How much do you save/invest every year?

[Splenda88]

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Windows are insane - I had the exact same reaction when I looked into doing my basement windows.

Splenda - did you cash pay or go through insurance? My experience with roofs was when it was an insurance claim, it was $35k to do our roof. When I got quotes to get a new roof on a similar sized potential purchase, the big name companies that advertised well were still $35k but the smaller guys were $10-$15k less.

Windows was similar tale - on my last remodel I got two quotes for window places to replace my 8 basement windows - quotes came in around $1500-$2000 per window installed. I ended up using my kitchen guy to do the windows with me - got the windows for $100 a pop from Home Depot and paid him right around 2 hours of labor per window to install (he charges $75 an hour).

Sadly everything is like healthcare - I cash paid $80 to have a mole removed when my insurance company would have been billed $400

Cash.

I made the mistake of not finding a smaller guy to do it.

 

[mmmcdowe]

Windows are insane - I had the exact same reaction when I looked into doing my basement windows.

Splenda - did you cash pay or go through insurance? My experience with roofs was when it was an insurance claim, it was $35k to do our roof. When I got quotes to get a new roof on a similar sized potential purchase, the big name companies that advertised well were still $35k but the smaller guys were $10-$15k less.

Windows was similar tale - on my last remodel I got two quotes for window places to replace my 8 basement windows - quotes came in around $1500-$2000 per window installed. I ended up using my kitchen guy to do the windows with me - got the windows for $100 a pop from Home Depot and paid him right around 2 hours of labor per window to install (he charges $75 an hour).

Sadly everything is like healthcare - I cash paid $80 to have a mole removed when my insurance company would have been billed $400

Yup as much as I prefer to work directly with local companies, there is so much arbitrage nonsense going on where all these people are taking commission it has been really hard to find unencumbered companies. Also learned the home Depot trick after getting crushed for like 20k on one floor of windows. Slowly through building relationships I've found honest local people for plumbing, etc, but it takes a long time and a lot of dead ends with dbags telling you need a 5 k wall teardown for a 100 dollar leaky spigot.

 

[eyeeye_captain]

Saw a post in a different thread about if you’re going to make your kids get a job in high school.

I was kinda taken aback, despite working in a nerdy field where most folks never had one before residency. My wife and I worked cash only gigs before I think either of us was technically legal to be on a payroll. Planning to throw mine on as soon as possible so they know the value of a dollar and fortunately have good connections to get them started down the road.

 

[gutonc]

Saw a post in a different thread about if you’re going to make your kids get a job in high school.

I was kinda taken aback, despite working in a nerdy field where most folks never had one before residency. My wife and I worked cash only gigs before I think either of us was technically legal to be on a payroll. Planning to throw mine on as soon as possible so they know the value of a dollar and fortunately have good connections to get them started down the road.

I bought my kid a car when she turned 16 (which was as much a present for me as it was for her) but the deal was that she needed to pay for her own gas and insurance, and in order to do that, she needed to get a job. So she did. Best idea ever.

Not counting a paper route, I've been working at least PT since I was 15.

 

[dpmd]

Saw a post in a different thread about if you’re going to make your kids get a job in high school.

I was kinda taken aback, despite working in a nerdy field where most folks never had one before residency. My wife and I worked cash only gigs before I think either of us was technically legal to be on a payroll. Planning to throw mine on as soon as possible so they know the value of a dollar and fortunately have good connections to get them started down the road.

Are you going to make them work for the money or just use or as a tax shelter like a lot of people do?

 

[eyeeye_captain]

Are you going to make them work for the money or just use or as a tax shelter like a lot of people do?

I’m not opposed to a good ol’ tax shelter, but no, they’re going to be working some kind of crappy entry level job.

I’m not Red from That 70’s Show, but our family backgrounds are very blue collar and I think there’s a lot of value in hard work and being able to speak to/relate to folks who don’t have the income a doc’s kid has. I’ve literally dug my share of ditches, and it was at least as formative as going to the brand name schools I did (thanks scholarships).

It’s not a flex. I just think that even though I want my kids to have all the advantages, they should pull their own weight as well.

 

[goldsummer]

Think I'm investing around 100-110k a year at this point.

 

[clubdeac]

From all these house horror stories regarding maintenance costs, I'm not sure buying a home is really worth it anymore. Been renting since fellowship and have saved signficantly while renting. Buying a house these days just seem like a good way to cut into your net worth or worse, become house poor.

Everyone says you'll make it back when you sell it but I wouldn't say that's 100% accurate

 

[dpmd]

From all these house horror stories regarding maintenance costs, I'm not sure buying a home is really worth it anymore. Been renting since fellowship and have saved signficantly while renting. Buying a house these days just seem like a good way to cut into your net worth or worse, become house poor.

