Buying house 1 million at 40?

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Topic Author
ps2me11
Posts: 40
Joined: Mon Sep 10, 2018 9:24 am

Buying house 1 million at 40?

Post by ps2me11 »

Hello Boggleheads! Looking for an advice.
I am thinking of buying a million dollar house in next 2 year but not sure it’s advisable to stretch that much or not. How much should be the income for a quality living with 2 kids, school colleges and expenses.
Here’s our financial standing as of today.

Age: 38 &38
Income: ~$300k base + bonus(25-30%)
401k: 285k + 50k. Maxing out (both)
Federal: 30% - 35% depending on the year
State: 6.5%
2 kids - 9 (college in 2031) and 3 ( college in 2037).
In hand cash: 530k ( Another year of saving ~120k)

After 20% down payment: monthly payment: 5k

Driving force to stretch is good schooling district. I wish to stop around 700k ( sweet spot) but will not get any at that price.

Can you please advice should I or not go for 1mm property as per my financial status. What factors should I keep in mind considering saving for children eduction, marriage etc.
lazynovice
Posts: 3370
Joined: Mon Apr 16, 2012 10:48 pm
Location: Denver area. Former Texan.

Re: Buying house 1 million at 40?

Post by lazynovice »

How long do you plan to work? I think you should have more saved for retirement before stretching for a house in that price range. Will you have pensions or is your 401(k) and Roth going to all you have to supplement social security?
mervinj7
Posts: 2496
Joined: Thu Mar 27, 2014 3:10 pm

Re: Buying house 1 million at 40?

Post by mervinj7 »

ps2me11 wrote: Mon Jun 14, 2021 10:10 pm Hello Boggleheads! Looking for an advice.
I am thinking of buying a million dollar house in next 2 year but not sure it’s advisable to stretch that much or not. How much should be the income for a quality living with 2 kids, school colleges and expenses.
Here’s our financial standing as of today.

Age: 38 &38
Income: ~$300k base + bonus(25-30%)
401k: 285k + 50k. Maxing out (both)
Federal: 30% - 35% depending on the year
State: 6.5%
2 kids - 9 (college in 2031) and 3 ( college in 2037).
In hand cash: 530k ( Another year of saving ~120k)

After 20% down payment: monthly payment: 5k

Driving force to stretch is good schooling district. I wish to stop around 700k ( sweet spot) but will not get any at that price.

Can you please advice should I or not go for 1mm property as per my financial status. What factors should I keep in mind considering saving for children eduction, marriage etc.
3x your base salary would be a $900k mortgage. The sweet spot for deducting your mortgage interest would be around a $750k mortgage. I would recommend a 25% down payment and you can invest the rest of your cash as you wish.

Does the $530k in cash also reflect your EF? Do you have no taxable investments? Is that why your cash holdings are relatively high for your net worth?
KlangFool
Posts: 31527
Joined: Sat Oct 11, 2008 12:35 pm

Re: Buying house 1 million at 40?

Post by KlangFool »

OP,

1) What is your current annual savings?

2) What is your current rent/mortgage payment?

3) What would be your annual savings after buying the house?

4) Do you plan to pay for your kids' college education?

5) Do you plan to take a student loan for your kids?

6) How much college education will cost for 2 kids?

7) If the choice is between buying this 1 million house versus paying for your kids' college education, what would you choose?

8) After buying this house, how long do you have to work in order to retire?

9) Is it likely for you to be continuously fully-employed until that age?

KlangFool
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Topic Author
ps2me11
Posts: 40
Joined: Mon Sep 10, 2018 9:24 am

Re: Buying house 1 million at 40?

Post by ps2me11 »

mervinj7 wrote: Mon Jun 14, 2021 10:15 pm
ps2me11 wrote: Mon Jun 14, 2021 10:10 pm Hello Boggleheads! Looking for an advice.
I am thinking of buying a million dollar house in next 2 year but not sure it’s advisable to stretch that much or not. How much should be the income for a quality living with 2 kids, school colleges and expenses.
Here’s our financial standing as of today.

