How do people afford 5 million + homes?

[Anonymous]

I love watching realtor shows like Million Dollar Listings, and it's mind blowing to me how so many people can afford those homes. If you can afford that, how did you get there?

[Anonymous]

Own 2 homes, combined worth about $5.5M. How did we get there? Living below our means for many years, bought first home as one we could afford on only 1 salary (either of ours), and continued to save for retirement and life. Did not upgrade that home for 7+ years, until we relocated. Then bought a home for 50% of what "we could have".
Had that $500K+ home fully paid off by time we were 40.
But made the jump to $5M+ once we were able to cash in stock options. But without that we would still be at the $2M+ as affordable to us. Thru savings and living below our means and having a good salary to start with.

[Anonymous]

Anonymous wrote:I love watching realtor shows like Million Dollar Listings, and it's mind blowing to me how so many people can afford those homes. If you can afford that, how did you get there?

Where do you get the idea that "so many people" can afford a $5 million home? Perhaps not even 0.1% of the population can.

[Anonymous]

Anonymous wrote:Own 2 homes, combined worth about $5.5M. How did we get there? Living below our means for many years, bought first home as one we could afford on only 1 salary (either of ours), and continued to save for retirement and life. Did not upgrade that home for 7+ years, until we relocated. Then bought a home for 50% of what "we could have".
Had that $500K+ home fully paid off by time we were 40.
But made the jump to $5M+ once we were able to cash in stock options. But without that we would still be at the $2M+ as affordable to us. Thru savings and living below our means and having a good salary to start with.

How much is that though?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I love watching realtor shows like Million Dollar Listings, and it's mind blowing to me how so many people can afford those homes. If you can afford that, how did you get there?

Where do you get the idea that "so many people" can afford a $5 million home? Perhaps not even 0.1% of the population can.

Probably around the top 2-3% of households in the US.

https://www.bankrate.com/investing/income-wealth-top-1-percent/

[Anonymous]

Anonymous wrote:

Anonymous wrote:Own 2 homes, combined worth about $5.5M. How did we get there? Living below our means for many years, bought first home as one we could afford on only 1 salary (either of ours), and continued to save for retirement and life. Did not upgrade that home for 7+ years, until we relocated. Then bought a home for 50% of what "we could have".
Had that $500K+ home fully paid off by time we were 40.
But made the jump to $5M+ once we were able to cash in stock options. But without that we would still be at the $2M+ as affordable to us. Thru savings and living below our means and having a good salary to start with.

How much is that though?

Salary of $300-400K, with bonus possible up to 100% of salary (which typically is only 50% on average).

Key was in our 20s, we made 200K combined, and chose to buy a home of only $200K. Then we worked to save as much as possible. Soon after the combined salary went to $275K. We didn't take over the top fancy vacations, we drove a Nissan Sentra and a Honda Civic for 10+ years, when we could have easily afforded something newer, larger and much nicer.
So while that alone didn't get us to $5M homes, it was a strong start.
We also didn't have a dining room set or living room furniture in that $200K home (4 bed/2.5 bath typical family home). We didn't see the need to spend $4-5K to furnish those rooms that would hardly be used. so it was a mindset of not wasting $$$ and living comfortably but well below what you could easily afford.

Whereas, everyone else I knew bought a house based on both salaries (not 1) and then had to furnish it all with new stuff in first 3-4 months. They drove newer/bigger cars and everything else so many do to "keep up with the joneses".

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Own 2 homes, combined worth about $5.5M. How did we get there? Living below our means for many years, bought first home as one we could afford on only 1 salary (either of ours), and continued to save for retirement and life. Did not upgrade that home for 7+ years, until we relocated. Then bought a home for 50% of what "we could have".
Had that $500K+ home fully paid off by time we were 40.
But made the jump to $5M+ once we were able to cash in stock options. But without that we would still be at the $2M+ as affordable to us. Thru savings and living below our means and having a good salary to start with.

How much is that though?

Salary of $300-400K, with bonus possible up to 100% of salary (which typically is only 50% on average).