Everyone says you'll make it back when you sell it but I wouldn't say that's 100% accurate

Lots of factors go into it. You have to compare equivalent properties first off. Too many people compare renting an apartment to buying a house. Of course a house is going to cost more. If an apartment meets your needs then you could compare renting to buying an equal size condo. The benefit of not worrying about rising rent prices matters more in some places than in others. The benefit of having a yard and being able to customize the property matters more to some people than others and can make up for a higher cost for some. The benefit of equity is something that matters more over long term so if you are the kind of person who wants the freedom to move more easily then buying doesn't make as much sense as it does for someone who plans to own for decades (whether living there themselves or because they are willing to be a landlord later). I bought a condo in med school for lower cost than renting even when factoring in maintenence costs and all the other costs unique to ownership. Now it produces nice rental income and has appreciated significantly in value. In residency I bought a house for about the same cost as renting an apartment. But mostly I wanted a yard for pets and wanted to pick flooring and other finishes that don't make sense in a rental. I did end up spending a bunch on remodeling and new windows and landscaping and such but that was over years and was easily affordable because I chose a house we could easily afford. It too is now a rental bringing in profit and has appreciated in value. I bought the current house because I wanted a bigger place to make my own but still kept it to easily affordable rather than doing a rich doctor house. That has made it not a big deal when I needed roof repairs shortly after the old house needed roof repairs or when I needed new water heaters. I haven't sat down to compare what renting a similar place would have cost because I like not having to wait for a landlord to do repairs and not worrying when my dogs scratch up the finish on the doors.

 

[Nocturnist]

From all these house horror stories regarding maintenance costs, I'm not sure buying a home is really worth it anymore. Been renting since fellowship and have saved signficantly while renting. Buying a house these days just seem like a good way to cut into your net worth or worse, become house poor.

Everyone says you'll make it back when you sell it but I wouldn't say that's 100% accurate

I think of them less as horror stories and more as part of adulting. These are just all the things that factor into your yearly rent increase that college me couldn't care less about and now forced to. I rented a studio apartment in the big city my first year out of residency, and to this day the rent increase they tried to force on me the second year, is as traumatic as any broken thing I've had to replace in my home.

The rent vs own has been debated to death. NYT has a decent calculator based on your personal factors.

Pre 2021 it would have been an easy question for me, these days I'm not so confident. The pro rent camp argues that opportunity cost of the lost down payment invested/compounding outweighs the liabilities of owning.
The pro own camp will argue you're otherwise paying someone else's mortgage. Besides, how many of those renters are truly disciplined enough to actually invest the difference? Neither is wrong, the truth lies somewhere in the middle.

What it comes down to me is- do you want to set down roots somewhere or not? It's not just about a landlord increasing my rent each year, building equity, leveraging my money using one of the lowest interest loans available to the general public. it's about no landlord having the power to displace me, and being able to do whatever I want in and to my own home.

When you're single and unattached, this is a liability. It's very costly and cumbersome to move. When I was young and single, I could move to Hawaii for a year to have a home base closer to far east travels. Now that I have kids, it's most imperative to me they have a permanent place they never have to leave.

It's not always just cents and dollars.

 

[clubdeac]

I think of them less as horror stories and more as part of adulting. These are just all the things that factor into your yearly rent increase that college me couldn't care less about and now forced to. I rented a studio apartment in the big city my first year out of residency, and to this day the rent increase they tried to force on me the second year, is as traumatic as any broken thing I've had to replace in my home.

The rent vs own has been debated to death. NYT has a decent calculator based on your personal factors.

Pre 2021 it would have been an easy question for me, these days I'm not so confident. The pro rent camp argues that opportunity cost of the lost down payment invested/compounding outweighs the liabilities of owning.
The pro own camp will argue you're otherwise paying someone else's mortgage. Besides, how many of those renters are truly disciplined enough to actually invest the difference? Neither is wrong, the truth lies somewhere in the middle.

What it comes down to me is- do you want to set down roots somewhere or not? It's not just about a landlord increasing my rent each year, building equity, leveraging my money using one of the lowest interest loans available to the general public. it's about no landlord having the power to displace me, and being able to do whatever I want in and to my own home.

When you're single and unattached, this is a liability. It's very costly and cumbersome to move. When I was young and single, I could move to Hawaii for a year to have a home base closer to far east travels. Now that I have kids, it's most imperative to me they have a permanent place they never have to leave.

It's not always just cents and dollars.