Age: 38 &38
Income: ~$300k base + bonus(25-30%)
401k: 285k + 50k. Maxing out (both)
Federal: 30% - 35% depending on the year
State: 6.5%
2 kids - 9 (college in 2031) and 3 ( college in 2037).
In hand cash: 530k ( Another year of saving ~120k)

After 20% down payment: monthly payment: 5k

Driving force to stretch is good schooling district. I wish to stop around 700k ( sweet spot) but will not get any at that price.

Can you please advice should I or not go for 1mm property as per my financial status. What factors should I keep in mind considering saving for children eduction, marriage etc.
3x your base salary would be a $900k mortgage. The sweet spot for deducting your mortgage interest would be around a $750k mortgage. I would recommend a 25% down payment and you can invest the rest of your cash as you wish.

Does the $530k in cash also reflect your EF? Do you have no taxable investments? Is that why your cash holdings are relatively high for your net worth?
Thanks for your response. $530 K includes my taxable investment of 100k and $150k equity in my condo which I will be selling before buying the house. Also, it includes my EF.
Topic Author
ps2me11
Posts: 40
Joined: Mon Sep 10, 2018 9:24 am

Re: Buying house 1 million at 40?

Post by ps2me11 »

KlangFool wrote: Mon Jun 14, 2021 10:24 pm OP,

1) What is your current annual savings? ~$120k post tax.

2) What is your current rent/mortgage payment? $2500

3) What would be your annual savings after buying the house?
$80k

4) Do you plan to pay for your kids' college education?
Yes

5) Do you plan to take a student loan for your kids?
No

6) How much college education will cost for 2 kids?
$1 million

7) If the choice is between buying this 1 million house versus paying for your kids' college education, what would you choose?
Good question. Prefer house as good schooling district.


8) After buying this house, how long do you have to work in order to retire?
20 years

9) Is it likely for you to be continuously fully-employed until that age?
Not sure.

KlangFool
Thanks for your response, please find my response.
Topic Author
ps2me11
Posts: 40
Joined: Mon Sep 10, 2018 9:24 am

Re: Buying house 1 million at 40?

Post by ps2me11 »

lazynovice wrote: Mon Jun 14, 2021 10:15 pm How long do you plan to work? I think you should have more saved for retirement before stretching for a house in that price range. Will you have pensions or is your 401(k) and Roth going to all you have to supplement social security?
Thanks for the response.
My goal is to retire 55-60. No pension.
babystep
Posts: 775
Joined: Tue Apr 09, 2019 9:44 am

Re: Buying house 1 million at 40?

Post by babystep »

mervinj7 wrote: Mon Jun 14, 2021 10:15 pm
ps2me11 wrote: Mon Jun 14, 2021 10:10 pm Hello Boggleheads! Looking for an advice.
I am thinking of buying a million dollar house in next 2 year but not sure it’s advisable to stretch that much or not. How much should be the income for a quality living with 2 kids, school colleges and expenses.
Here’s our financial standing as of today.

Age: 38 &38
Income: ~$300k base + bonus(25-30%)
401k: 285k + 50k. Maxing out (both)
Federal: 30% - 35% depending on the year
State: 6.5%
2 kids - 9 (college in 2031) and 3 ( college in 2037).
In hand cash: 530k ( Another year of saving ~120k)

After 20% down payment: monthly payment: 5k

Driving force to stretch is good schooling district. I wish to stop around 700k ( sweet spot) but will not get any at that price.

Can you please advice should I or not go for 1mm property as per my financial status. What factors should I keep in mind considering saving for children eduction, marriage etc.
3x your base salary would be a $900k mortgage. The sweet spot for deducting your mortgage interest would be around a $750k mortgage. I would recommend a 25% down payment and you can invest the rest of your cash as you wish.

Does the $530k in cash also reflect your EF? Do you have no taxable investments? Is that why your cash holdings are relatively high for your net worth?
With 375k-390k salary, you can afford the house. Even with 20% down-payment you have 60k per year cash available to invest in taxable which is in addition to maxing out two 401k etc. Even after 20% down there is additional 330k cash/investment left-over.

