What can I be doing different Financially??

[sloh]

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Some parts of San Diego too. Low property taxes and relatively limited land to build on means housing isn’t a terrible investment long term.

In other parts of the country it’s much easier to build outwards. It’s simple economics — with less supply constraint, property values won’t appreciate as much. Dallas is a good example of this with so many newer suburbs popping up around the metro area.

If you gave me $2 million, I would much rather buy a house in Southern California even if it’s only a 2,000 sqft track house. Sure that same amount will get you a house three times as big elsewhere, but odds are property taxes will be higher, it’ll be in a suburb 30-60 minutes from downtown, and in five years another newer development will pop up right next to you.

Gf and I have been looking for a house in Irvine. We were asking our realtor if we bought a ~2500 sq ft house we like (but don’t love) in the Irvine village/neighborhood we love (Great Parks much different vibe compared to Orchard Hills) and found a house we really love 4-5 years later, how much money would we lose selling and buying another house since we would not have lived there that long. She laughed and said “you would make money on that house in 2 years.”

 

[skougess]

You need to add the maintenance, repairs, and renovations to the cost of buying and to the returns of investing. It’ll cost you way more than your estimate once you add in the return on investment of all that money you didn’t spend renovating/repairing.

I have a humble 1600 square foot home. I roughly estimate over the past 2 years I’ve spent:
-$28000 on maintenance
-$16000 on renovations

On a 3-4k sq ft house those costs go up. Every sq ft of building is more headache and more expense. More siding/roof to fail. More windows to replace. More hvac to buy. None of this stuff is cheap.

Don’t believe the online calculators about how much you’ll spend on this stuff, OP. Those are for the average American who would rather throw a tarp over their roof then repair a leaking shingle. You are a physician, which means you have money and are conscientious. You will want things done right, and frequently done beautifully.

I promise if you and your wife feel like you need a $4m house now, that in 20 years you’ll want the ENTIRE interior renovated.

 

[aneftp]

I've already run the numbers in a post I made months ago on a comparable $3.3 million dollar home. It becomes a no brainer to buy in this area (in my humble opinion) if:

1) the housing market finally flattens in the next 5 years
2) interest rates go down below 4% again
3) we plan to stay here 20-30 years

This is just for 15 years, if the conditions above are met, buying becomes more prudent. Note numbers a little different as we moved since that post (but still the principal doesn't change).

Scenario 1 - Rent the house:
-I rent the house for $6850 a month for 15 years. With utilities I pay $7500. Cost of living adjustment 3% a year. I spend $1,4000,000 to rent this house for 15 years.
-We take that $600,000 down payment and put it in VTI/VOO. Each month, I take the rest of the money I would have been paying the mortgage with ($21,000 - $7500 = $13,500) and just invest that too. In an ideal world I get 8% ROI in the market. That is $6,500,000 after 15 years.

=>So we netted $6,500,000 - $1,400,000 = $5,100,000.

Scenario 2 - Buy the house:
-I take every call shift possible, 1099 side gigs, wife inherits money and somehow we piecemeal our way to buying this house for $3,000,000. We put 20% or $600,000 down and take out a $2,400,000 mortgage at 7.2%.
-After $600,000 down, I am paying $21,000 a month for mortgage, utiliteis, property tax, and insurance. We live extremely uncomfortably paycheck to paycheck.
-If we sell in 15 years with a 5% return on investment each year the house should net $6,200,000.
-We will owe the bank $1,800,000 to pay off the rest of the mortgage and the realtor 5% ($300,000) for selling the house.

=>So we netted $4,100,000 (not including any maintenance, repairs, renovations during that 15 years).

So the difference is $1,000,000 over 15 years (probably closer to $1,500,000 once you factor in repairs/renovations).

Ur rent could increase 20-30% in 5 years. And not 3% cost of living adjustment. U forgot to factor that in also

It’s complicated.

 

[triggermaster]

Gf and I have been looking for a house in Irvine. We were asking our realtor if we bought a ~2500 sq ft house we like (but don’t love) in the Irvine village/neighborhood we love (Great Parks much different vibe compared to Orchard Hills) and found a house we really love 4-5 years later, how much money would we lose selling and buying another house since we would not have lived there that long. She laughed and said “you would make money on that house in 2 years.”

That’s realtor math. They think making money is sale price - purchase price = profit. That’s just wrong but good if you are trying to extort 5-6% as largely unnecessary middle men in the transaction.

 

[GassYous]

Gf and I have been looking for a house in Irvine. We were asking our realtor if we bought a ~2500 sq ft house we like (but don’t love) in the Irvine village/neighborhood we love (Great Parks much different vibe compared to Orchard Hills) and found a house we really love 4-5 years later, how much money would we lose selling and buying another house since we would not have lived there that long. She laughed and said “you would make money on that house in 2 years.”