True the equation changes dramatically when you have a family. Makes it almost a necessity to own. All points are valid however everyone always says you don't have to worry about your rent increasing if you own. I will say you do have to worry about your property taxes increasing though which is about the same as the marginal increase in rent. My parents have owned there home since the late 90's and one of my dad's biggest gripes is the ever increasing property tax. Can't escape it even though the house has been paid off for 20 yrs. Might as well be a rent increase

 

[dpmd]

True the equation changes dramatically when you have a family. Makes it almost a necessity to own. All points are valid however everyone always says you don't have to worry about your rent increasing if you own. I will say you do have to worry about your property taxes increasing though which is about the same as the marginal increase in rent. My parents have owned there home since the late 90's and one of my dad's biggest gripes is the ever increasing property tax. Can't escape it even though the house has been paid off for 20 yrs. Might as well be a rent increase

That is why you buy somewhere that has a property tax increase cap.

 

[Nocturnist]

True the equation changes dramatically when you have a family. Makes it almost a necessity to own. All points are valid however everyone always says you don't have to worry about your rent increasing if you own. I will say you do have to worry about your property taxes increasing though which is about the same as the marginal increase in rent. My parents have owned there home since the late 90's and one of my dad's biggest gripes is the ever increasing property tax. Can't escape it even though the house has been paid off for 20 yrs. Might as well be a rent increase

Remember that property tax increase is directly proportional to your property value, which is generally proportional to inflation. Boomers are always shaking their fists at what they perceive to be the world's injustice. My parents bought their home in 2000 for 565k, it's since more than tripled in value. So have their salaries. Their mortgage is now paid off and they're millionaires just by virtue of paying a mortgage instead of rent.

Property taxes are also no where near rent increases. Properties increase by 3-4% on average. A 1% property tax rate means your property tax increases by 0.03-0.04% a year. On a million dollar home that's less than $500 a year, and your net worth went up by 30-40k. I guarantee the rent on a million dollar home is going up more than $40 a month.

When your property tax goes up, it's because you are objectively wealthier. When your rent goes up, your landlord got richer and you get poorer.

 

[Nocturnist]

That is why you buy somewhere that has a property tax increase cap.

Haven't heard of this. Where are these places and how are they funding their public services?

 

[sloh]

Haven't heard of this. Where are these places and how are they funding their public services?

California is pretty special with prop 13 (unfair if you ask me):

1. The Three Pillars of Prop 13​

• The 1% Cap: The general property tax rate is limited to 1% of a property's assessed value.
• The 2% Assessment Limit: Once your "Base Year Value" is set (usually at purchase), the assessed value can only increase by a maximum of 2% per year, regardless of how much the market value actually climbs.
• The Reset Trigger: Your property is only reassessed to current market value when there is a "Change in Ownership" or "New Construction" (like adding a bedroom or a pool).

---

2. The Proposition 19 Era (Current Rules)​

While Prop 13 remains the foundation, Proposition 19 (which took effect in 2021) significantly modified how you can "keep" or "move" your tax base.

• Portability (Seniors 55+ & Disabled): You can now transfer your low tax base to a new home anywhere in California up to three times. If the new home is more expensive, you only pay the difference between the two prices on top of your old tax base, rather than a full reassessment.
• The "Inheritance" Catch: Previously, you could pass your home to your children without any tax increase. Now, to keep the low tax base, the child must move into the home as their primary residence within one year.
• The 2026 Exclusion Limit: Even if the child moves in, the exclusion is capped. If the market value exceeds the parent’s tax base by more than $1,044,586 (the 2026-2027 threshold), the excess is added to the tax bill.

 

[dpmd]

Haven't heard of this. Where are these places and how are they funding their public services?

California prohibits increase of more than 2% per year. I would guess state income and sales taxes fund it, plus maybe gas taxes?

 

[sloh]

California prohibits increase of more than 2% per year. I would guess state income and sales taxes fund it, plus maybe gas taxes?

Yup.

Education: Under Proposition 98, California is constitutionally required to spend roughly 40% of its General Fund on K-14 education. Because property tax is capped, the state "backfills" what's missing.

Personal income taxes, sales taxes.

Mello-Roos which is a "parcel tax": Unlike property tax (which is based on your home's value), a Mello-Roos is a parcel tax based on things like square footage or just a flat fee.

 

[eyeeye_captain]

The undiscussed thing about buying versus renting is that your housing payments (note that I didn’t say cost as owners are responsible for everything that breaks, needs upgrades, etc.) goes down over time as an owner instead of a renter. The further into your mortgage payment you get, the less you pay as your principal goes down. Your landlord can do what they want, which is usually/always go up.

A quick rentals search around me for something comparable to my not huge but well appointed place has nothing under my monthly mortgage/taxes, with the only one at cost looking like what I lived in through training.

 

[Nocturnist]

California prohibits increase of more than 2% per year. I would guess state income and sales taxes fund it, plus maybe gas taxes?