Good school generally means good neighborhood as well. I would go for it.
reln
Posts: 718
Joined: Fri Apr 19, 2019 4:01 pm

Re: Buying house 1 million at 40?

Post by reln »

ps2me11 wrote: Mon Jun 14, 2021 10:10 pm Hello Boggleheads! Looking for an advice.
I am thinking of buying a million dollar house in next 2 year but not sure it’s advisable to stretch that much or not. How much should be the income for a quality living with 2 kids, school colleges and expenses.
Here’s our financial standing as of today.

Age: 38 &38
Income: ~$300k base + bonus(25-30%)
401k: 285k + 50k. Maxing out (both)
Federal: 30% - 35% depending on the year
State: 6.5%
2 kids - 9 (college in 2031) and 3 ( college in 2037).
In hand cash: 530k ( Another year of saving ~120k)

After 20% down payment: monthly payment: 5k

Driving force to stretch is good schooling district. I wish to stop around 700k ( sweet spot) but will not get any at that price.

Can you please advice should I or not go for 1mm property as per my financial status. What factors should I keep in mind considering saving for children eduction, marriage etc.
Go for it. Put 500k down.

Just make sure you love the place.
rascott
Posts: 2957
Joined: Wed Apr 15, 2015 10:53 am

Re: Buying house 1 million at 40?

Post by rascott »

Is private school an option with a $700k house?

Have you even looked into that option and compared it with what the total cost will be for the $1m house (property taxes, maintenance, excess interest etc)
Last edited by rascott on Tue Jun 15, 2021 8:05 am, edited 1 time in total.
KlangFool
Posts: 31527
Joined: Sat Oct 11, 2008 12:35 pm

Re: Buying house 1 million at 40?

Post by KlangFool »

ps2me11 wrote: Tue Jun 15, 2021 12:05 am
KlangFool wrote: Mon Jun 14, 2021 10:24 pm OP,

1) What is your current annual savings? ~$120k post tax.

2) What is your current rent/mortgage payment? $2500

3) What would be your annual savings after buying the house?
$80k

4) Do you plan to pay for your kids' college education?
Yes

5) Do you plan to take a student loan for your kids?
No

6) How much college education will cost for 2 kids?
$1 million

7) If the choice is between buying this 1 million house versus paying for your kids' college education, what would you choose?
Good question. Prefer house as good schooling district.


8) After buying this house, how long do you have to work in order to retire?
20 years

9) Is it likely for you to be continuously fully-employed until that age?
Not sure.

KlangFool
Thanks for your response, please find my response.
OP,

I was wrong! You can afford it if you can be fully-employed for about 10+ years. I have another post showing the calculation.

KlangFool
Last edited by KlangFool on Tue Jun 15, 2021 8:20 am, edited 1 time in total.
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rascott
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Joined: Wed Apr 15, 2015 10:53 am

Re: Buying house 1 million at 40?

Post by rascott »

OP can easily afford it and still retire in 20 years. Now spending $1m on college for two kids is a bigger and different issue. That's an extreme luxury purchase that's likely nowhere near necessary.
KlangFool
Posts: 31527
Joined: Sat Oct 11, 2008 12:35 pm

Re: Buying house 1 million at 40?

Post by KlangFool »

OP,

Your gross income = 375K to 390K per year.

Your annual savings before buying the house = 120k (after-tax) + 50K (401K) = 170K

Assuming that your income = 390K and your taxes = 1/3 = 130K.

Your annual expense = 90K.

Housing expense before buying the house = 2.5K X 12 = 30K

Your annual expense without housing expense = 90K - 30K = 60K.

After buying the house,

Your annual expense after buying the house = 130K

Your annual savings = 80K (after-tax) + 50K = 130K

Your portfolio size = 285K + 50K + 530K + 120K - 200k (down payment) = 785K

<<2 kids - 9 (college in 2031) and 3 ( college in 2037).>>

500K for each kid for college education.

