700k house in cash or 3m house with mortgage?

[Tim]

“However, there is much more fun in the former, and it’s a place that I would likely keep for life ”

No offense intended. Have you ever lived in a large house with a larger than normal lot? Forget the price, I don’t think you really know. So far your “dream house” has a price tag, very impressive. Seriously, how many bedrooms, bathrooms, garage space for autos, and special purpose rooms make up your dream? Big is more than square footage. Whatever you buy now, will change. 5 car garage, 5 br, 5.5 bath? Squash court, tennis court, home theater, library, ballroom, home gym , home office, art room, game room?
Bedrooms start at 3, kitchen, family room, breakfast area, 2.5 baths. 99% of your time will be spent there. Ok, add a game room and laundry room.

My point, put some thought into what you really want. I didn’t catch a great deal of enthusiasm about the house.
If it’s 2 story, you won’t see the 2nd floor often. At $3mm, nice amenities don’t cut it. $750- $1mm you get some size and amenities. Two or three are great and some you will consider a big waste, even the size of some rooms.

In closing, price is no object, but it’s not going to mean to feel at home. Buyers remorse is terrible feeling with a $3mm price tag.

[FCP]

burritos wrote:

I think you can readily afford the 3 mill home. You don’t have wife or kids so working to generate that income without schedule conflicts won’t be an issue. You love your work so burnout won’t be an issue.

I love young people willing to work and contribute to the machine:equity wise, tax wise, and economically promoting wise.

You’re not going to make a big decision like this based on some random advice from strangers. I suspect there’s some flexing happening here amongst peers, that’s okay. I’m impressed with those numbers., even a little bit

ddswifey wrote:

DCdoc wrote:

No doubt you can afford a 3 million dollar house. But as a single person without kids, why would you want that? I hate my house and all the costs associated with it. And it’s definitely not 3 million. In your shoes I would be renting a hip downtown condo under kiddies were on the way. No driveway to seal-coat. No mulch to have put down. No grass to mow. Seriously, you’re young. Why would you ever want a 3 million dollar house now? I can almost guarantee a similar house will be available in 3-5 years when you’re ready for that.

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There’s no such thing as a “forever house”.    That’s a unicorn that will disappoint.    Go VRBO a house that big for a month and see how it feels if you truly think that isn’t too big.  The upkeep/maintenance/cleaning lady cost is just the start.  It’ll prob throw some amazing parties with a house like that but it won’t be your forever home.

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jealous. That’s ok cause my above sentiment is sincere. I say go for it.

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I appreciate everyone's responses.  I can assure everyone I am not trying to flex here on an anonymous forum.  The problem is, these are not the kinds of questions I can ask any of my friends or family (who are mostly all middle class), without sounding like a jackass; this is one of the only places where I can ask a question like this and actually get some very useful input that can help shape these major decisions.

After hearing everyone's input on how much of a pain a large home can be, I will likely just pay cash for a small home and only expand to a larger one if absolutely necessary.

Some reasons why I am even asking this include:

1) transaction costs: whether it's better to just buy what I believe I'd be happy with for the next 20+ years now, versus buying something temporary for 5 yrs then moving on.

2) no guarantee on having same rental year after year, so I am looking to buy soon: I've had more than one landlord decide to sell their house when my lease was up, so I had to move instead of being able to renew my lease.  I'd rent continuously if there was a guarantee I could keep renting the same place for 5+ years

3) diminishing returns with additional savings: currently, I think I'd be bored if I wasn't working full time for most of my life, so as I see my savings pile up, I figure I might as well just put it toward an amazing place to stay, but at the same time there are diminishing returns to living space, and who knows whether I'll still feel the same way about my work in 5 years, or whether there will be changes in reimbursements that will make my work unattractive.

4) related to #1, I recall a poster recently stating that buying is generally a good idea if you stay in a house for 20+ years, so if you can find a place where you have a high chance of doing that, it could be a good move.  as a result, that further influenced this decision process.

