I don’t understand how my neighbors are paying for their renovation

[Anonymous]

Yeah, yeah, I should mind my own business – but I still don’t get it. They are in their mid-30s with three young kids. I obviously don’t know their exact salaries, but based on their jobs, I’d bet one earns about $90,000 and the other about $70,000.

Pre-renovation, the house was probably worth $900,000. And they’re now doing so much work that it’s almost like a new build (adding square footage, completely gutting the inside, adding a deck, etc.). I don’t see how they’re spending any less than $500,000 on the renovation, and it’s probably more.

I don’t get how a family with three young kids making $160,000 a year can afford this. I guess the answer is family money, but is there really this much of it going around? This is not even in Bethesda or some place like that. I should add that it is the childhood home for one of them, so maybe they were gifted it by their parents – but still, are parents giving an extra $500,000+ cash on top of a paid-off $900,000 house (plus rent for a second place while the remodel is happening)??

[Anonymous]

Family money is your answer, like it or not. I think it is difficult to understand if one does not come from wealth or generous families.

[Anonymous]

Anonymous wrote:Yeah, yeah, I should mind my own business – but I still don’t get it. They are in their mid-30s with three young kids. I obviously don’t know their exact salaries, but based on their jobs, I’d bet one earns about $90,000 and the other about $70,000.

Pre-renovation, the house was probably worth $900,000. And they’re now doing so much work that it’s almost like a new build (adding square footage, completely gutting the inside, adding a deck, etc.). I don’t see how they’re spending any less than $500,000 on the renovation, and it’s probably more.

I don’t get how a family with three young kids making $160,000 a year can afford this. I guess the answer is family money, but is there really this much of it going around? This is not even in Bethesda or some place like that. I should add that it is the childhood home for one of them, so maybe they were gifted it by their parents – but still, are parents giving an extra $500,000+ cash on top of a paid-off $900,000 house (plus rent for a second place while the remodel is happening)??

MYOB.

[Anonymous]

Family money, or you're just completely wrong about their salaries. When we bought our house my in laws were apparently shocked and gossiped for months about how we were showing off or in over our heads or something. They just had literally no idea how much I made at work and that we actually bought at the very low end of our budget. And I'll never correct them, because it's none of their business (and in our interest to have people think we have less $ than we do, not more).

[Anonymous]

For us it was Apple stock and a decade of frugality.

Not everything is about family money, far from it, but after spending years on DCUM, I've seen that people feel more comfortable thinking their neighbors benefited from family help than from their own investment decisions or their own frugality or hard work. It must make them feel better about themselves, a la "it's not my fault I can't have the same thing, this family just started out on a different rung".

[Anonymous]

It's the childhood home for one of them, so it probably doesn't have a mortgage. and a $500k refinance mortgage on $160k HHI is doable.

And "is there really that much family money floating around" isn't really the question. The question is whether this particular family has money, or whether an aunt died and left them $250k and they are spending it on this renovation, or whatever.
But really, MYOB

[Anonymous]

It's none of your business.

It's strange to me that you give this a moment's thought.

[Anonymous]

Anonymous wrote:Yeah, yeah, I should mind my own business – but I still don’t get it. They are in their mid-30s with three young kids. I obviously don’t know their exact salaries, but based on their jobs, I’d bet one earns about $90,000 and the other about $70,000.

Pre-renovation, the house was probably worth $900,000. And they’re now doing so much work that it’s almost like a new build (adding square footage, completely gutting the inside, adding a deck, etc.). I don’t see how they’re spending any less than $500,000 on the renovation, and it’s probably more.

I don’t get how a family with three young kids making $160,000 a year can afford this. I guess the answer is family money, but is there really this much of it going around? This is not even in Bethesda or some place like that. I should add that it is the childhood home for one of them, so maybe they were gifted it by their parents – but still, are parents giving an extra $500,000+ cash on top of a paid-off $900,000 house (plus rent for a second place while the remodel is happening)??

I’m half wondering if you’re neighbors with my brother, but since it’s pretty far from DC, I’m guessing you wouldn’t have made it on DCUM if so! In his case, there’s no real family money but he got the paid off house transferred to him by my parents for free. He has a construction loan to pay for the $500k-ish renovation costs, which I believe require only payments on the interest during construction. Once the house is finished, my incomplete understanding is the construction loan turns into or functions like a mortgage. So, essentially your neighbor would end up with a $500k mortgage, which isn’t crazy for those salaries. (If you’re actually neighbors with my brother, the total family income is a little higher than you think, making the $500k more reasonable).

[Anonymous]

I think questions like this are fair. We all want things we can't afford so when we see someone who appears to be doing something very expensive compared to what they appear to earn it kind of begs the question "what am I doing wrong that I can't afford the same or similar thing."

But to your question OP, I'd imagine the key is a gifted house and the only thing they're paying for is the renovation. Even if the house isn't gifted entirely, whatever they paid is likely much below market rate, or they're paying their parents directly and that is a whole lot easier than paying a bank who could take the house if you miss a payment.

[Anonymous]

I agree it’s either family help or they make much more than you think. Possibly both.

[Anonymous]

They probably make much more than you think. Private sector jobs can vary stunningly in pay and the title doesn't tell you much.

[Anonymous]

Family money. Or, if the house was gifted to them and they have no mortgage, they could get a HELOC for the $500k and that essentially becomes their mortgage (easily affordable on a $160k income). I guess that's still family money in a way since they got the house for free.

Keep in mind that family money doesn't have to mean parents. One rich aunt could do it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Yeah, yeah, I should mind my own business – but I still don’t get it. They are in their mid-30s with three young kids. I obviously don’t know their exact salaries, but based on their jobs, I’d bet one earns about $90,000 and the other about $70,000.

Pre-renovation, the house was probably worth $900,000. And they’re now doing so much work that it’s almost like a new build (adding square footage, completely gutting the inside, adding a deck, etc.). I don’t see how they’re spending any less than $500,000 on the renovation, and it’s probably more.

I don’t get how a family with three young kids making $160,000 a year can afford this. I guess the answer is family money, but is there really this much of it going around? This is not even in Bethesda or some place like that. I should add that it is the childhood home for one of them, so maybe they were gifted it by their parents – but still, are parents giving an extra $500,000+ cash on top of a paid-off $900,000 house (plus rent for a second place while the remodel is happening)??

MYOB.

Are you the same poster who posts this (MYOB) repeatedly throughout this website ?

Do you see the irony of your posts ?

[Anonymous]

Likely family money, or simply the fact it's a "family home" and if it was gifted to them free and clear they can easily afford a HELOC for $500k.
But in reality, it's possible they have saved well before they had kids and are worth more than you think. We lived frugally when younger, paid off college loans and saved. Combine a few good years of bonuses that we banked and normal savings, and we bought a $600K home at age 32 for cash. Only made $175K at that point (and lived in CA for a few years of the saving period, so not a LCOL). So it is possible they are where they are without much help.

But really it's nobody's business.

[Anonymous]

Another vote for family assistance. SIL and BIL live in a lower COL area than DC, but still an east cost area. Their jobs are ok, but not $$. Gutted the kitchen and took down a wall and had a large new pretty kitchen installed in a 40's house. While not a whole house reno like OP, likely in the $75-100k range. I'm sure their neighbors wonder the same.