Key was in our 20s, we made 200K combined, and chose to buy a home of only $200K. Then we worked to save as much as possible. Soon after the combined salary went to $275K. We didn't take over the top fancy vacations, we drove a Nissan Sentra and a Honda Civic for 10+ years, when we could have easily afforded something newer, larger and much nicer.
So while that alone didn't get us to $5M homes, it was a strong start.
We also didn't have a dining room set or living room furniture in that $200K home (4 bed/2.5 bath typical family home). We didn't see the need to spend $4-5K to furnish those rooms that would hardly be used. so it was a mindset of not wasting $$$ and living comfortably but well below what you could easily afford.

Whereas, everyone else I knew bought a house based on both salaries (not 1) and then had to furnish it all with new stuff in first 3-4 months. They drove newer/bigger cars and everything else so many do to "keep up with the joneses".

So the answer is you earned a lot of money very young, that makes sense! Nothing to do with keeping up with the joneses really, more like living normally on a HUGE salary.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Own 2 homes, combined worth about $5.5M. How did we get there? Living below our means for many years, bought first home as one we could afford on only 1 salary (either of ours), and continued to save for retirement and life. Did not upgrade that home for 7+ years, until we relocated. Then bought a home for 50% of what "we could have".
Had that $500K+ home fully paid off by time we were 40.
But made the jump to $5M+ once we were able to cash in stock options. But without that we would still be at the $2M+ as affordable to us. Thru savings and living below our means and having a good salary to start with.

How much is that though?

Salary of $300-400K, with bonus possible up to 100% of salary (which typically is only 50% on average).

Key was in our 20s, we made 200K combined, and chose to buy a home of only $200K. Then we worked to save as much as possible. Soon after the combined salary went to $275K. We didn't take over the top fancy vacations, we drove a Nissan Sentra and a Honda Civic for 10+ years, when we could have easily afforded something newer, larger and much nicer.
So while that alone didn't get us to $5M homes, it was a strong start.
We also didn't have a dining room set or living room furniture in that $200K home (4 bed/2.5 bath typical family home). We didn't see the need to spend $4-5K to furnish those rooms that would hardly be used. so it was a mindset of not wasting $$$ and living comfortably but well below what you could easily afford.

Whereas, everyone else I knew bought a house based on both salaries (not 1) and then had to furnish it all with new stuff in first 3-4 months. They drove newer/bigger cars and everything else so many do to "keep up with the joneses".

So the answer is you earned a lot of money very young, that makes sense! Nothing to do with keeping up with the joneses really, more like living normally on a HUGE salary.

I agree. We will never earn 200K combined.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Own 2 homes, combined worth about $5.5M. How did we get there? Living below our means for many years, bought first home as one we could afford on only 1 salary (either of ours), and continued to save for retirement and life. Did not upgrade that home for 7+ years, until we relocated. Then bought a home for 50% of what "we could have".
Had that $500K+ home fully paid off by time we were 40.
But made the jump to $5M+ once we were able to cash in stock options. But without that we would still be at the $2M+ as affordable to us. Thru savings and living below our means and having a good salary to start with.

How much is that though?

Salary of $300-400K, with bonus possible up to 100% of salary (which typically is only 50% on average).

Key was in our 20s, we made 200K combined, and chose to buy a home of only $200K. Then we worked to save as much as possible. Soon after the combined salary went to $275K. We didn't take over the top fancy vacations, we drove a Nissan Sentra and a Honda Civic for 10+ years, when we could have easily afforded something newer, larger and much nicer.
So while that alone didn't get us to $5M homes, it was a strong start.
We also didn't have a dining room set or living room furniture in that $200K home (4 bed/2.5 bath typical family home). We didn't see the need to spend $4-5K to furnish those rooms that would hardly be used. so it was a mindset of not wasting $$$ and living comfortably but well below what you could easily afford.

Whereas, everyone else I knew bought a house based on both salaries (not 1) and then had to furnish it all with new stuff in first 3-4 months. They drove newer/bigger cars and everything else so many do to "keep up with the joneses".

LOL. Frugality doesn't get you a $5 million house; millions in stocks options/grants does. This post is so out of touch and so arrogant.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Own 2 homes, combined worth about $5.5M. How did we get there? Living below our means for many years, bought first home as one we could afford on only 1 salary (either of ours), and continued to save for retirement and life. Did not upgrade that home for 7+ years, until we relocated. Then bought a home for 50% of what "we could have".
Had that $500K+ home fully paid off by time we were 40.
But made the jump to $5M+ once we were able to cash in stock options. But without that we would still be at the $2M+ as affordable to us. Thru savings and living below our means and having a good salary to start with.

