Maximum price for a house for a doc?

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Lothric

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Hey,

Is it possible for a single doctor with an annual salary of 300k $ to buy a house for 6 million dollars?
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Lothric said:
Hey,

Is it possible for a single doctor with an annual salary of 300k $ to buy a house for 6 million dollars?
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Lets run the numbers here.

A single physician making $300,000 in a state without an income tax would have a net pay of approximately $207k, with $80k going towards federal income taxes, $8k towards social security, and $5k towards medicare. Might be able to get that a bit higher with additional deductions (such as from a big mortgage!) but not by a whole lot.

A 30-year fixed jumbo rate right now is at approximately ~4.5% interest. Even with 20% down ($1.2 million!), a $4.8 million mortgage would run you $24.3k... monthly. That would be ~$292k/year. Approximately $85k a year more than the above net pay.

And that's just for principle/interest.That doesn't take into account insurance, property tax, or utilities, which will all likely be absurd for a house that expensive. Plus you know, food, transporation, and all the other expenses of living. Plus saving for retirement (though I suppose that person can always sell the house...).

Basically, it's not feasible to buy a $6mm house on "only" a $300,000 salary, even if you have a $1.2 million down payment.
 
Raryn said:
Lets run the numbers here.

A single physician making $300,000 in a state without an income tax would have a net pay of approximately $207k, with $80k going towards federal income taxes, $8k towards social security, and $5k towards medicare. Might be able to get that a bit higher with additional deductions (such as from a big mortgage!) but not by a whole lot.

A 30-year fixed jumbo rate right now is at approximately ~4.5% interest. Even with 20% down ($1.2 million!), a $4.8 million mortgage would run you $24.3k... monthly. That would be ~$292k/year. Approximately $85k a year more than the above net pay.

And that's just for principle/interest.That doesn't take into account insurance, property tax, or utilities, which will all likely be absurd for a house that expensive. Plus you know, food, transporation, and all the other expenses of living. Plus saving for retirement (though I suppose that person can always sell the house...).

Basically, it's not feasible to buy a $6mm house on "only" a $300,000 salary, even if you have a $1.2 million down payment.
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So in other words, only those that happen to be lucky and relative to a doctor lazy/effortless can buy houses for those prices and up like actors/the kids on Twitch/YouTube who pull in millions per month, athletes etc. Sad. The hard-working academics can forget it.

Well, what's the extreme viable end on the spectrum then regarding the house with the annual 300k? 4 million maybe?
 
Lothric said:
So in other words, only those that happen to be lucky and relative to a doctor lazy/effortless can buy houses for those prices and up like actors/the kids on Twitch/YouTube who pull in millions per month, athletes etc. Sad. The hard-working academics can forget it.

Well, what's the extreme viable end on the spectrum then regarding the house with the annual 300k? 4 million maybe?
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Probably not. After your $800,000 down payment, that would give you a mortgage of $192k a year, not enough left over to even pay your property taxes more likely than not.

Look, 99.99% of houses aren't worth in the multiple millions. The rule of thumb for someone who is actually responsible with their money is that your mortgage should not exceed 28% of your gross take home. That would be (for an income of $300,000) a mortgage of no more than $7,000/month, or a mortgage of ~$1.4million (assuming an interest rate of ~4.5% on a jumbo loan), which would be a house of ~$1.7million with a down payment of $340k.

That is to say, a single physician could fairly simply afford a $1-2million house (depending on their priorities). Above that, you start stretching budgets. $3-3.5mm would be doable but would leave you basically no money for anything else, which makes zero sense to me.But outside of buying a penthouse in NYC or something in the middle of SF, $1-2mm is a perfectly reasonable (if not quite large) budget.

Oh, and I'd be quite surprised if anyone on Twitch is pulling in monthly millions. In fact, I'd be surprised if there's more than a tiny fraction of streamers who even make six figures... versus every single doctor can if they want to. I'll take those odds.
 
Raryn said:
Probably not. After your $800,000 down payment, that would give you a mortgage of $192k a year, not enough left over to even pay your property taxes more likely than not.

Look, 99.99% of houses aren't worth in the multiple millions. The rule of thumb for someone who is actually responsible with their money is that your mortgage should not exceed 28% of your gross take home. That would be (for an income of $300,000) a mortgage of no more than $7,000/month, or a mortgage of ~$1.4million (assuming an interest rate of ~4.5% on a jumbo loan), which would be a house of ~$1.7million with a down payment of $340k.

