How did you afford your $1M plus home?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP again. We take home about 19k (after paying into healthcare costs which are high for our firm, 401k, etc). Nanny is 3500/month. Family help is about 2k/month now but that will go up in time. We've also had to bail out the parents from a foreclosure and pick up emergency health expenses so all of those things took a toll early on and ate up money we could have saved. Also, we weren't as disciplined about savings until the last few years (paid for our own modest wedding etc). Student loans from college are 1k/month. Hoping we find a house eventually that has room for an au pair so we can cut way down on childcare costs. For those who have incomes similar to ours, thanks so much for posting your budgets. We know we can cut down in some areas but there aren't huge areas of excess (lavish vacations, jewelry, fancy clothes, cars, etc).
I'd like to put together a larger downpayment (wait until we can save enough) rather than raising our monthly cost if possible. It just seems excessive to spend more than 4500/month. We realize our HHI income is high now so it worries me to take on even more monthly expense.

I think your situation demonstrates very nicely the hedonic treadmill and why people who earn lots of money still feel poor. Just think about how "rich" you would be if you discarded your attachment to the $1 mil house and bought a $500k house. You'd be rich! But since you've developed this concept that you have to have a $1 mil house, you're essentially going to be financially exactly the same as my family in terms of disposible income (we earn almost half what you do and are looking for a 500k house). I guess you could argue that you get 2x the pleasure out of your $1 mil house as I do out of my $500 k house. But I truly believe that we adjust to our circumstances in terms of happiness -- as long as your home is safe, clean, and comfortable, you won't really notice the difference.

I am the hedonic treadmill PP. The gravy PP explained it better than me! It's this exactly: you don't need to live to the extent of your means; there's a certain level of house you can have for an *adequate* existance, and the rest is gravy! My personal problem is convincing my DH of this, but still working on it!

By your logic then, shouldn't you be looking at a $250K house? Why do you think you should buy at the same price point as you when they make twice as much. This doesn't make any sense to me

You seem to be saying that everyone should live to the maximum extent of their means, and as we can see from the meltdowns of the last several years, many Americans agree with you.

What PP is saying is that past a certain price point, everything else is gravy - and that the gravy is a waste of money, especially if it cuts into your disposable income (and hence, quality of life).

I don't think that. It just seems they are lecturing someone else when they are putting themselves in the same position. Why doesn't that person buy a $250K home and adjust their happiness level so they can feel "rich"? Just a worthless argument to me.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP, we are in a similar situation to you. We are under contract to buy a $900K home. We are currently in a sh*tty school district, area w/ higher crime than we feel comfortable with, etc. It feels ridiculous to us, too, given our HHI, but it is a stretch for us to buy the $900K home. HHI is $340K. That will go up to $400K next month when the one of us who is not currently employed starts working. Nanny is $50K/yr. Pre-school $15K. We are paying off law and grad school debt, have 1 car note at $350/mo, pay for life insurance, disability insurance, college savings, retirement savings, emergency savings, etc. We take a modest 1 wk. vacation (maybe $2-3K) every 2-3 yrs. We are putting down $180K, and with closing costs added, that's $210K. We saved 3/4 of this, but I am taking a loan from my 401K to fund the balance. A loan means no tax penalty--it has a 4% rate and I'll pay it off from paycheck deducts over 2 years. To us, it was the right thing to do, b/c our children are almost school age so the school issue is looming, the interest rate we are getting on our new mortgage (3.875% on first trust, 4.25% on 2nd) is historically unprecedented and makes our monthly payment $3,600ish, with insurance and taxes added, $4600ish. That's definitely doable on our take home, but after paying for life and disability insurace, college savings, retirement savings that are not as great as I'd like them to be, etc., there is very little left. This is a very expensive area to live in, espec. if you want to be in the better school districts.

Wow. Live in a 3300 square foot home in a great school district that is worth $750,000, and I have a 10 minute commute to work. I'd say really broaden your thinking.