How much is that though?

Salary of $300-400K, with bonus possible up to 100% of salary (which typically is only 50% on average).

Key was in our 20s, we made 200K combined, and chose to buy a home of only $200K. Then we worked to save as much as possible. Soon after the combined salary went to $275K. We didn't take over the top fancy vacations, we drove a Nissan Sentra and a Honda Civic for 10+ years, when we could have easily afforded something newer, larger and much nicer.
So while that alone didn't get us to $5M homes, it was a strong start.
We also didn't have a dining room set or living room furniture in that $200K home (4 bed/2.5 bath typical family home). We didn't see the need to spend $4-5K to furnish those rooms that would hardly be used. so it was a mindset of not wasting $$$ and living comfortably but well below what you could easily afford.

Whereas, everyone else I knew bought a house based on both salaries (not 1) and then had to furnish it all with new stuff in first 3-4 months. They drove newer/bigger cars and everything else so many do to "keep up with the joneses".

So the answer is you earned a lot of money very young, that makes sense! Nothing to do with keeping up with the joneses really, more like living normally on a HUGE salary.

So wrong! Had we purchased the $450K home our agent told us we could afford, instead of the $200K one we did, that alone would be 2.5x the cost for the house we got (taxes, upkeep, mortgage, etc). Then add in if you furnish/fully decorate everything on a much bigger home (and we didn't do it for the "formal parts" of our home. So add in another $15-20K that would be spent.

Yes, we had good salaries. But a large part of the key is we DID NOT spend everything we made. We SAVED and invested. Just stated that we had similar friends who did spend and save very little in their 20s and early 30s. I know because we had similar jobs and I can compare our lifestyles.

So that 25-30K we saved (after investing well for retirement, some years it was more) becomes a lot over 25 years. Do that for 5-10 years and you'd be surprised what you have.

So yes, higher salaries have something to do with it. But not everything. Living so that you actually save a decent portion of your salary is how you get to the "next level". Life is about choices---you can spend it all or you can save and then spend it later on bigger purchases (like a home) if that's what you want to do.

[Anonymous]

Start your own business, get lucky with stock options, inherit, or bought home early and had it appreciate.

Usually people buying $5M homes have the liquidity to pay the full amount in cash as a minority of their holdings, even if they take a mortgage.

Most people who are frugal and living significantly below their means would not spring for a $5M home even if they can afford it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Own 2 homes, combined worth about $5.5M. How did we get there? Living below our means for many years, bought first home as one we could afford on only 1 salary (either of ours), and continued to save for retirement and life. Did not upgrade that home for 7+ years, until we relocated. Then bought a home for 50% of what "we could have".
Had that $500K+ home fully paid off by time we were 40.
But made the jump to $5M+ once we were able to cash in stock options. But without that we would still be at the $2M+ as affordable to us. Thru savings and living below our means and having a good salary to start with.

How much is that though?

Salary of $300-400K, with bonus possible up to 100% of salary (which typically is only 50% on average).

Key was in our 20s, we made 200K combined, and chose to buy a home of only $200K. Then we worked to save as much as possible. Soon after the combined salary went to $275K. We didn't take over the top fancy vacations, we drove a Nissan Sentra and a Honda Civic for 10+ years, when we could have easily afforded something newer, larger and much nicer.
So while that alone didn't get us to $5M homes, it was a strong start.
We also didn't have a dining room set or living room furniture in that $200K home (4 bed/2.5 bath typical family home). We didn't see the need to spend $4-5K to furnish those rooms that would hardly be used. so it was a mindset of not wasting $$$ and living comfortably but well below what you could easily afford.

Whereas, everyone else I knew bought a house based on both salaries (not 1) and then had to furnish it all with new stuff in first 3-4 months. They drove newer/bigger cars and everything else so many do to "keep up with the joneses".

So the answer is you earned a lot of money very young, that makes sense! Nothing to do with keeping up with the joneses really, more like living normally on a HUGE salary.

So wrong! Had we purchased the $450K home our agent told us we could afford, instead of the $200K one we did, that alone would be 2.5x the cost for the house we got (taxes, upkeep, mortgage, etc). Then add in if you furnish/fully decorate everything on a much bigger home (and we didn't do it for the "formal parts" of our home. So add in another $15-20K that would be spent.