That is to say, a single physician could fairly simply afford a $1-2million house (depending on their priorities). Above that, you start stretching budgets. $3-3.5mm would be doable but would leave you basically no money for anything else, which makes zero sense to me.But outside of buying a penthouse in NYC or something in the middle of SF, $1-2mm is a perfectly reasonable (if not quite large) budget.

Oh, and I'd be quite surprised if anyone on Twitch is pulling in monthly millions. In fact, I'd be surprised if there's more than a tiny fraction of streamers who even make six figures... versus every single doctor can if they want to. I'll take those odds.
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1.7 million is a LOT of house on 300k. Don't forget property taxes on a 1.7 million dollar house will easily exceed $25,000/year in many states. Don't forget your student loan payments either.
 
cpants said:
1.7 million is a LOT of house on 300k. Don't forget property taxes on a 1.7 million dollar house will easily exceed $25,000/year in many states. Don't forget your student loan payments either.
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The rule of thumb is for a reasonable maximum to your mortgage payment. Someone making $300k/year with $93k in taxes and an $84k mortgage still has $123k a year for everything else. Even with $25k for property taxes and $30k for student loans (about the highest you'd pay with that income under the current IBR plans), that's $68k a year for insurance, food, transportation, etc. It would be basically you prioritizing the house above all else, but you will have enough money left to live a good life (that is, your discretionary spending AFTER housing and loans would still be higher than half the households in the country total income. While you're living in your $1.7mm house).
 
Raryn said:
The rule of thumb is for a reasonable maximum to your mortgage payment. Someone making $300k/year with $93k in taxes and an $84k mortgage still has $123k a year for everything else. Even with $25k for property taxes and $30k for student loans (about the highest you'd pay with that income under the current IBR plans), that's $68k a year for insurance, food, transportation, etc. It would be basically you prioritizing the house above all else, but you will have enough money left to live a good life (that is, your discretionary spending AFTER housing and loans would still be higher than half the households in the country total income. While you're living in your $1.7mm house).
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Yes, I agree with you that it is possible. I think it is a very bad idea. But it is possible.

I think a more interesting question which is less easy to answer is: what is the optimal priced home a physician should buy on a $300k income? The goals are becoming wealthy, achieving financial independence, and retiring by age 65.
 
cpants said:
Yes, I agree with you that it is possible. I think it is a very bad idea. But it is possible.

I think a more interesting question which is less easy to answer is: what is the optimal priced home a physician should buy on a $300k income? The goals are becoming wealthy, achieving financial independence, and retiring by age 65.
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I think that depends entirely depending on what market you're in. Assuming that our physician wants to live in a decent sized home in a safe neighborhood with quality schools.

In some parts of the country it might be $200,000 and in some it might be $1,000,000. Both are quite compatible with an income of $300k and a goal for FI, depending on your spending elsewhere.
 
Lothric said:
So in other words, only those that happen to be lucky and relative to a doctor lazy/effortless can buy houses for those prices and up like actors/the kids on Twitch/YouTube who pull in millions per month, athletes etc. Sad. The hard-working academics can forget it.

Well, what's the extreme viable end on the spectrum then regarding the house with the annual 300k? 4 million maybe?
Click to expand...

Why are you asking this absurd question? Can you do simple math?
 
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Lothric said:
Why are you replying to a question that's already been answered? Can't you read?
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Speaking of reading, I recommend The Millionaire Next Door by Stanley and Danko. They identify physicians as the top group of high income earners who are Under-Accumulators of Wealth (UAW) and identify reasons why. The mentality that drove you to create this thread only confirm the stereotype that some physicians -- generally speaking -- are horrible with personal finance and accumulating wealth.

For a more extreme example of a hardcore saver, look at Mr. Money Mustache's blog and the tenets of his philosophy.
 
at most, your monthly house (mortgage + tax + insurance) payment should be 25-33% of your post-tax income, depending on who you talk to. if you make 10k after taxes, your house payment shouldn't be more than 2.5-3.3k per month.
 
Lothric said:
Hey,

Is it possible for a single doctor with an annual salary of 300k $ to buy a house for 6 million dollars?
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Well I started out making 300k my first year. So I bought a house for 575k 3.5 years later. i stayed in an apartment those first few years and saved up for a huge downpayment (30%). 3 mil is smoking crack for a house. You cant afford it.
 
Lonestar said:
Well I started out making 300k my first year. So I bought a house for 575k 3.5 years later. i stayed in an apartment those first few years and saved up for a huge downpayment (30%). 3 mil is smoking crack for a house. You cant afford it.
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I know the rule of thumb is ~23% of income for a mortgage, but if you are using 25% of your salary towards your home every year, is that still a comfortable living?
 