Retirement amount needed = 130K X 25 = 3.25 million

In 10 years, let's assume 6% return, you have 3.1 million and you pay out 500K. You are down to 2.6 million

Starting Net Worth $785,000
Annual Savings $130,000
Years
Annual Return Rate 10
5.00% $2,913,808
6.00% $3,119,319
7.00% $3,340,352

In another 6 years, you pay out another 500K but you have 4.6 million. So, you are down to 4.1 million.

Starting Net Worth $2,600,000
Annual Savings $130,000
Years
Annual Return Rate 6
5.00% $4,368,497
6.00% $4,594,941
7.00% $4,831,827

So, I was wrong! You can afford it. But, this requires you to be almost fully-employed over the next 16 years.

KlangFool
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User avatar
Watty
Posts: 28860
Joined: Wed Oct 10, 2007 3:55 pm

Re: Buying house 1 million at 40?

Post by Watty »

ps2me11 wrote: Mon Jun 14, 2021 10:10 pm Age: 38 &38
Income: ~$300k base + bonus(25-30%)
How long have you had your current income and how stable it is?

The reason I ask is that it looks like your net worth is only about $900K which is barely more than twice your gross income.

I did not really crunch the numbers but I don't see how your numbers add up unless you just recently started making that income or you had something else going on like a lot of student debt or some other large expense in the past that you did not mention.

I would also be concerned about how stable your income is. If you are getting paid well because you are in the medical field that is one thing but if you are a tech worker then I would not count on having that high income for the next 30 years if you get a 30 year mortgage. Some management positions may not be that stable for the long term either.
ps2me11 wrote: Mon Jun 14, 2021 10:10 pm Driving force to stretch is good schooling district. I wish to stop around 700k ( sweet spot) but will not get any at that price.
It sounds like that in your area that in a good school district you probably don't get a really great house for a million dollars.

You should also consider how strong your ties are to where you live now. In a lot of the country you could probably buy a lot nicer house in a good school district for cash or with a very small mortgage so you should keep an open mind about moving to a less expensive part of the country. You might make a bit less in a lower cost of living area but you would also pay a lot less in taxes with a paid off house you could come out way ahead.

One huge benefit of living in a more affordable area is that when your kids grow up they may be able to afford to live near you even if they do not have income that is as high as yours.
ps2me11 wrote: Mon Jun 14, 2021 10:10 pm I am thinking of buying a million dollar house in next 2 year ......

2 kids - 9 (college in 2031) and 3 ( college in 2037).
......

Driving force to stretch is good schooling district.
Why 2 years? Your 9 year old will be 11 then and if the schools where you live now are not good then that could be a problem.

If you get a 30 year mortgage when you are 40 it will not be paid off until you are 70. At least for me having a paid off house made my retirement numbers work a lot better.
ps2me11 wrote: Mon Jun 14, 2021 10:10 pm What factors should I keep in mind considering saving for children eduction, marriage etc.
One big factor to keep in mind is if you might have any more kids.
cabfranc
Posts: 272
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Re: Buying house 1 million at 40?

Post by cabfranc »

Are you taking out a 30 year mortgage? I have very similar stats to you (age 41, $375k HHI, two young children) and just purchased a $700K house. We got a 20-year mortgage because I wanted to be sure that without making prepayments that mortgage would be paid prior to retirement. You are basically saying that is where you feel comfortable and I think you should listen to your gut. There are many, many things to spend money on with two small children. Also, you do not have enough money saved in retirement. Buy a $700k house with 20% down on a 15- or 20-year mortgage, and invest the rest of the cash that is not needed for emergency fund.
User avatar
lthenderson
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Location: Iowa

Re: Buying house 1 million at 40?

Post by lthenderson »

If this your income or combined income? My worry would always be what happens if one of you (if both) or you (as primary) breadwinner were to lose your job or get into a car accident that prevents you from working full time again and at the mentioned salary?
London
Posts: 722
Joined: Sun Dec 11, 2016 10:50 am

Re: Buying house 1 million at 40?