Huh? Broaden our thinking how? Being close to our offices is important for us, too. The neighborhood in which we are buying is the perfect location to keep both of our commutes to a minimum, give us excellent schools, wonderful neighbors, a house we love, be 4 blocks to the Metro, stores, etc. so we can walk instead of drive everything. The house also has a full in-law suite for our in-law moving to live with us. We've been looking for a year and a half and it's not easy to find that combination of elements. The difference between a $750K and $900K mortgage, in terms of monthly payments, is $750/mo--once our kids are in school in 1 and 2 years, respectively, our $50K in nanny cost and $12.5K in preschool cost goes away (Hallelulah!), giving us $5000 more in cash flow per month. Worth it, IMO, to suck up 1-2 more years of not having much excesss cash flow, to buy in this location, w/ these interest rates, now.

Bwahahaha - that's what I thought would happen, too. But no. After kids start school, they still need experiences and things, all of which suck up that cash flow.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Actually as a family of 6 we can use more than one toilet at a time.

We had seven and just one toilet. We all have fond memories of the old house and it one of those things that keeps from from 'stretching' for a bigger place.

We live in america the most developed nation in the world, why should I subject my family to 3rd world living conditions. FYI I have lived in the 3rd world.

You're funny. Silver Spring, now part of the third world! (according to this guy).

[Anonymous]

Back to the original question - we don't live in one now but will likely move into one within a few years. Inheritance from wealthy parents. Feel very fortunate (though not to have lost my parents so young). We do both work, but not in super-high-earning industries. HHI is about $160k. Currently live in a small house worth about $520k.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP, we are in a similar situation to you. We are under contract to buy a $900K home. We are currently in a sh*tty school district, area w/ higher crime than we feel comfortable with, etc. It feels ridiculous to us, too, given our HHI, but it is a stretch for us to buy the $900K home. HHI is $340K. That will go up to $400K next month when the one of us who is not currently employed starts working. Nanny is $50K/yr. Pre-school $15K. We are paying off law and grad school debt, have 1 car note at $350/mo, pay for life insurance, disability insurance, college savings, retirement savings, emergency savings, etc. We take a modest 1 wk. vacation (maybe $2-3K) every 2-3 yrs. We are putting down $180K, and with closing costs added, that's $210K. We saved 3/4 of this, but I am taking a loan from my 401K to fund the balance. A loan means no tax penalty--it has a 4% rate and I'll pay it off from paycheck deducts over 2 years. To us, it was the right thing to do, b/c our children are almost school age so the school issue is looming, the interest rate we are getting on our new mortgage (3.875% on first trust, 4.25% on 2nd) is historically unprecedented and makes our monthly payment $3,600ish, with insurance and taxes added, $4600ish. That's definitely doable on our take home, but after paying for life and disability insurace, college savings, retirement savings that are not as great as I'd like them to be, etc., there is very little left. This is a very expensive area to live in, espec. if you want to be in the better school districts.

Wow. Live in a 3300 square foot home in a great school district that is worth $750,000, and I have a 10 minute commute to work. I'd say really broaden your thinking.

Huh? Broaden our thinking how? Being close to our offices is important for us, too. The neighborhood in which we are buying is the perfect location to keep both of our commutes to a minimum, give us excellent schools, wonderful neighbors, a house we love, be 4 blocks to the Metro, stores, etc. so we can walk instead of drive everything. The house also has a full in-law suite for our in-law moving to live with us. We've been looking for a year and a half and it's not easy to find that combination of elements. The difference between a $750K and $900K mortgage, in terms of monthly payments, is $750/mo--once our kids are in school in 1 and 2 years, respectively, our $50K in nanny cost and $12.5K in preschool cost goes away (Hallelulah!), giving us $5000 more in cash flow per month. Worth it, IMO, to suck up 1-2 more years of not having much excesss cash flow, to buy in this location, w/ these interest rates, now.

Bwahahaha - that's what I thought would happen, too. But no. After kids start school, they still need experiences and things, all of which suck up that cash flow.

What 'experiences' cost $5k/month??

[Anonymous]

Anonymous wrote:Not if they're paying her on the books, which is what it sounds like to me. We paid $14/hr for 55 hours a week and with taxes we were paying over $50k a year.

Yes, we pay on the books. My DH has a security clearance, but mostly, we do it b/c it is the right thing to do.

We have 3 kids, so our nanny makes close to $20/hour. But this is really besides the point...

[Anonymous]

Anonymous wrote:The other thing about just one bathroom is the resale value. Even if I could manage with only one (which I can't), it will be harder to find a buyer who is happy with just one when I go to sell my house.