2.5x your annual salary is reasonable. Do you need multimillion dollar home for some reason? Is this a hyperinflated coastal region? Rent or come join us in flyover and get you a bona fried mansion for 1M.
 
Also yes, academia and medicine are upper middle class bourgeois fields and not routes to super wealth. Multimillion dollar houses are for the independently wealthy, finance parasites, and/or lucky idiots who are going to go bankrupt eventually.
 
CyrusHabs7695 said:
I know the rule of thumb is ~23% of income for a mortgage, but if you are using 25% of your salary towards your home every year, is that still a comfortable living?
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I mean, let's say you make 12k a month after taxes, and you spend 3k on your mortgage. That still leaves you with 9k/month to spend, which is still pretty damn comfortable to me.
 
Mad Jack said:
I mean, let's say you make 12k a month after taxes, and you spend 3k on your mortgage. That still leaves you with 9k/month to spend, which is still pretty damn comfortable to me.
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haha that is true. I feel like a big factor in determining the house you can afford is where it actually is, tax wise. You could afford something more expensive in an area like Vegas with no state taxes right?
 
IDK what these guys are talking about OP.

Yes you CAN.

So go!

Go buy it...

And then once you foreclose on it, I'll buy it off of you for a fraction of what you got and then flip it again.

#MedStudentsWithNoCommonSense

#MedStudentsThatAreBookSmartButNotStreetSmart

#LivingLavishWhileBeingBroke

#DoctorMoneyWithDonkeyBrains

🙂
 
CyrusHabs7695 said:
I know the rule of thumb is ~23% of income for a mortgage, but if you are using 25% of your salary towards your home every year, is that still a comfortable living?
Click to expand...

Roughly 1/3 of my take home pay goes towards rent and utilities. I still had enough left over to contribute to an IRA, eat out far more often than I should’ve, and pay down some of my student loans. It depends what your take home pay is and what your expenses are. If I made paying off my loans more of a priority, I could move somewhere where the rent is cheaper, but I’d be giving up some of my “comfortable” living in the process.
 
Lothric said:
Why are you replying to a question that's already been answered? Can't you read?
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I'm guessing they are asking because your original question seemed to be hinting at something else and that something else might be more easily answered if you came out and asked it. I mean why ask if a doctor making $300K can afford a $6M house? As already pointed out, that's a simple math problem and anybody that got into medical school can solve the equation for themselves. Are you asking if any physician can ever afford a $6M house? That's a different question because some physicians can they just have much higher incomes than $300K. Are you asking if a physician earning $300K a year can afford an awesome house? Of course they can but that kinda depends what housing market they are in.

$6M is a lot of house. I've been in some 20,000 sq ft plus mega mansions that cost way less than $6M. Is there a particular house you wanted to buy that makes that particular number so special?

My advice is if you want a fancy house, earn a high income to be able to afford it.
 
Mman said:
I'm guessing they are asking because your original question seemed to be hinting at something else and that something else might be more easily answered if you came out and asked it. I mean why ask if a doctor making $300K can afford a $6M house? As already pointed out, that's a simple math problem and anybody that got into medical school can solve the equation for themselves. Are you asking if any physician can ever afford a $6M house? That's a different question because some physicians can they just have much higher incomes than $300K. Are you asking if a physician earning $300K a year can afford an awesome house? Of course they can but that kinda depends what housing market they are in.

$6M is a lot of house. I've been in some 20,000 sq ft plus mega mansions that cost way less than $6M. Is there a particular house you wanted to buy that makes that particular number so special?

My advice is if you want a fancy house, earn a high income to be able to afford it.
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Usually when people ask the kind of question like OP did, asking about A 6M dollar house, they are referring to the ones in the Hollywood hills
 
CyrusHabs7695 said:
Usually when people ask the kind of question like OP did, asking about A 6M dollar house, they are referring to the ones in the Hollywood hills
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if someone wants to live in Southern California, they can be happy with whatever kind of shack they can afford. Between the state taxes and insane property values, it won't be much. If you want a real luxurious house as a doc, trying living elsewhere.

edit: and based on his recent postings in the Heme/Onc forum trying to figure out how to get a $400K starting salary in SoCal while working < 50 hours per week you are probably correct
 
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CyrusHabs7695 said:
I know the rule of thumb is ~23% of income for a mortgage, but if you are using 25% of your salary towards your home every year, is that still a comfortable living?
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I'm in a very high COL area spending $1350 on my half of rent on a resident salary (~65k so like 1/3 of my take-home) and feel completely comfortable. I don't have a car--not because a car is itself expensive but because parking in my building and at the hospital would triple the cost of ownership. I don't see how someone netting three times my gross would have trouble living comfortably spending less on their housing--proportionally--than I spend on rent now.
 