Post by London »

lthenderson wrote: Tue Jun 15, 2021 9:20 am If this your income or combined income? My worry would always be what happens if one of you (if both) or you (as primary) breadwinner were to lose your job or get into a car accident that prevents you from working full time again and at the mentioned salary?
Taking risk is part of life. Anything you’ve mentioned can happen at any time and is just a part of life. Buying a house isn’t a irreversible decision. If you can’t manage due to unforeseen circumstances, you sell. Sometimes, you even sell at a loss. That happens whether the house costs $200k or a million. I won’t let uncertainly keep me from going after things I want in life. But that’s a personal choice based on risk tolerance.
Topic Author
ps2me11
Posts: 40
Joined: Mon Sep 10, 2018 9:24 am

Re: Buying house 1 million at 40?

Post by ps2me11 »

babystep wrote: Tue Jun 15, 2021 12:15 am
mervinj7 wrote: Mon Jun 14, 2021 10:15 pm
ps2me11 wrote: Mon Jun 14, 2021 10:10 pm Hello Boggleheads! Looking for an advice.
I am thinking of buying a million dollar house in next 2 year but not sure it’s advisable to stretch that much or not. How much should be the income for a quality living with 2 kids, school colleges and expenses.
Here’s our financial standing as of today.

Age: 38 &38
Income: ~$300k base + bonus(25-30%)
401k: 285k + 50k. Maxing out (both)
Federal: 30% - 35% depending on the year
State: 6.5%
2 kids - 9 (college in 2031) and 3 ( college in 2037).
In hand cash: 530k ( Another year of saving ~120k)

After 20% down payment: monthly payment: 5k

Driving force to stretch is good schooling district. I wish to stop around 700k ( sweet spot) but will not get any at that price.

Can you please advice should I or not go for 1mm property as per my financial status. What factors should I keep in mind considering saving for children eduction, marriage etc.
3x your base salary would be a $900k mortgage. The sweet spot for deducting your mortgage interest would be around a $750k mortgage. I would recommend a 25% down payment and you can invest the rest of your cash as you wish.

Does the $530k in cash also reflect your EF? Do you have no taxable investments? Is that why your cash holdings are relatively high for your net worth?
[/]

With 375k-390k salary, you can afford the house. Even with 20% down-payment you have 60k per year cash available to invest in taxable which is in addition to maxing out two 401k etc. Even after 20% down there is additional 330k cash/investment left-over.

Good school generally means good neighborhood as well. I would go for it.

Agree, Thanks!!
Topic Author
ps2me11
Posts: 40
Joined: Mon Sep 10, 2018 9:24 am

Re: Buying house 1 million at 40?

Post by ps2me11 »

Thanks a lot for explanation! It cleared lot of my doubtsZ
KlangFool wrote: Tue Jun 15, 2021 8:18 am OP,

Your gross income = 375K to 390K per year.

Your annual savings before buying the house = 120k (after-tax) + 50K (401K) = 170K

Assuming that your income = 390K and your taxes = 1/3 = 130K.

Your annual expense = 90K.

Housing expense before buying the house = 2.5K X 12 = 30K

Your annual expense without housing expense = 90K - 30K = 60K.

After buying the house,

Your annual expense after buying the house = 130K

Your annual savings = 80K (after-tax) + 50K = 130K

Your portfolio size = 285K + 50K + 530K + 120K - 200k (down payment) = 785K

<<2 kids - 9 (college in 2031) and 3 ( college in 2037).>>

500K for each kid for college education.

Retirement amount needed = 130K X 25 = 3.25 million

In 10 years, let's assume 6% return, you have 3.1 million and you pay out 500K. You are down to 2.6 million

Starting Net Worth $785,000
Annual Savings $130,000
Years
Annual Return Rate 10
5.00% $2,913,808
6.00% $3,119,319
7.00% $3,340,352

In another 6 years, you pay out another 500K but you have 4.6 million. So, you are down to 4.1 million.

Starting Net Worth $2,600,000
Annual Savings $130,000
Years
Annual Return Rate 6
5.00% $4,368,497
6.00% $4,594,941
7.00% $4,831,827

So, I was wrong! You can afford it. But, this requires you to be almost fully-employed over the next 16 years.

KlangFool
sureshoe
Posts: 2165
Joined: Tue Jan 15, 2019 3:26 pm

Re: Buying house 1 million at 40?