 

 

[ajm184]

FCP wrote:

I’d rent continuously if there was a guarantee I could keep renting the same place for 5+ years

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Have you asked?  Most landlords should be more than willing to negotiate a multi-year lease given your financial capacity.

[Anne]

If you feel like a jackass even discussing a 3 million dollar house with your middle class family/friends you might feel even more like one hosting Thanksgiving dinner there. Not trying to be glib or say that people who buy such houses are jackasses, just that a 3 million dollar house generally comes with 3 million dollar neighbors and the associated lifestyle. If you are from a middle class background you want to make sure you feel comfortable in the rich neighborhood before you commit. I found that I am most comfortable living in a middle class neighborhood with middle class friends. Just a consideration.

Agree with all the comments about the hassle/added expenses of a ginormous house. If you were living in a place where 3 million is avg (say Palo Alto) I'd say go for it but given that you can get an acceptable house for 700k that doesn't sound to be the case.

I thought I would be bored unless I worked full time for most of my life too when I was early 30s. Those feelings can change for a variety of reasons. It's really nice to know that you can quit/slow down/change course, even if you don't want to.

[Brains428]

When speaking of transaction costs, wouldn't you be equally as worried to take a 2.3M mortgage and fill that house only to find you don't like that in 5 years?

 

[HandFellow]

so tough to say what is the right decision, especially when you can technically afford something.  Personally, I have a house that in my city is considered "fancy" and "big."  I can afford it and I have 5 people living in the house.  In this 4000 ft2 house, we still have rooms we don't use nor do we want to fill them up with furniture just to declare they are finished.

Personally, I wouldn't get sucked into any sort of house that I wouldn't use.  If you are concerned about transaction costs and opportunity costs, don't be.  You are going to have so much money if you continue on your current trajectory that you will be able to buy that "dream" house when the timing is right.

[AR]

I only kind of skimmed this thread, but I'll go against the grain here and say you should probably get the 3 million dollar house.

The only caveat has to do with your partner.  If the partner is for keeps, so to speak, then I say go ahead and buy your dream home.  Especially if partner is someone you're planning on having kids with in the near future.  You can easily afford it and you won't have to deal with moving and the transactions costs associated with a temporary place.

If the partner is temporary or you're unsure, then just get the smaller, cheaper house, if you have to buy something.  I'd still say renting would be better, even with the disadvantages that you mention.

[Kamban]

FCP wrote:

After hearing everyone’s input on how much of a pain a large home can be, I will likely just pay cash for a small home and only expand to a larger one if absolutely necessary.

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Believe me you might actually like the 700K house and might not want to move after 5 years. We got a <200K house fifteen years ago thinking we might move in a couple of years to a house on a land I have owned for some time. We loved the close location to stores, my work and my daughter's schools that we decided to stay a bit long and we have stayed here for  15+ years even though I could have moved any time. And we are only moving now because there are no bedrooms downstairs and my in-laws find it difficult to climb stairs. And only 2.5 baths. A couple of extra rooms, an elevator and an extra full bath and we would have stayed put here.

 

FCP wrote:

1) transaction costs: whether it’s better to just buy what I believe I’d be happy with for the next 20+ years now, versus buying something temporary for 5 yrs then moving on.

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FCP wrote:

I recall a poster recently stating that buying is generally a good idea if you stay in a house for 20+ years, so if you can find a place where you have a high chance of doing that, it could be a good move. as a result, that further influenced this decision process.

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The $700K house will be easier to sell after 5-10 years than a $3M house, should you feel the need to sell. And the money saved could improve your net worth, should it happens that in 5 years the work becomes not as attractive as it was or the reimbursements go down. You will thank your fully paid off house and the unused "mortgage" now going to investments and fast approaching FI.

[fasteddie911]

It sounds like you've made your decision already but I'd chime in and say hold off until you actually have kids, a family and see what things are like then.  Your priorities, interests, etc. may change, and having a 3M house may end up being a hindrance.  I'd bet unloading such an expensive house can be more difficult too.