Your realtor is incentivized to make sure that you buy a house so that they can receive the unjustified fees. A 2 million dollar house is 60k for the buyers agent and sellers agent EACH! They are making a normal person's annual salary just for showing an expensive house. Absurd.

Think of all the realtors the past year that have been telling their clients to marry the house but date the rate. Where have the rates gone in the past year?

Also buying a house with a gf would be a really bad move

 

[deleted1183938]

I've already run the numbers in a post I made months ago on a comparable $3.3 million dollar home. It becomes a no brainer to buy in this area (in my humble opinion) if:

1) the housing market finally flattens in the next 5 years
2) interest rates go down below 4% again
3) we plan to stay here 20-30 years

This is just for 15 years, if the conditions above are met, buying becomes more prudent. Note numbers a little different as we moved since that post (but still the principal doesn't change).

Scenario 1 - Rent the house:
-I rent the house for $6850 a month for 15 years. With utilities I pay $7500. Cost of living adjustment 3% a year. I spend $1,4000,000 to rent this house for 15 years.
-We take that $600,000 down payment and put it in VTI/VOO. Each month, I take the rest of the money I would have been paying the mortgage with ($21,000 - $7500 = $13,500) and just invest that too. In an ideal world I get 8% ROI in the market. That is $6,500,000 after 15 years.

=>So we netted $6,500,000 - $1,400,000 = $5,100,000.

Scenario 2 - Buy the house:
-I take every call shift possible, 1099 side gigs, wife inherits money and somehow we piecemeal our way to buying this house for $3,000,000. We put 20% or $600,000 down and take out a $2,400,000 mortgage at 7.2%.
-After $600,000 down, I am paying $21,000 a month for mortgage, utiliteis, property tax, and insurance. We live extremely uncomfortably paycheck to paycheck.
-If we sell in 15 years with a 5% return on investment each year the house should net $6,200,000.
-We will owe the bank $1,800,000 to pay off the rest of the mortgage and the realtor 5% ($300,000) for selling the house.

=>So we netted $4,100,000 (not including any maintenance, repairs, renovations during that 15 years).

So the difference is $1,000,000 over 15 years (probably closer to $1,500,000 once you factor in repairs/renovations).

Jesus!! Send me to Europe. The way doctors in America talk about money like it is growing on trees is so bizarre to me. I hear doctors all the time comparing their $1 or 2Mil houses and really think that so many are out of touch with reality.
Good luck in whatever decision you make OP. Rich people problems.

 

[anonperson]

I've already run the numbers in a post I made months ago on a comparable $3.3 million dollar home. It becomes a no brainer to buy in this area (in my humble opinion) if:

1) the housing market finally flattens in the next 5 years
2) interest rates go down below 4% again
3) we plan to stay here 20-30 years

This is just for 15 years, if the conditions above are met, buying becomes more prudent. Note numbers a little different as we moved since that post (but still the principal doesn't change).

Scenario 1 - Rent the house:
-I rent the house for $6850 a month for 15 years. With utilities I pay $7500. Cost of living adjustment 3% a year. I spend $1,4000,000 to rent this house for 15 years.
-We take that $600,000 down payment and put it in VTI/VOO. Each month, I take the rest of the money I would have been paying the mortgage with ($21,000 - $7500 = $13,500) and just invest that too. In an ideal world I get 8% ROI in the market. That is $6,500,000 after 15 years.

=>So we netted $6,500,000 - $1,400,000 = $5,100,000.

Scenario 2 - Buy the house:
-I take every call shift possible, 1099 side gigs, wife inherits money and somehow we piecemeal our way to buying this house for $3,000,000. We put 20% or $600,000 down and take out a $2,400,000 mortgage at 7.2%.
-After $600,000 down, I am paying $21,000 a month for mortgage, utiliteis, property tax, and insurance. We live extremely uncomfortably paycheck to paycheck.
-If we sell in 15 years with a 5% return on investment each year the house should net $6,200,000.
-We will owe the bank $1,800,000 to pay off the rest of the mortgage and the realtor 5% ($300,000) for selling the house.

=>So we netted $4,100,000 (not including any maintenance, repairs, renovations during that 15 years).

So the difference is $1,000,000 over 15 years (probably closer to $1,500,000 once you factor in repairs/renovations).

You are stuck on a $3.3 million dollar house. You cannot swing that on your current income.. Couple that if there is a health issue etc where you can't work as much, then you will really feel it.

The tech money is too strong up north. We cannot compete with the RSUs that these workers have.

There's nothing acceptable in the $2 million range at all?

It would be a shame to have the stress of living paycheck to paycheck with such a high income. You have to adjust your expectations a bit.

 

[thinkorswim]

Your realtor is incentivized to make sure that you buy a house so that they can receive the unjustified fees. A 2 million dollar house is 60k for the buyers agent and sellers agent EACH! They are making a normal person's annual salary just for showing an expensive house. Absurd.