My husband is a superminimalist when it comes to housing, and even he will extol the benefits of having two bathrooms. And we don't even have kids yet!

[Anonymous]

OP, will your parents go on Medicare soon? Are they low income, you mentioned they are unemployed, but can they be eligible for some sort of social support at this age? You need to investigate this and concentrate your energy on controlling your costs to support your parents, I mean medical costs, because high medical expenses can wipe out even millionaires. Are you paying for their insurance or you are paying out of pocket? You seem to be comfortable with the level of support you are providing now but mentioned the costs will grow, so unless you parents can qualify for some medical social benefits you will go bankrupt regardless of your HHI while paying their bills and supporting kids.

We are supporting our families too, similar costs to yours, but this isn’t for medical expenses, they are covered by Medicare and DH’s mother is still working a low paying job to keep her insurance till she turns 65.

We didn’t feel comfortable purchasing 1m home, we went with the ho hum rambler under 800K but in a very good area with great schools. Nanny expenses are similar to yours and HHI around 350K with both of us working. Our networth is about 2 mil due to income producing rentals we started buying in our early 20s and now own free and clear. We are happier this way, because we like to not be stressed about money since we grew up very poor. We like to go on nice vacations and weekend trips and don’t like to have to worry about where to shop for groceries and how many times to order takeout or go out. We are frugal, but we are not cutting coupons or counting every penny.

[Anonymous]

we had the same problem as 16:20. We had 2.5 baths - all freshly renovated - but only one was on the level with the 3 bedrooms. I suspected that a lot of our potential buyers were coming out of apartments and condos that had 2 baths on the level with the bedrooms, because in that price range, 1 bathroom on the upper level is not at all unusual around here. (I spent over $200K more than our previous house and still ended up one full bath on the upstairs level, plus one downstairs.)

[Anonymous]

Anonymous wrote:OP, will your parents go on Medicare soon? Are they low income, you mentioned they are unemployed, but can they be eligible for some sort of social support at this age? You need to investigate this and concentrate your energy on controlling your costs to support your parents, I mean medical costs, because high medical expenses can wipe out even millionaires. Are you paying for their insurance or you are paying out of pocket? You seem to be comfortable with the level of support you are providing now but mentioned the costs will grow, so unless you parents can qualify for some medical social benefits you will go bankrupt regardless of your HHI while paying their bills and supporting kids.

We are supporting our families too, similar costs to yours, but this isn’t for medical expenses, they are covered by Medicare and DH’s mother is still working a low paying job to keep her insurance till she turns 65.

We didn’t feel comfortable purchasing 1m home, we went with the ho hum rambler under 800K but in a very good area with great schools. Nanny expenses are similar to yours and HHI around 350K with both of us working. Our networth is about 2 mil due to income producing rentals we started buying in our early 20s and now own free and clear. We are happier this way, because we like to not be stressed about money since we grew up very poor. We like to go on nice vacations and weekend trips and don’t like to have to worry about where to shop for groceries and how many times to order takeout or go out. We are frugal, but we are not cutting coupons or counting every penny.

How time consuming is managing your rentals?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP, we are in a similar situation to you. We are under contract to buy a $900K home. We are currently in a sh*tty school district, area w/ higher crime than we feel comfortable with, etc. It feels ridiculous to us, too, given our HHI, but it is a stretch for us to buy the $900K home. HHI is $340K. That will go up to $400K next month when the one of us who is not currently employed starts working. Nanny is $50K/yr. Pre-school $15K. We are paying off law and grad school debt, have 1 car note at $350/mo, pay for life insurance, disability insurance, college savings, retirement savings, emergency savings, etc. We take a modest 1 wk. vacation (maybe $2-3K) every 2-3 yrs. We are putting down $180K, and with closing costs added, that's $210K. We saved 3/4 of this, but I am taking a loan from my 401K to fund the balance. A loan means no tax penalty--it has a 4% rate and I'll pay it off from paycheck deducts over 2 years. To us, it was the right thing to do, b/c our children are almost school age so the school issue is looming, the interest rate we are getting on our new mortgage (3.875% on first trust, 4.25% on 2nd) is historically unprecedented and makes our monthly payment $3,600ish, with insurance and taxes added, $4600ish. That's definitely doable on our take home, but after paying for life and disability insurace, college savings, retirement savings that are not as great as I'd like them to be, etc., there is very little left. This is a very expensive area to live in, espec. if you want to be in the better school districts.