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If I wanted a house in the hills iiwould start with a 1m house and invest two million over twenty years. That 2 million will be worth about five total from compounding interest. Then you can move into your dream house.
 
FlowRate said:
I'm in a very high COL area spending $1350 on my half of rent on a resident salary (~65k so like 1/3 of my take-home) and feel completely comfortable. I don't have a car--not because a car is itself expensive but because parking in my building and at the hospital would triple the cost of ownership. I don't see how someone netting three times my gross would have trouble living comfortably spending less on their housing--proportionally--than I spend on rent now.
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Because some people get the fancy house plus the fancy car, then send their kids to the fancy private school, and go on fancy vacations when they aren't buying fancy **** for their house.
 
dpmd said:
Because some people get the fancy house plus the fancy car, then send their kids to the fancy private school, and go on fancy vacations when they aren't buying fancy **** for their house.
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Is that your definition of living comfortably? Or are you making the sarcastic point that some people do think that's what it means?
 
always.chillin said:
Bumping this thread to get some thoughts. I currently live in a small house I bought in residency. I'm an attending now, 29, and currently make 600k/yr. No debt. I have no problems with my current house, but I was day-dreaming and browsing Zillow and ended up looking up Hollywood Hills houses (lol). Saw some pretty cool spots for 2-3 million. Obviously the market will change in the future, but is it feasible to retire to a house in that price range in my 60s if I continue working at my current income level?
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With an income of $600k, you can feasibly get a $2million house even now, but with current interest rates, it's a bit of a stretch to go higher than that. PITI for a house like that will depend on the exact rates, down payment, and property tax/local insurance environment, but is likely on the order of ~$16k/month. That's around a third of your gross and probably around half your net income, depending on your marital status, dependents, and state you're in. Regardless, it's not "unaffordable", but it's not ideal either. Three million would be really pushing it.
 
always.chillin said:
Bumping this thread to get some thoughts. I currently live in a small house I bought in residency. I'm an attending now, 29, and currently make 600k/yr. No debt. I have no problems with my current house, but I was day-dreaming and browsing Zillow and ended up looking up Hollywood Hills houses (lol). Saw some pretty cool spots for 2-3 million. Obviously the market will change in the future, but is it feasible to retire to a house in that price range in my 60s if I continue working at my current income level?
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Depends on what you do with your income now. If you live on a small fraction of it and invest the rest you will accumulate enough assets to pay the costs a house like that would bring you. But why would you want to do that? If you are happy with your house and with an inexpensive lifestyle now why would you need this later? And if you aren't happy with either why would you deprive yourself for so long?
 
always.chillin said:
Bumping this thread to get some thoughts. I currently live in a small house I bought in residency. I'm an attending now, 29, and currently make 600k/yr. No debt. I have no problems with my current house, but I was day-dreaming and browsing Zillow and ended up looking up Hollywood Hills houses (lol). Saw some pretty cool spots for 2-3 million. Obviously the market will change in the future, but is it feasible to retire to a house in that price range in my 60s if I continue working at my current income level?
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Yes - and much sooner than that if you are even remotely smart with your money.
 
always.chillin said:
Bumping this thread to get some thoughts. I currently live in a small house I bought in residency. I'm an attending now, 29, and currently make 600k/yr. No debt. I have no problems with my current house, but I was day-dreaming and browsing Zillow and ended up looking up Hollywood Hills houses (lol). Saw some pretty cool spots for 2-3 million. Obviously the market will change in the future, but is it feasible to retire to a house in that price range in my 60s if I continue working at my current income level?
Click to expand...
You won't even have to be 60 to retire to a house of 2.5 mil if you continue to live like regular a upper middle class individual (eg., living on 10-12k/month), which is a lot IMO. 600k/yr is a lot money.
 
On 600k you could probably get a house like that now what’s the point if you’re already 60 might as well enjoy the money smartly while you have it in my opinion
 
always.chillin said:
Bumping this thread to get some thoughts. I currently live in a small house I bought in residency. I'm an attending now, 29, and currently make 600k/yr. No debt. I have no problems with my current house, but I was day-dreaming and browsing Zillow and ended up looking up Hollywood Hills houses (lol). Saw some pretty cool spots for 2-3 million. Obviously the market will change in the future, but is it feasible to retire to a house in that price range in my 60s if I continue working at my current income level?
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No debt, reasonable house, maybe no kids too?
Great income and if you want wealth and be young limit spending to 8-10k/mo for the next 10 years and invest everything else and you'll be "fire" 2.0. This is extremely hard to do for most as they don't have the variables in place and a great salary and being content with a reasonable house and ur 29!! Best of luck.
 