Ah that's right. With upto 13.3% income tax rate and local sales tax upto 10% it's by far the highest taxed state in the country. Not sure anyone's ever recommended moving there for the property taxes

 

[dpmd]

Ah that's right. With upto 13.3% income tax rate and local sales tax upto 10% it's by far the highest taxed state in the country. Not sure anyone's ever recommended moving there for the property taxes

Income taxes matter less when you aren't funding your life with income. So older folks who bought a long time ago will be able to afford to keep their homes easier. I don't mind paying more taxes now to help that be possible for others.

 

[Nocturnist]

Income taxes matter less when you aren't funding your life with income. So older folks who bought a long time ago will be able to afford to keep their homes easier. I don't mind paying more taxes now to help that be possible for others.

Sorry if this went over my head but how are older folks funding their lives in CA? The state still taxes retirement accounts at the same rates. Not social security i suppose but that's not enough to live on.

 

[dpmd]

Sorry if this went over my head but how are older folks funding their lives in CA? The state still taxes retirement accounts at the same rates. Not social security i suppose but that's not enough to live on.

My parents have a rental property, retirement accounts, high yield savings accounts, and social security but they don't pay any state or federal income taxes because most of social security isnt taxable and the rest of their income is under the threshold.

 

[mmmcdowe]

I treat my primary residence as a partial rebate not an investment. That makes the math more palatable. Real estate agencies have been pushing your home as an investment so long that it can be hard to even conceive that it isn't. It is part of the American dream mantra.

 

[Splenda88]

I treat my primary residence as a partial rebate not an investment. That makes the math more palatable. Real estate agencies have been pushing your home as an investment so long that it can be hard to even conceive that it isn't. It is part of the American dream mantra.

But for a lot of Americans, it's a forced saving mechanism given that most people are financial stupid. Then again, most of these Americans usually end up buying too much house.

 

[clubdeac]

But for a lot of Americans, it's a forced saving mechanism given that most people are financial stupid. Then again, most of these Americans usually end up buying too much house.

Yeah for me at this time it just seems like a net worth sunk cost. Curious what posters here would recommend one pay for their home as a % of total net worth. Assuming one pays cash.

 

[Splenda88]

Yeah for me at this time it just seems like a net worth sunk cost. Curious what posters here would recommend one pay for their home as a % of total net worth. Assuming one pays cash.

If you live in a HCOL area, you should borrow no more than 2X of your salary. If you make 500k, the max you can borrow is 1M. If you want to buy a home that cost 1.5M, you should come up with 500k down payment in order to avoid being house-poor.

I only borrowed 0.7X of my salary when I was purchasing my home because I live in a LCOL area. I also was ok to live in a cookie cutter home in a class B neighborhood unlike most docs who usually live in class A neighborhoods.

Classes of Property in Real Estate: A, B, C & D Neighborhoods Explained

Learn about the classes of property in real estate and the difference between A, B, C and D neighborhoods.

realwealth.com

 

[dpmd]

Yeah for me at this time it just seems like a net worth sunk cost. Curious what posters here would recommend one pay for their home as a % of total net worth. Assuming one pays cash.

I don't know that i would ever tie up my cash that way

 

[dpmd]

Or more accurately that I would de-invest my money for that

 

[sloh]

I wouldn’t tie up my NW all in one go like that either. 20% down, total cost of house no more than 2x HHI is my rule of thumb

 

[Nocturnist]

Agree. Not sure why pay all cash for a house. Even if i were a boomer with a paid off house I was selling to downsize I'd still rather take out a mortgage and have the flexibility to pay it off when I saw fit. I guess only exception would be in the covid housing insanity when the only way to win a house was cash but that's no longer the case.

I would push back a little on going by a multiple of one's salary because it doesn't factor in any variable like interest rate, taxes, insurance etc.

A 2M house with 20% down at 6% is 9500 a month. Add insurance and taxes and you're looking at 12k monthly. For a 500k salary this is 28% which is quite affordable.

I would say in both coasts if you're limiting your options strictly to 2x your salary, a million dollar home is not going to buy you anything reasonable. My town passed the million dollar median home sale several years ago as did most surrounding towns. At least in the northeast, you gotta go upto 1.5-2M for anything even worth owning these days.

 

[eyeeye_captain]

For a 500k salary this is 28% which is quite affordable.

Maybe? Playing around with a tax calculator (which I know isn’t taking deductions into account), that’s still roughly 40% of your net if married in what is obviously a HCOL area. That’s basically the whole NE.

In theory it should be no problem to live on the $200k left over, but it seems like via various factors, everyone in the thread is spending like $150k at a minimum. That’s already got the base covered.

I feel for folks where it really does take that much to get something good. Sometimes it’s places I wouldn’t expect. One of my tech buddies moved to Denver a good while back and was constantly outbid. I want to say it was at least 50 properties. Another friend moved to Seattle and is in some tiny condo - I didn’t realize it’s a top 5 VHCOL area in the US.