Post by sureshoe »

ps2me11 wrote: Mon Jun 14, 2021 10:10 pm I am thinking of buying a million dollar house in next 2 year but not sure it’s advisable to stretch that much or not. How much should be the income for a quality living with 2 kids, school colleges and expenses.
Here’s our financial standing as of today.

Age: 38 &38
Income: ~$300k base + bonus(25-30%)
401k: 285k + 50k. Maxing out (both)
Federal: 30% - 35% depending on the year
State: 6.5%
2 kids - 9 (college in 2031) and 3 ( college in 2037).
In hand cash: 530k ( Another year of saving ~120k)

After 20% down payment: monthly payment: 5k

Driving force to stretch is good schooling district. I wish to stop around 700k ( sweet spot) but will not get any at that price.

Can you please advice should I or not go for 1mm property as per my financial status. What factors should I keep in mind considering saving for children eduction, marriage etc.
You're in the same ballpark as us for income. We have 4 kids (0-11) instead of 2, but significantly more saved. You don't mention if there is an HOA fee or what the property taxes are - assuming low since the state income taxes are high, but that's a factor.

All I can advise is this - we have a $500k loan on a $720k house, and I dunno... going up to $1M would stress me out. We considered it. We have one old car and one 4 year old car. Full transparency, we're considering a $100-$150k expansion on the place, so maybe I'm a hypocrite :)

We like doing several vacations a year and having lots of disposable income.

Can you afford it? Sure. The only advice I'd give you is this > you're going to be married to that house. It's going to affect how you save. It's going to affect whether you buy a car. It's going to affect whether you can/can't take a nice vacation. You're going to be in a neighborhood with people who drive very expensive cars and take very expensive vacations. I already have those heartburns and my place is $300k/year less than yours, and I have nearly a $2M net worth.

On the flipside, I don't regret being in this house because now I have a huge yard, and we're starting to have lots of parties as covid winds down. We have a full bar down stairs with lots of TVs/etc. I want to enjoy the money while my kids and I are still (somewhat) young. I don't know the area you're in, but I struggle to understand needing to spend $1M. We have .8 acres and 6000 square feet for 75% of that number.
sureshoe
Posts: 2165
Joined: Tue Jan 15, 2019 3:26 pm

Re: Buying house 1 million at 40?

Post by sureshoe »

lthenderson wrote: Tue Jun 15, 2021 9:20 am If this your income or combined income? My worry would always be what happens if one of you (if both) or you (as primary) breadwinner were to lose your job or get into a car accident that prevents you from working full time again and at the mentioned salary?
This is a very good question. I think very good advice is that 1 person should be able to lose their job and the mortgage should continue to be able to made with minimal stress. For example, if my wife or I lost our jobs or became disabled, we might have to stop IRA/401k contributions, but all bills would continue to be paid easily on one income. I think that's a very important consideration.
Topic Author
ps2me11
Posts: 40
Joined: Mon Sep 10, 2018 9:24 am

Re: Buying house 1 million at 40?

Post by ps2me11 »

Watty wrote: Tue Jun 15, 2021 8:19 am
ps2me11 wrote: Mon Jun 14, 2021 10:10 pm Age: 38 &38
Income: ~$300k base + bonus(25-30%)
How long have you had your current income and how stable it is?

The reason I ask is that it looks like your net worth is only about $900K which is barely more than twice your gross income.

I did not really crunch the numbers but I don't see how your numbers add up unless you just recently started making that income or you had something else going on like a lot of student debt or some other large expense in the past that you did not mention.

I would also be concerned about how stable your income is. If you are getting paid well because you are in the medical field that is one thing but if you are a tech worker then I would not count on having that high income for the next 30 years if you get a 30 year mortgage. Some management positions may not be that stable for the long term either.
ps2me11 wrote: Mon Jun 14, 2021 10:10 pm Driving force to stretch is good schooling district. I wish to stop around 700k ( sweet spot) but will not get any at that price.
It sounds like that in your area that in a good school district you probably don't get a really great house for a million dollars.