You can do whatever you want. It's your money. However, if you want to build wealth, I would suggest following one or both of these two guidelines:

# 1 Keep all housing expenses (Principal, interest, taxes, insurance, utilities etc) to less than 20% of your gross income
# 2 Keep mortgage amount to less than 2X gross income. So if you make $300K and want an $800K house, you should put $200K down to stay within that guideline.

While you can stretch these guidelines a little (3-4X is a stretch, 10X is insane) as people feel they must in HCOLA, there are consequences to doing so, like working longer, driving crummier cars, going on fewer vacations, more financial stress etc.
 
Lothric said:
Hey,

Is it possible for a single doctor with an annual salary of 300k $ to buy a house for 6 million dollars?
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Possible and smart are two very different things. Possible? Sure. If you've got an income of $300K and $6M sitting around you could buy a $6M house. Would that be smart for this person to put all of their net worth into a house? No.

Can a $300K income afford the payments on a $6 million 6% mortgage? The answer to that is no. The payments are $435K per year.
 
I'm seeing a lot of houses now that are baseline around 1 mil. So if you are working as hospitalist and earn about $200K, can you realistically afford this? How do we work property taxes into the equation?
 
Jay2910 said:
I'm seeing a lot of houses now that are baseline around 1 mil. So if you are working as hospitalist and earn about $200K, can you realistically afford this? How do we work property taxes into the equation?
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With our income levels, I think "can you afford this" is better replaced by "should you really spend that much."

There's a lot of stuff you "can afford" if you don't contribute anything to retirement accounts. High-end brand-new luxury cars, $1M homes, etc. But that's how you go about never retiring. A $1M 30-yr fixed mortgage at 7% interest is $6.6k per month. In my area, $200k gross is $140k net for a single filer. After you add insurance, property tax, upkeep, and utilities, you're spending around $90k/yr on housing. Do you want to have only $50k/yr budget for all other spending?

There are a lot of recommended spending amounts. WCI recommends 2x your gross for home price, stretching to 3-4x in high COL areas.

FWIW, as a personal anecdote, I earn around $300k and I'm planning on buying in the $600-800 range. I'd love to feel like I should stretch to 4x and go for $1.2M since that's the entry to some really nice areas of town, but I don't think it's worth everything I'd sacrifice to get there.
 
Jay2910 said:
I'm seeing a lot of houses now that are baseline around 1 mil. So if you are working as hospitalist and earn about $200K, can you realistically afford this? How do we work property taxes into the equation?
Click to expand...
If the interest rates are low enough, you have enough down payment, and you have no other debt to pay you can. There are calculators that you can put your info including state/county into and it will spit out your anticipated property taxes and monthly mortgage payment.
 
FlowRate said:
With our income levels, I think "can you afford this" is better replaced by "should you really spend that much."

There's a lot of stuff you "can afford" if you don't contribute anything to retirement accounts. High-end brand-new luxury cars, $1M homes, etc. But that's how you go about never retiring. A $1M 30-yr fixed mortgage at 7% interest is $6.6k per month. In my area, $200k gross is $140k net for a single filer. After you add insurance, property tax, upkeep, and utilities, you're spending around $90k/yr on housing. Do you want to have only $50k/yr budget for all other spending?

There are a lot of recommended spending amounts. WCI recommends 2x your gross for home price, stretching to 3-4x in high COL areas.

FWIW, as a personal anecdote, I earn around $300k and I'm planning on buying in the $600-800 range. I'd love to feel like I should stretch to 4x and go for $1.2M since that's the entry to some really nice areas of town, but I don't think it's worth everything I'd sacrifice to get there.
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Don't forget all the luxury vacations
 
Jay2910 said:
I'm seeing a lot of houses now that are baseline around 1 mil. So if you are working as hospitalist and earn about $200K, can you realistically afford this? How do we work property taxes into the equation?
Click to expand...
My mortgage is $900K at just below 5%, and with my base salary of nearly $500K, after contributing 22% to retirement, there definitely is a lot less leftover at the end of the month than I would like there to be. And that's before even starting student loan payments again! I can't imagine how tight it would feel on a $200K salary.
 
My house was $230k. 6.5% rate though.

but I'm frugal AF 🙂
 
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