 

[Nocturnist]

Maybe? Playing around with a tax calculator (which I know isn’t taking deductions into account), that’s still roughly 40% of your net if married in what is obviously a HCOL area. That’s basically the whole NE.

In theory it should be no problem to live on the $200k left over, but it seems like via various factors, everyone in the thread is spending like $150k at a minimum. That’s already got the base covered.

I feel for folks where it really does take that much to get something good. Sometimes it’s places I wouldn’t expect. One of my tech buddies moved to Denver a good while back and was constantly outbid. I want to say it was at least 50 properties. Another friend moved to Seattle and is in some tiny condo - I didn’t realize it’s a top 5 VHCOL area in the US.

An affordable mortgage is widely considered under 30% of gross. I'm in the camp that folks with salaries in the top 5% can comfortably stretch that to 40%, because our leftovers provide alot of cushion unlike the middle/lower class.

Even if your credit card bills are 150k, a fairly lavish lifestyle even on the coasts, you still have 50k of those 200k left over (and that's after maxing out your retirement).

Honestly, I feel for 2 types of people- those who can't afford even homes not worth owning in HCOL, and those in places where a 200k house is only a 250k house 25 years later. The former not just because the American dream is out of reach for so many, but (without sounding too elitist) there's nobody blue collar to service the white collars. We're losing alot of them to the south. The area where my vacation house is at is already 95% developed by law. Very little is being built, and a high percentage of existing homes are 2nd or 3rd homes. It's becoming an enormous problem finding housing for our teachers, police, firefighters or seasonal workers. When affordable housing comes up, the income limit to qualify as a family is close to 200k- it's staggering to think about that as low income.

Homes are expensive in the NE because of an abundance of high paying jobs and very limited supply of homes within reasonable distance to them. My parents bought their 550k homes 25 years ago on an engineer and accountant salaries in a town that is now nearly unaffordable to me despite an income double both of theirs combined. These days its mostly executives and pro athletes living there. My current town probably won't be affordable to doctors when I retire either.

I'd personally rather stretch to buy a 2M house that'll be 6M when I retire than a cheap home that'll hardly appreciate. The buy in's not cheap but I prefer to know once I have a chip in the game, I'm in an area where the house always wins.

 

[sloh]

An affordable mortgage is widely considered under 30% of gross. I'm in the camp that folks with salaries in the top 5% can comfortably stretch that to 40%, because our leftovers provide alot of cushion unlike the middle/lower class.

Even if your credit card bills are 150k, a fairly lavish lifestyle even on the coasts, you still have 50k of those 200k left over (and that's after maxing out your retirement).

Honestly, I feel for 2 types of people- those who can't afford even homes not worth owning in HCOL, and those in places where a 200k house is only a 250k house 25 years later. The former not just because the American dream is out of reach for so many, but (without sounding too elitist) there's nobody blue collar to service the white collars. We're losing alot of them to the south. The area where my vacation house is at is already 95% developed by law. Very little is being built, and a high percentage of existing homes are 2nd or 3rd homes. It's becoming an enormous problem finding housing for our teachers, police, firefighters or seasonal workers. When affordable housing comes up, the income limit to qualify as a family is close to 200k- it's staggering to think about that as low income.

Homes are expensive in the NE because of an abundance of high paying jobs and very limited supply of homes within reasonable distance to them. My parents bought their 550k homes 25 years ago on an engineer and accountant salaries in a town that is now nearly unaffordable to me despite an income double both of theirs combined. These days its mostly executives and pro athletes living there. My current town probably won't be affordable to doctors when I retire either.

I'd personally rather stretch to buy a 2M house that'll be 6M when I retire than a cheap home that'll hardly appreciate. The buy in's not cheap but I prefer to know once I have a chip in the game, I'm in an area where the house always wins.

It’s crazy how a lot of 2 physician couples are getting priced out of certain locations in the US. Check this out. Recent wsj article about the housing market in SF:

SAN FRANCISCO—At a Pacific Heights open house in January, a line of people made their way up the steps of a two-bedroom, one-bath cooperative. There were 85 of them—steps, not people. Eight flights, no elevator.
The property received 14 offers and sold for over $1.62 million, more than $400,000 over the asking price.

Single-family home prices are up 23% with the median price at $1.96 million.

“It’s just skyrocketed,” says Kelsea Carlson, 34 years old, an attorney who is expecting her first child in June and has been house hunting with her husband since April. “You’re way more likely to get outbid by an all-cash offer.”

Carlson was outside a packed open house for a three-bedroom, two-bath condo on Buchanan Street in Pacific Heights. The area, known for its breathtaking views and mix of mansions, Victorians and prewar apartment buildings, has long been sought after.

Carlson and her husband have been outbid on four properties so far—even a house in nearby Presidio Heights that needed hundreds of thousands of dollars of work.