Yes, we had good salaries. But a large part of the key is we DID NOT spend everything we made. We SAVED and invested. Just stated that we had similar friends who did spend and save very little in their 20s and early 30s. I know because we had similar jobs and I can compare our lifestyles.

So that 25-30K we saved (after investing well for retirement, some years it was more) becomes a lot over 25 years. Do that for 5-10 years and you'd be surprised what you have.

So yes, higher salaries have something to do with it. But not everything. Living so that you actually save a decent portion of your salary is how you get to the "next level". Life is about choices---you can spend it all or you can save and then spend it later on bigger purchases (like a home) if that's what you want to do.

It would have been fine if you bought for 450k because 1. you could VERY easily afford that mortgage on that salary 2. You would have made a massive profit on that home. Either choice was a great choice in order to accumulate wealth.

[Anonymous]

In my circle, everyone at that level started a business.

[Anonymous]

High income when young with a trajectory through the roof.

I started a business young and was making substantially more than anyone I knew by 25. We diverted the extra income into assets that earned us more money. 1 property became many. Residential properties became commercial properties. One business became many. Business net profits went from $220k to $1M in less than a decade. And then from $1M to $2M less than a decade later. Before I retired I was netting $4M+ consistently but in really good years woth good capital gains I could get 8 figures.

We purchased a home for a little over $3M and ended up putting another just under $2M into it. Today it’s worth $7m-$8m. We purchased a vacation home for $1.5M. That one we put in $200K and it appreciated to low $3Ms.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Own 2 homes, combined worth about $5.5M. How did we get there? Living below our means for many years, bought first home as one we could afford on only 1 salary (either of ours), and continued to save for retirement and life. Did not upgrade that home for 7+ years, until we relocated. Then bought a home for 50% of what "we could have".
Had that $500K+ home fully paid off by time we were 40.
But made the jump to $5M+ once we were able to cash in stock options. But without that we would still be at the $2M+ as affordable to us. Thru savings and living below our means and having a good salary to start with.

How much is that though?

Salary of $300-400K, with bonus possible up to 100% of salary (which typically is only 50% on average).

Key was in our 20s, we made 200K combined, and chose to buy a home of only $200K. Then we worked to save as much as possible. Soon after the combined salary went to $275K. We didn't take over the top fancy vacations, we drove a Nissan Sentra and a Honda Civic for 10+ years, when we could have easily afforded something newer, larger and much nicer.
So while that alone didn't get us to $5M homes, it was a strong start.
We also didn't have a dining room set or living room furniture in that $200K home (4 bed/2.5 bath typical family home). We didn't see the need to spend $4-5K to furnish those rooms that would hardly be used. so it was a mindset of not wasting $$$ and living comfortably but well below what you could easily afford.

Whereas, everyone else I knew bought a house based on both salaries (not 1) and then had to furnish it all with new stuff in first 3-4 months. They drove newer/bigger cars and everything else so many do to "keep up with the joneses".

So the answer is you earned a lot of money very young, that makes sense! Nothing to do with keeping up with the joneses really, more like living normally on a HUGE salary.

So wrong! Had we purchased the $450K home our agent told us we could afford, instead of the $200K one we did, that alone would be 2.5x the cost for the house we got (taxes, upkeep, mortgage, etc). Then add in if you furnish/fully decorate everything on a much bigger home (and we didn't do it for the "formal parts" of our home. So add in another $15-20K that would be spent.

Yes, we had good salaries. But a large part of the key is we DID NOT spend everything we made. We SAVED and invested. Just stated that we had similar friends who did spend and save very little in their 20s and early 30s. I know because we had similar jobs and I can compare our lifestyles.

So that 25-30K we saved (after investing well for retirement, some years it was more) becomes a lot over 25 years. Do that for 5-10 years and you'd be surprised what you have.

So yes, higher salaries have something to do with it. But not everything. Living so that you actually save a decent portion of your salary is how you get to the "next level". Life is about choices---you can spend it all or you can save and then spend it later on bigger purchases (like a home) if that's what you want to do.

DP. I’m not disagreeing with your bottom line message but you are downplaying the income part of this. For a quarter of a century you’ve been pulling in solid six figure amounts annually, with $200k in your 20s (which is equivalent to much more now) and then $450-$600k all-in comp more recently. Yes, you could have frittered it away like your friends and you didn’t, which is great. But there are far more people living just like you that will never hope to see a $5 million home.