Wow. Live in a 3300 square foot home in a great school district that is worth $750,000, and I have a 10 minute commute to work. I'd say really broaden your thinking.

Huh? Broaden our thinking how? Being close to our offices is important for us, too. The neighborhood in which we are buying is the perfect location to keep both of our commutes to a minimum, give us excellent schools, wonderful neighbors, a house we love, be 4 blocks to the Metro, stores, etc. so we can walk instead of drive everything. The house also has a full in-law suite for our in-law moving to live with us. We've been looking for a year and a half and it's not easy to find that combination of elements. The difference between a $750K and $900K mortgage, in terms of monthly payments, is $750/mo--once our kids are in school in 1 and 2 years, respectively, our $50K in nanny cost and $12.5K in preschool cost goes away (Hallelulah!), giving us $5000 more in cash flow per month. Worth it, IMO, to suck up 1-2 more years of not having much excesss cash flow, to buy in this location, w/ these interest rates, now.

Bwahahaha - that's what I thought would happen, too. But no. After kids start school, they still need experiences and things, all of which suck up that cash flow.

Or for some reason, public school may not work out so well for your child, so you have to go the private route. It happened to us. I'm just thankful we didn't put ourselves in a position where private wouldn't have been an option.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP, will your parents go on Medicare soon? Are they low income, you mentioned they are unemployed, but can they be eligible for some sort of social support at this age? You need to investigate this and concentrate your energy on controlling your costs to support your parents, I mean medical costs, because high medical expenses can wipe out even millionaires. Are you paying for their insurance or you are paying out of pocket? You seem to be comfortable with the level of support you are providing now but mentioned the costs will grow, so unless you parents can qualify for some medical social benefits you will go bankrupt regardless of your HHI while paying their bills and supporting kids.

We are supporting our families too, similar costs to yours, but this isn’t for medical expenses, they are covered by Medicare and DH’s mother is still working a low paying job to keep her insurance till she turns 65.

We didn’t feel comfortable purchasing 1m home, we went with the ho hum rambler under 800K but in a very good area with great schools. Nanny expenses are similar to yours and HHI around 350K with both of us working. Our networth is about 2 mil due to income producing rentals we started buying in our early 20s and now own free and clear. We are happier this way, because we like to not be stressed about money since we grew up very poor. We like to go on nice vacations and weekend trips and don’t like to have to worry about where to shop for groceries and how many times to order takeout or go out. We are frugal, but we are not cutting coupons or counting every penny.

How time consuming is managing your rentals?

Not too bad, most of them are where my parents live and they help out a lot. They speak poor english though, so, DH and I usually get the calls from tenants and direct from there. We do a lot of stuff online, like ordering parts if needed, but this is rare. We have full time jobs.

[Anonymous]

On the school-age kids costs issue:

I find we still need a sitter for pickup and aftercare (school aftercare hrs don't work for us) during the school year, and then a sitter/nanny for the summer. My oldest is in first grade and I can't cover the whole summer with camps, although I send him for about 7 weeks. Between the camps and the sitter, it's shocking how much it adds up.

[Anonymous]

Unless you are sitting on $2mil, do not buy a $1 mil house
Spread your investments.
No need to rush to have the home of your dreams.

With a lower cost house you will be able to afford the take out food, cleaning service, nanny, Bethesda hair cuts, Hanna Anderson clothing and still be able to impress those people you do not like

[Anonymous]

Anonymous wrote:On the school-age kids costs issue:

I find we still need a sitter for pickup and aftercare (school aftercare hrs don't work for us) during the school year, and then a sitter/nanny for the summer. My oldest is in first grade and I can't cover the whole summer with camps, although I send him for about 7 weeks. Between the camps and the sitter, it's shocking how much it adds up.

I'm the PP who is imagining we will have more cash flow when the kids are school age. I only alluded briefly to it in my original post, so to clarify, our kids' grandmother is retiring and moving in w/ us -- hence (in addition to the good schools issue) the need for a larger house w/ an apartment for her. She is going to be taking care of the kids post school time until I get home at 5:30. So, while we will still need camp and an occasional babysitter, it won't (will it?? yikes) be anywhere near the $62,500/yr we are currently paying for a nanny and PT preschool.