The Buchanan Street property closed less than two weeks later for $3.4 million—a full million over the listed price, according to Arrian Binnings with Christie’s Sereno. There were nine offers, four of them all cash. The buyers accepted the third-highest offer since it was a fast, seven-day close, Binnings says.

Farther south in Noe Valley, long a popular area for families, a three-bedroom home listed in late February at $2.6 million quickly sold for $4.6 million. One house there recently caught fire as it was coming to market: A local broker said he heard the owners still received offers.

One Sunday in March, she visited a condo in Lower Pacific Heights listed for $1.9 million, also one with a long set of stairs to the entrance. When she wondered aloud about carrying groceries, the listing agent said she could skip leg day at the gym. At another property she saw, there was a cryptic warning sign near the steps to the backyard—something about using them at your own risk.

“I’ve seen a lot of places where you couldn’t pay me $2 million to live in them,” she says. “But that’s what they’re selling for.“

 

[clubdeac]

You’re saying a 12k monthly mortgage making $500k is affordable?? I would consider that if I had a net worth of 10 million otherwise I’m not sure you’ll be able to accumulate any substantial net worth before 65.

 

[Nocturnist]

You’re saying a 12k monthly mortgage making $500k is affordable?? I would consider that if I had a net worth of 10 million otherwise I’m not sure you’ll be able to accumulate any substantial net worth before 65.

Not just me saying it but that's the widely agreed on consensus.

I happen to be at a 13.5k mortgage with an income around that ballpark these days and it's not uncomfortable for me. It doesn't include any other debts so if you had a car loan or student debt, you'd need to adjust for those. It's getting tight these days with 2 daycares to pay for, but that's not forever.

If you just maxed out your retirement for 30 years and didn't save another dollar ever, you'd stil end up with around 7.5M (my employer also contributes another 16k a year) and a paid off house. That 2M house will be 6-7M by then if it continues appreciating at 4%. You'll end up with a networth in the 15M area.

I can understand how that high of a mortgage can feel uncomfortable to people, but if you're in a HCOL area it's just the reality if you want something decent in a good school district.

 

[eyeeye_captain]

Not just me saying it but that's the widely agreed on consensus.

I happen to be at a 13.5k mortgage with an income around that ballpark these days and it's not uncomfortable for me. It doesn't include any other debts so if you had a car loan or student debt, you'd need to adjust for those. It's getting tight these days with 2 daycares to pay for, but that's not forever.

Widely agreed doesn’t mean wise. My eye is twitching reading that, especially with kids in a HCOL area.

If it’s working for you and you’re able to play the (very) long game, great, but your mortgage alone outpaces my entire monthly by at least 10%, and I’m at a higher income - granted at what sounds like a significantly lower COL. That’s not a flex, it’s just me struggling to comprehend that level of sunk cost for 30 years (if you want to stay in the house that long and that’s your mortgage term). I hope the good school district means you’re not paying for private going forward.

Also your 401k match is worse than mine as a practice owner where I’m stuck with safe harbor stuff.

Edit to say: I don’t envy H-VHCOL folks. Certainly a different financial mindset, which is cool as long as it works for you. I’m somewhere around 75% liquid savings on my net, which is far from common TBF. I’m fine getting out of the game when I can.

 

[thumbz]

I think part of it is what do you want your life to look like now versus in 20 years.

Let's use the 2x salary - you make $500k a year, get a $1.0mil mortgage - you have a $7000 a month mortgage payment. So you're taking home $24k a month (assuming you're single and live in a state with average income tax, and max out your 401k and HSA).

What are you spending the other $17,000 on?

I agree with Nocturnist - as salaries get higher you have more disposable income and that changes the entire equation.

If you make $5 mil a year, now you're taking home $232k a month. A $10 mil mortgage is $65k a month. So now we are talking in terms of $150k of left over monthly income.

I understand the networth argument - but at some point you have to ask how much is enough. Given average life expectancy and liklihood of developing chronic disease, is $15mil at 65 that much better than $5 mil? Of course that's entirely person dependent.

 

[Nocturnist]

Widely agreed doesn’t mean wise. My eye is twitching reading that, especially with kids in a HCOL area.

If it’s working for you and you’re able to play the (very) long game, great, but your mortgage alone outpaces my entire monthly by at least 10%, and I’m at a higher income - granted at what sounds like a significantly lower COL. That’s not a flex, it’s just me struggling to comprehend that level of sunk cost for 30 years (if you want to stay in the house that long and that’s your mortgage term). I hope the good school district means you’re not paying for private going forward.

Also your 401k match is worse than mine as a practice owner where I’m stuck with safe harbor stuff.

Edit to say: I don’t envy H-VHCOL folks. Certainly a different financial mindset, which is cool as long as it works for you. I’m somewhere around 75% liquid savings on my net, which is far from common TBF. I’m fine getting out of the game when I can.