You should also consider how strong your ties are to where you live now. In a lot of the country you could probably buy a lot nicer house in a good school district for cash or with a very small mortgage so you should keep an open mind about moving to a less expensive part of the country. You might make a bit less in a lower cost of living area but you would also pay a lot less in taxes with a paid off house you could come out way ahead.

One huge benefit of living in a more affordable area is that when your kids grow up they may be able to afford to live near you even if they do not have income that is as high as yours.
ps2me11 wrote: Mon Jun 14, 2021 10:10 pm I am thinking of buying a million dollar house in next 2 year ......

2 kids - 9 (college in 2031) and 3 ( college in 2037).
......

Driving force to stretch is good schooling district.
Why 2 years? Your 9 year old will be 11 then and if the schools where you live now are not good then that could be a problem.

If you get a 30 year mortgage when you are 40 it will not be paid off until you are 70. At least for me having a paid off house made my retirement numbers work a lot better.
ps2me11 wrote: Mon Jun 14, 2021 10:10 pm What factors should I keep in mind considering saving for children eduction, marriage etc.
One big factor to keep in mind is if you might have any more kids.
Thanks for your answer and giving valuable inputs!
- I changed the job in 2015 and started seeing increment after that. My wife started job in 2019.We have day care expense and paid of 50% of my mortgage on my condo which has equity of 155k now. Also there were some other major contributions.

- I believe tri-state area is better for job perspective so would stick with that specially when both are in tech.

- Planning to change schooling district in middle school considering elementary school is average. 6/10.

- 2 kids are enough.
Topic Author
ps2me11
Posts: 40
Joined: Mon Sep 10, 2018 9:24 am

Re: Buying house 1 million at 40?

Post by ps2me11 »

rascott wrote: Tue Jun 15, 2021 6:12 am Is private school an option with a $700k house?

Have you even looked into that option and compared it with what the total cost will be for the $1m house (property taxes, maintenance, excess interest etc)
Thanks for your response! Private for 2 kids only high school will cost me 40K x 8 = 320K minimum.

What are your thoughts?
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ps2me11
Posts: 40
Joined: Mon Sep 10, 2018 9:24 am

Re: Buying house 1 million at 40?

Post by ps2me11 »

sureshoe wrote: Tue Jun 15, 2021 1:30 pm
ps2me11 wrote: Mon Jun 14, 2021 10:10 pm I am thinking of buying a million dollar house in next 2 year but not sure it’s advisable to stretch that much or not. How much should be the income for a quality living with 2 kids, school colleges and expenses.
Here’s our financial standing as of today.

Age: 38 &38
Income: ~$300k base + bonus(25-30%)
401k: 285k + 50k. Maxing out (both)
Federal: 30% - 35% depending on the year
State: 6.5%
2 kids - 9 (college in 2031) and 3 ( college in 2037).
In hand cash: 530k ( Another year of saving ~120k)

After 20% down payment: monthly payment: 5k

Driving force to stretch is good schooling district. I wish to stop around 700k ( sweet spot) but will not get any at that price.

Can you please advice should I or not go for 1mm property as per my financial status. What factors should I keep in mind considering saving for children eduction, marriage etc.
You're in the same ballpark as us for income. We have 4 kids (0-11) instead of 2, but significantly more saved. You don't mention if there is an HOA fee or what the property taxes are - assuming low since the state income taxes are high, but that's a factor.

All I can advise is this - we have a $500k loan on a $720k house, and I dunno... going up to $1M would stress me out. We considered it. We have one old car and one 4 year old car. Full transparency, we're considering a $100-$150k expansion on the place, so maybe I'm a hypocrite :)

We like doing several vacations a year and having lots of disposable income.

Can you afford it? Sure. The only advice I'd give you is this > you're going to be married to that house. It's going to affect how you save. It's going to affect whether you buy a car. It's going to affect whether you can/can't take a nice vacation. You're going to be in a neighborhood with people who drive very expensive cars and take very expensive vacations. I already have those heartburns and my place is $300k/year less than yours, and I have nearly a $2M net worth.

