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

Home Personal Finance and Budgeting 700k house in cash or 3m house with mortgage?

  • Avatar uteomfs 
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    Rent a 3 million dollar house/condo/loft. I would bet all I have that your “Dream House” will change in 5 years.

    #221366 Reply
    Liked by hightower, Peds
    Avatar soundsystem 
    Participant
    Status: Physician
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    Joined: 12/14/2017

    What part of the country are we talking about? This changes the whole conversation. If he’s talking Manhattan, 3 million would get you a nice 3-br in a luxury building in a nice location, probably 2000 sq ft. For someone living with a partner, this is not unreasonable to have (1 master bedroom, 1 room for office, 1 guest room). Of course, you’re paying the premium of living in a good neighborhood in Manhattan and enjoying great amenities in the building.

    #221367 Reply
    MPMD MPMD 
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    Status: Physician
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    What part of the country are we talking about? This changes the whole conversation. If he’s talking Manhattan, 3 million would get you a nice 3-br in a luxury building in a nice location, probably 2000 sq ft. For someone living with a partner, this is not unreasonable to have (1 master bedroom, 1 room for office, 1 guest room). Of course, you’re paying the premium of living in a good neighborhood in Manhattan and enjoying great amenities in the building.

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    i think op kind of already implied this was a really big house in a nice burb

    #221388 Reply
    White.Beard.Doc White.Beard.Doc 
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    Status: Physician
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    Sure, you can buy this house if you want to.  Does it make sense? Maybe not.

    If it was me, I would consider the stability of the home value when I look forward and consider the ease of selling.  A home is a consumption item, but it is also an item with value that can add or subtract from your net worth in a variable way.

    One of the best ways to understand if this is a crazy purchase or not is to consider the land value.  We bought a too big doctor house as a foreclosure in the midst of the last real estate crash.  We now have a very nice, too large home, but the land value was worth about 70% of the value at the foreclosure price and we got the high end house on it at less than $100/square foot.  Now that real estate has recovered, high quality homes in this area are selling for around $500/square foot.

    What I am trying to say is land in a highly desirable area generally doesn’t depreciate, it appreciates nicely.  The house, in contrast, requires maintenance and upgrades to maintain its value over time and that part is costly.

    What is the value of the land in this 3MM transaction?  What is the median value of homes in this area?  In our area, homes under 2MM sell fast, with bidding wars under 1.5MM.  In contrast, we have a buyers market when you get to prices over 2MM.  No one seems to want to stomach the onerous property taxes on the big homes now that the deductibility is gone for SALT.

    #221433 Reply
    Liked by artemis, Infinity, G, Tim
    Avatar Scarftheverb 
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    Just came to say congrats on that monster income so early on! I’m guessing some in-demand specialty with a heavy call stipend?

    #221436 Reply
    Avatar soundsystem 
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    Status: Physician
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    If you’re early 30s and no kids, I’d agree with one of the posts above. I’d not buy a big house in the suburbs and would rather go to a nice condo in the city depending where in the country you are. As you start having kids then you can start reconsidering your housing situation.

    #221463 Reply
    Avatar hightower 
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    Status: Physician
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    Joined: 12/07/2016

    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.

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    Damn, I really picked the wrong profession, lol!  And he doesn’t have to do a physical exam!  Lucky!

    #221558 Reply
    Avatar AR 
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    Status: Physician
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    Joined: 03/10/2016

    It seems like most of the don’t buy comments aren’t really that specific to the situation.  They are more generic “There is never a good reason for a doc to buy a $3 million house” type of arguments.  And there is certainly merit to that line of thinking.  If this doc shoudn’t buy one then, I’d be hard-pressed to find one that could.

    #221561 Reply
    Liked by EndoRobert
    White.Beard.Doc White.Beard.Doc 
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    Status: Physician
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    Joined: 02/06/2016

    In my mind, it is pretty simple.  If the surrounding homes are all in the multi-million dollar range, such as in California, then go ahead and buy this crazy expensive house as there will be options should you need to/decide to exit.

    If this is the tippy top 1% of your local market, don’t do it!  3MM is a lot to lose, even for someone at your income level.

    I live in a multi-million dollar house in a VHCOL city.  The homes a bit below our price level are selling well.  But in the 2-3MM range of our house, the market is pretty slow.  A relatively typical 1.5MM dollar house in our suburb would likely sell in less than 60 days.  My more expensive home in the top 10% of size/cost for our area could potentially take up to a year to sell, and perhaps require discounting the asking price.

    #221571 Reply
    Avatar Bubbadog 
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    Status: Physician
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    Joined: 06/06/2019
    Earnest refinancing bonus

    Most people I know who have purchased their “forever/dream home” have ended up selling it within 10 years or less due to life changes. IMO, the forever home is largely a myth as our wants/needs change over time. My advice would be to buy the more modest home and invest the difference.

    Best of luck with your decision

    #221582 Reply
    Liked by ddswifey
    childay childay 
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    Status: Physician
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    Joined: 01/09/2016
    If this is the tippy top 1% of your local market, don’t do it!  3MM is a lot to lose, even for someone at your income level.

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    This.  Here in VLCOL area a 3M house would be extremely hard to sell.  People in that price range often would just build instead.  Who wants an outdated 20 year old 7000 square foot mcmansion?

    #221597 Reply
    childay childay 
    Participant
    Status: Physician
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    Joined: 01/09/2016

    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…

    Click to expand…

    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.

    Click to expand…

    Yes as I recall OP is a locums psych working >12 hours a day 7 days a week.  No thanks but good for him/her!

    #221600 Reply

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