I guess widely doesn't mean wise, but it doesn't mean foolish either. It just means that the trillion dollar financial/mortgage industries and financial experts have done their research/risk analysis and came to a consensus that up to 30% debt to income ratio is the acceptable amount for the average consumer which maximizes profits while minimizing foreclosures.

It doesn't mean anyone's forcing you to take that much mortgage out, it does mean the vast majority of the US population can handle this amount for 30 years without defaulting.

Totally see where you're coming from though-
I think everyone has their priorities and goals. If your priority is to save 75% and FI at 40, that's great. If your priority is to live in a HCOL area, buy a decent house, max your retirement for 30 years while paying off your house and retire with that paid off house and multi millions in 401k- i dont think there's any shame in it either. I think so many of us here are lucky to be in such a well off position, we forget that scenario's not only normal, it's considered doing incredibly well.

If I'd moved somewhere where my 2M home is 500k, I'd invest the difference over time and probably retire 10 years earlier. But my priority for better or worse is to live where the weather hurts my face 6 months a year. And that's ok too.

As for my situation personally, I'm not playing *that* long of a game- that 13.5k is two 15 years that will be paid off in 5 and 10 years. My point was just to say that 30% of my gross is affordable to me.

 

[mmmcdowe]

Yeah for me at this time it just seems like a net worth sunk cost. Curious what posters here would recommend one pay for their home as a % of total net worth. Assuming one pays cash.

I think I've said this before on this thread but I have come to recommend roughly 1x salary as the gold standard for a mortgage amount for physicians, especially if you aren't at coast fire yet. Doesn't mean you can't buy a house more but I would rent and invest heavily until you can put down the difference.

That being said, I still wouldn't go more than 1x my salary as I value liquidity more and more now that I'm over my coast fire cutoff. I want opportunity to invest excess cash on a monthly basis when good, time limited opportunities arise and otherwise just keep it flowing into the market. Or maybe I just want to buy something pricey and just hold the post tax investments for a month from time to time. I also donate all of my post tax contributions every December to charity.

 

[Nocturnist]

I think I've said this before on this thread but I have come to recommend roughly 1x salary as the gold standard for a mortgage amount for physicians, especially if you aren't at coast fire yet. Doesn't mean you can't buy a house more but I would rent and invest heavily until you can put down the difference.

That being said, I still wouldn't go more than 1x my salary as I value liquidity more and more now that I'm over my coast fire cutoff. I want opportunity to invest excess cash on a monthly basis when good, time limited opportunities arise and otherwise just keep it flowing into the market. Or maybe I just want to buy something pricey and just hold the post tax investments for a month from time to time. I also donate all of my post tax contributions every December to charity.

Sure, that works great some place where 500k can buy you a decent home. Do you live somewhere really inexpensive?

1x salary homes don't exist in my area.
If I wanted to pay 1x my salary for a 2M home, I'd have to come up with 1.5M down payment. Even if I miraculously manage to save half of my gross, it would take me 6 years to come up with that cash. In 6 years, that same house is now 2.5-3M, now I need to save for another 3-4 years. And in 3-4 years, that house got even more expensivs... it's a non ending catch-22.

That's a decade of money I kept in my savings account, not an investment account. I'd be an idiot to roulette my down payment in the market.

So I didnt invest it, I wasted a decade renting, I missed sub 3% mortgage rate waiting, all the while I missed a decade of building equity.

Even at 6.5% interest, a 1x salary mortgage is like 9% of gross. I just don't understand what's so scary about a real mortgage?

 

[mmmcdowe]

Sure, that works great some place where 500k can buy you a decent home. Do you live somewhere really inexpensive?

1x salary homes don't exist in my area.
If I wanted to pay 1x my salary for a 2M home, I'd have to come up with 1.5M down payment. Even if I miraculously manage to save half of my gross, it would take me 6 years to come up with that cash. In 6 years, that same house is now 2.5-3M, now I need to save for another 3-4 years. And in 3-4 years, that house got even more expensivs... it's a non ending catch-22.

That's a decade of money I kept in my savings account, not an investment account. I'd be an idiot to roulette my down payment in the market.

So I didnt invest it, I wasted a decade renting, I missed sub 3% mortgage rate waiting, all the while I missed a decade of building equity.

Even at 6.5% interest, a 1x salary mortgage is like 9% of gross. I just don't understand what's so scary about a real mortgage?

My counter would be if you know it's going to take 5 years to save up why wouldn't you put your down payment in the market? I'm not suggesting building up in a savings account for that amount, I would personally put it in the market. Conservative investments maybe but in the market. Regardless, my caveat was that you should do this until you are at coast fire at least. If you accumulated 1.5M you'd be well above what is my definition of coast fire assuming you were a new grad and under 40 by the time you crossed 1M.