[RogueDadMD]

Without knowing where this is, hard to know if the prices are “reasonable” either way. I will say if it’s not a HCOL area, then with your income and situation I’d start by buying the “cheap” home in cash, or just getting a condo or renting a nice place.

One thing that’s hard to fathom right now given your status — you will FEEL far less wealthy owning a $3m home with a $2m+ mortgage than the $700k home. Your behavior and outlook my change. You may feel a need to work to maintain or upgrade the fancy home. The upkeep in retirement will be outrageous. You will have to save far more to retire early and stay in that home.

I’m close to 40, married with 3 kids. We went from our cheap home our or expensive home 3 years ago, and if you look at our income in a relative sense (you make way $ than me), the home prices are similar. We have 3 young kids and our 3500 sq ft house feels way to big or way too small depending on how many are home. Right now 2 of them are gone (at in-laws for a week) and there’s no way we need this much open space without them. But I still have a long time left here and a lot of property taxes to pay and repairs/upgrades in my future. We will likely be here 15-20 more years (barring moving out of town) so it makes sense to be here, but I would never consider this house if we didn’t have multiple kids.

And you gonna need a lot of close family and friends to fill up the giant $3m house. I like having family and friends over, but unless they moving in you don’t buy a house for them. It’s like buying a giant SUV/minivan to help take kids around when you don’t have kids.

[Hatton]

I would be more concerned about the stability of that income.  It is easy to get sucked into the belief as a young physician that changes in reimbursement will not effect you.  OTOH you can afford the house.  I have always lived in a too big house.  I just bought a 4200 sq foot house.     The house met my needs and I could afford it.

[hightower]

SO, good responses so far about the house.  The most important thing to realize is that there's no way you can know now where you'll want to be for 20+ years.  Life can change dramatically from year to year, so buy what you need now and if you want to splurge a little on yourself by buying in a nice location with nice views or something, fine.

As to the income...please for the rest of us who are puzzled, can you explain how an early 30 year old physician is making 1.5-2.5 million a year?  What specialty are you in?  Did you just graduate from residency/fellowship?  What kind of contracts with hospitals are you talking about?  How do you own your own practice already?  Do you have any debt related to these ventures?  It's extraordinarily rare for someone so young to be making that kind of money and have what sounds like such an established, profitable practice.  I would love to hear how you accomplished it.  Just genuinely curious...

[G]

hatton1 wrote:

I would be more concerned about the stability of that income.  It is easy to get sucked into the belief as a young physician that changes in reimbursement will not effect you.  OTOH you can afford the house.  I have always lived in a too big house.  I just bought a 4200 sq foot house.     The house met my needs and I could afford it.

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gotta make sure the dogs have space to stretch their legs in case it is raining outside!!  ?

[Tim]

OP,
“ I would love to hear how you accomplished it. Just genuinely curious…”

No offense intended, you sought free knowledgeable advice. Quite honestly, the business model that generates that range of income extremely valuable.
It would be appreciated if you would freely share it.

[MPMD]

hightower wrote:

SO, good responses so far about the house.  The most important thing to realize is that there’s no way you can know now where you’ll want to be for 20+ years.  Life can change dramatically from year to year, so buy what you need now and if you want to splurge a little on yourself by buying in a nice location with nice views or something, fine.

As to the income…please for the rest of us who are puzzled, can you explain how an early 30 year old physician is making 1.5-2.5 million a year?  What specialty are you in?  Did you just graduate from residency/fellowship?  What kind of contracts with hospitals are you talking about?  How do you own your own practice already?  Do you have any debt related to these ventures?  It’s extraordinarily rare for someone so young to be making that kind of money and have what sounds like such an established, profitable practice.  I would love to hear how you accomplished it.  Just genuinely curious…

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Based on other threads on this forum I'm going to guess psych with a heavy focus on inpatient.

I think we've established on other threads that if you are willing to kill yourself that's probably the field where you can make the most the fastest.