning commute increased by maybe 5 minutes, but the evening commute increased by a good 15-20 minutes.  In the morning, I was ok--my dog got a slightly shorter walk some mornings. But the evening commute really started to get to me after a few weeks--my back started to hurt (due to sitting too long or due to repressed road rage, idk), I would get home tired and skip working out (which just made my back hurt more and made me feel more fatigued), and I would start planning my day around the commute, even staying at work late just to avoid rush hour.  That extra 15-20 minutes was killer, and that was only on one half of the day.   If your husband ever wants to make a move like this, I would test drive the commute multiple times before assuming an extra 15 min won't make a difference.

                As far as if it's ever a good idea to buy such a house, it's probably never a good idea if your goal in life is to have as much money as possible, but it may be a good idea for some people if such a house is really a big priority for you and you can still attain the rest of your goals.  I think a few things that would be necessary would be: 1.  You both have to want it.   For smaller purchases, it's ok for one person to be not as amped up as the other.  But for something this big, if you both are not completely on board with the decision it will likely create problems.  2.  Longevity of the desire to purchase.  If you are both on board and find your tastes/desires for what you are looking for in a home don't change after several years, that's a good sign.  3.  Longevity of your desire to pull in maximum incomes for the long haul.  This is probably the biggest one.  It's easy in your mid 30s to say you are going to want to maximize your doctor incomes for the next 30+ years.  7-15 years in the shine may start to wear off, you want to slow down and change direction, and you can't.   If you wake up at age 45 or 50 with millions invested and you still can't wait to go to work and bring home the bacon, then I think it's fair to buy the dream house.  But imagine waking up at 50 in the dream house, feeling burned out or bored out of your mind at work, but you still have 1 million left on the mortgage, can't sell it without a major loss, and have ongoing large expenses with maintenance, property taxes, etc. that you have to keep up with.

                Comment


                • #38




                  – The land value of the $3M house is only 600K.

                  As a more theoretical question, is there ever a time that it would be a “good idea” to purchase a home like this? When you can pay for it in cash? Via market timing after the price has tumbled? If we have a good tip that this is an area ripe for appreciation? Or is a house in this price range just never a good idea for someone making a physician wage?
                  Click to expand...


                  Wow, that is an amazing degree of overcapitalisation for a single family home where the land value is 20%. This is possibly the worst single family home investment I have heard of all year.

                  I would never buy this sort of thing. The 2.5M house will be worth 500k in 30 years. Depreciation will be roughly 66k per year. Interest at 4% pa would be 100k/year on 2.5M. So you would need to get 166k in rent per year to just break even on the building. On top of this property and other taxes and maintenance. This would cost you easily 200k per year to break even and the house has virtually no chance of appreciating over time because 99% of buildings do not appreciate over a 30 year period.

                  I am not a buyer of this sort of property. If it could rent out for say 100k/ year, I might consider buying it for 1.6M (600k land value + building value). Building is only the cashflow value, as it doesn’t appreciate. But generally I wouldn’t buy with building:land over 50% so I would probably not pay over 1.2M for this sort of property, which is a long way from it’s asking price so I wouldn’t bother with it.

                  Just buy a Ferrari now, both take a year off work, give yourself and the family a round the world trip and you would still probably be ahead in 15 years than buying this place.

                  Can you post a picture of it ? It sounds like  a crazy degree of overcapitalisation to me. It must be a beast of a cash guzzling house.

                  Comment


                  • #39


                    As a more theoretical question, is there ever a time that it would be a “good idea” to purchase a home like this? When you can pay for it in cash? Via market timing after the price has tumbled? If we have a good tip that this is an area ripe for appreciation? Or is a house in this price range just never a good idea for someone making a physician wage?
                    Click to expand...


                    These are my thoughts - it is a good idea if:

                    • Such a property is a goal shared by both spouses.

                    • You both enthusiastically agree that this is the property for you.

                    • Your financial plan allows you to buy this property without impacting other long-term goals (retirement age, for example) or 

                    • If it does, the trade-off is worth it for you.


                    It doesn't really matter whether you are or aren't making a "physician wage". I do not believe it is a necessity to pay 100% cash, but you should keep in mind that, under the new tax bill, you will be able to deduct interest on only the 1st $750k of mortgage. Neither do I think you should never consider a $3M house if that is one of the cherished goals you share and you can afford it. My measurement for affording it is to have a written plan with all goals in place (and discussed/agreed upon) and the effect on other goals of purchasing the property is acceptable to you both.
                    Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

                    Comment


                    • #40
                      Quoting Zdogg MD here "Doctors shouldn't live in 30 million dollar homes". Yes he was referring to multi-million dollar homes, but still 3 million seems a bit much. Is this a HCOL? The average sports athlete whose making a 1mill +/year don't live in homes that expensive.

                      Comment


                      • #41
                        Just a gentle reflection on some of the comments posted on this thread. Not every physician decides to send their children to private school, but some do. Not every physician wants to spend $50k/yr on travel, but some do. And not every physician wants a $3M home, but some do, and some have chosen to live in HCOL areas where a $3M home is the entry fee.

                        Just as I don't think it is right to money shame, I don't think it is right to reverse money shame. If a $3M home is a couple's dream and goal and they can afford it and they die with $45M in the bank instead of $90M in the bank, what's really wrong with that? It's a very personal decision. Is the reason why it is important to this couple really our concern? I'm not sure we can solve everything we might consider a "problem". My opinion on right and wrong does not have to be shared by the rest of the world, even though I sometimes think it should   .
                        Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

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                        • #42
                          I did not see any mention of running a lease vs buy analysis. From a financial perspective, you could be better off due to market conditions. Home ownership could actually fair worse financially or brake even.
                          Figure out the numbers, then see if the emotional urge to buy remains.
                          The adrenaline shot of a major purchase does wear off. Buyers remorse is fairly common, even on a delayed basis. Another “perfect” condo or house for purchase or rent will always be available. Patience is your ally.

                          Comment


                          • #43




                            As a more theoretical question, is there ever a time that it would be a “good idea” to purchase a home like this? When you can pay for it in cash? Via market timing after the price has tumbled? If we have a good tip that this is an area ripe for appreciation? Or is a house in this price range just never a good idea for someone making a physician wage?
                            Click to expand...


                            It could make sense to buy this house.  If you buy it at a great discount and the area is ripe for appreciation and there are lots of buyers looking for expensive white contemporary houses when you want to sell and the cost of the house and the upkeep doesn't interfere with your other financial goals and your spouse doesn't mind the super long commute and you don't mind working for many years to pay for the house, then go ahead.  Under those circumstances it could turn out to be a great decision.

                            Comment


                            • #44
                              I feel like the doctor who will buy a 3 million dollar house will likely die with nowhere close to 45 mil in net worth. Likely not even 1/10th of that

                              Comment


                              • #45
                                My friend bought his house from an NFL running back 4-5 years back. He was a 'name brand' RB for a few years, he was on my fantasy football team one year. He had a big contract from my recollection (8 figures).  I think he was in the league for 6-8 years, which is a good career for that position. My friend purchased the house for ~$450k from him. It's in a suburb of a major city.

                                 

                                Just sayin'...

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