On the flipside, I don't regret being in this house because now I have a huge yard, and we're starting to have lots of parties as covid winds down. We have a full bar down stairs with lots of TVs/etc. I want to enjoy the money while my kids and I are still (somewhat) young. I don't know the area you're in, but I struggle to understand needing to spend $1M. We have .8 acres and 6000 square feet for 75% of that number.
Great points! Sure this will definitely impact the quality of life. Cars, travel and leisure. Living in condo right now space is less but we do t have to think twice before spending on anything else that also without impacting your saving goal. Jumping from 300k to 1million steep rise. Actually double the monthly house expense. On the other side in 700k we can get good home in our city( bad schooling) vs 1 million average house with good quality schooling.
We cannot match your 6000 sf in that price here 😔

Thanks
squirm
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Re: Buying house 1 million at 40?

Post by squirm »

1 million dollar property isn't that much these days. We were looking at some a couple years ago.

Just be prepared that you're buying at record highs and things could get dicey. A little increase in rates could have a big impact on the overall health in housing.
rascott
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Joined: Wed Apr 15, 2015 10:53 am

Re: Buying house 1 million at 40?

Post by rascott »

ps2me11 wrote: Tue Jun 15, 2021 1:47 pm
rascott wrote: Tue Jun 15, 2021 6:12 am Is private school an option with a $700k house?

Have you even looked into that option and compared it with what the total cost will be for the $1m house (property taxes, maintenance, excess interest etc)
Thanks for your response! Private for 2 kids only high school will cost me 40K x 8 = 320K minimum.

What are your thoughts?
Probably not worth it then and the more expensive house better choice.... in my area I'm paying more like $8k through 8th grade and $15k for HS.

How "poor" are the public schools in the $700k house? That's still not exactly slumming it. Though don't know your area.
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Watty
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Re: Buying house 1 million at 40?

Post by Watty »

ps2me11 wrote: Tue Jun 15, 2021 1:43 pm - Planning to change schooling district in middle school considering elementary school is average. 6/10.
There are lots of threads about figuring out if schools are good or not that you should look up. The Great Schools rankings are pretty useless.

It was a while back but I did a cross country corporate relocation when I had a kid in middle school so picking a house to buy with a good high school was a high priority. Basically we needed to fly into a city that we did not know to pick out a house and high school in a limited number of days of house hunting. Our basic approach was to try to identify a list of acceptable high schools and an then find a house within those school boundaries.

Because of the commute the logical area to look for a house was within a huge suburban school district that has over a dozen very large high schools. In the Great School ranking the high schools rank from 10 down to 4. The different parts of the school district vary from very affluent to lower middle class but there at not really any bad ghetto types of areas. The schools consistently ranked better as the areas became more affluent.

As part of the house hunting we were also visiting the high schools to get an impression of what they were like and that was very important since they each had a different feel which was very real but hard to quantify.

In our visits we were talking to one of the school counselors about the differences in the school rankings and it turned out that all the high schools in the school district had nearly identical circuliums and resources and that the main reason for the different school rankings was the demographics of the students. :oops:

It is very complex but one of the important factors in predicting how a group of students will do is the education level of their parents. In the more affluent area the parents tended to have more education and college degrees. There are lots and lots of other factors like the kids in more affluent areas tended to get more enrichment activities outside of school like science summer camps and after school programs.

Anyway it turned out that by spending more to buy a house with a high school that had a 9 or 10 rating I would not have really been getting a better education for my kid, instead it would mainly just be getting him in with better performing classmates.

There are of course valid concerns about how much crime,drugs, and disruptive students there might be in the high schools in the lower income areas but the affluent areas can have their own set of problems too. At one of the high schools in an affluent area we happened to drive through the student parking lot. There were a noticeable number of Mercedes and BMWs in the student parking lot and even a late model Corvette. Even if you can afford who in their right mind gives a 17 years old a Corvette? We did not buy a house in that area but later on we heard some stories about how at that high school there were problems with cliques of "rich kids" so we were glad that our son was not in that area.

Picking good schools is important but don't think you can depend on some easy 1 to 10 ranking system to judge how good a school is. Even in a more average school there will also be groups of kids like AP students that tend to hang out together.
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