My overarching belief here is that docs rush into primary home ownership too quickly and it seriously hampers their long term wealth building for the very reason that the houses that tend to be attractive are near the top of the market. I learned my lesson as a resident where I crippled myself by being house poor. I ended up selling after four years due to rising property taxes and hoa fees and was much better off financially renting for a few years after that.

I live in an area with dead average COL and slightly above average home price. Maybe 70th percentile in the most desirable locations. I used to live in NYC and I can say confidently that I wouldn't attempt to buy there even at my current financial state.

 

[sloh]

I think with how expensive COL is in HCOL locations, coastFIRE is much more than 1.5M NW. possibly 4-5M liquid NW. You also have to account for the fact that saving that 1.5M NW doesn’t mean much when it’s going to go right into the house when you decide to buy.

 

[mmmcdowe]

I think with how expensive COL is in HCOL locations, coastFIRE is much more than 1.5M NW. possibly 4-5M liquid NW. You also have to account for the fact that saving that 1.5M NW doesn’t mean much when it’s going to go right into the house when you decide to buy.

I don't think I'm explaining it very well. Let's say that 1 million is the baseline Coast fire just to keep the math easy to talk about. Once you have that doing the heavy lifting for you in your late thirties, if you have an extra half million dollars on top of that that you want to put as the down payment for a 2.5 million house and then use a big chunk of your income monthly on a 30-year mortgage, you will end up in 30 years with a paid off house which will dramatically reduce the cost of living in the high cost of living area.

The assumptions that I'm making here are that you have a million in investments by the age of 40. Obviously the coast fire number will change a lot if you were younger or older than that when you achieve it, but when I crunch the numbers, I feel like it is achievable for most physicians to do this with maybe a little bit of discipline. If you are in your early thirties, you can get there just by maximum contributions to all pre-tax retirement plans potentially depending on what your employer offers. I got my first big boy paycheck near the end of 35 so I had to play catch up with post tax investments. A million of incestments should give you roughly 7 to 8 million in inflation adjusted dollars by age 69 if you don't invest anything else along the way. 4% withdrawal with a paid off house roughly at the time of retirement should be a fairly good living even in hcol areas. Obviously if 300K a year (inflation adjusted) is not your definition of fire in your preferred location then the math will be different, but given the median salary of physicians, I would say that is a pretty solid ballpark for many of us at least. Living on a Cunard cruise costs less than that so it meets it for me!

 

[eyeeye_captain]

I would personally put it in the market. Conservative investments maybe but in the market.

I don’t have historical data, but even with the current volatility, Vanguard has money markets sitting around 3.6%. Doesn’t get lower risk than that and is a reasonable return if you want a simple build up.

There was some thread, I think on the anesthesiology board, a little while back with someone in the Bay Area asking how to survive with their $26k/mo mortgage.

If you have to be H to VHCOL for whatever reason, yeah, your economics are different. But jeez, it seems like such a balancing act to figure out what’s (usually) everybody’s biggest expense.

And side note: the young docs buying a place might not be staying there. I could text a decent group of folks who were on job #3 within ~5 years of graduation. No reason to jump right in. I know at least a couple where non-competes became a thing even though they’re becoming only quasi-legal.

(For reference: probably a little above average COL city, didn’t buy until we were at 1x gross income).

 

[mmmcdowe]

I don’t have historical data, but even with the current volatility, Vanguard has money markets sitting around 3.6%. Doesn’t get lower risk than that and is a reasonable return if you want a simple build up.

There was some thread, I think on the anesthesiology board, a little while back with someone in the Bay Area asking how to survive with their $26k/mo mortgage.

If you have to be H to VHCOL for whatever reason, yeah, your economics are different. But jeez, it seems like such a balancing act to figure out what’s (usually) everybody’s biggest expense.

And side note: the young docs buying a place might not be staying there. I could text a decent group of folks who were on job #3 within ~5 years of graduation. No reason to jump right in. I know at least a couple where non-competes became a thing even though they’re becoming only quasi-legal.

(For reference: probably a little above average COL city, didn’t buy until we were at 1x gross income).

I remember during my residency they threw up the stats for our grads over the prior 20 years and the average number of jobs was 3 for those under 10 years out . That always stuck with me. I was at job 2 after 2.5 years ands one of my classmates switched jobs after 6 months post-grad and then now just left job number 2 (we are approaching 4 years out).

 

[sloh]

Ditto

I remember during my residency they threw up the stats for our grads over the prior 20 years and the average number of jobs was 3 for those under 10 years out . That always stuck with me. I was at job 2 after 2.5 years ands one of my classmates switched jobs after 6 months post-grad and then now just left job number 2 (we are approaching 4 years out).

Ditto. I was already planning my out from my first job after 6 months. Stayed a full year just so it wouldn’t look bad.