Realtors don’t do as well as you’d think. Brokerages usually take half of that 3% commission. Then the realtor has their own expenses (MLS fees, licenses, etc). Then the reality is there only a few high volume realtors in most places and most others are only making a sale or two every few months. So the majority of realtors are barely breaking $100k probably. The ones you are thinking of are probably the top one percent with multiple monthly sales and large teams.

Think of all the realtors the past year that have been telling their clients to marry the house but date the rate. Where have the rates gone in the past year?

Rates haven’t gone anywhere but housing prices have certainly risen. So they have been right thus far and will probably continue to be unless you think rates will go significantly higher.

 

[aneftp]

Jesus!! Send me to Europe. The way doctors in America talk about money like it is growing on trees is so bizarre to me. I hear doctors all the time comparing their $1 or 2Mil houses and really think that so many are out of touch with reality.
Good luck in whatever decision you make OP. Rich people problems.

Very few doctors buy a 1 million dollar house fresh out of residency or even 3 years out of residency. Let alone a 3.3 million dollar home especially at 6.5% interest rates these days (interest rates going down to 4.5% likely doesn’t move the needle for the OP either.

Unless they have two physician income grossing over 600k plus have sufficient downpayment. And even than that gets you stretching it to make it work with a 1.3 million dollar home

There are cheaper homes once you get out of a certain part of the area the OP wants to live in. Just commute will take 45 min.

It’s a personal decision

Time and money. That is all it comes down to.

I. Does the spouse work remotely ? Is the job closer for both spouses?
2. What is the long term prospect of the current job for both spouses?

 

[emergentmd]

OP, I think the end of the day, you need to do what is best for you/your family but just make a educated decision.

I know docs who overspend and live check to check getting caught late in their career needing to still work full time. I know docs who spend little, make their family miserable, and died of Cancer in the early 50's.

No one can tell you or should judge what you decide. Just make sure your decision is made with eyes wide open. If you want to continue your current spending just realize that there are a lot of unknowns that could throw a wrench in current plans including divorce, kids, downturn in the job market, etc. If you think the risk is worth it, then keep doing what you are doing that makes you/your family happy.

 

[gaspusher]

I think the thing you guys (may) be forgetting is that we are already put $100,000 into retirement accounts alone each year - right now in our early 30s with 25 years to go. Shoot, conservatively that $7-8 million right there. I can't imagine that this will not be enough to live on in retirement with a paid off house. I can't predict the future with job stability, but as of right now we both have good stable jobs that we love.

Even if we lived paycheck to paycheck now with a nice house for a few years (we won't because I'm not jumping in until the next recession, hence why we are hoarding cash on the side), we have forced savings in our 401ks/Roths/IRAs. Not like a house around here is a bad investment either - that $3 million dollar house will be worth $10 million in 25 years.

Other than the house in a trust, we don't really anticipate leaving our kids anything - we are using every last penny we earned. As a matter of a fact, I hope they are supporting us in 30 years. I send my parents money each month and they are multi millionaire haha. That's the way I was raised and the way I will raise my children. They will go to public school throughout and study for SATs every week starting freshman year of high school so that they can get into a UC. If they get into a med/law/business school, then my wife's parent's trust for them will pay for that in whole quite easily.

Again, I know the spending has been way too much this year, but with all that we went through it will come down.

 

[deleted1183938]

I think the thing you guys (may) be forgetting is that we are already put $100,000 into retirement accounts alone each year - right now in our early 30s with 25 years to go. Shoot, conservatively that $7-8 million right there. I can't imagine that this will not be enough to live on in retirement with a paid off house. I can't predict the future with job stability, but as of right now we both have good stable jobs that we love.

Even if we lived paycheck to paycheck now with a nice house for a few years (we won't because I'm not jumping in until the next recession, hence why we are hoarding cash on the side), we have forced savings in our 401ks/Roths/IRAs. Not like a house around here is a bad investment either - that $3 million dollar house will be worth $10 million in 25 years.

Other than the house in a trust, we don't really anticipate leaving our kids anything - we are using every last penny we earned. As a matter of a fact, I hope they are supporting us in 30 years. I send my parents money each month and they are multi millionaire haha. That's the way I was raised and the way I will raise my children. They will go to public school throughout and study for SATs every week starting freshman year of high school so that they can get into a UC. If they get into a med/law/business school, then my wife's parent's trust for them will pay for that in whole quite easily.

Again, I know the spending has been way too much this year, but with all that we went through it will come down.

So your parents are rich, your wife’s parents are rich, you are gonna be rich and are upper class right now, and yet you are here asking us for advice on how to save money. And then turn around and throw it in our faces just how rich your family is because you don’t like some of the answers? Are you serious right now?
How many of us have parents with trusts And multimillionaire parents? And you still send them money? For what exactly?
I send my parents money each month but they earn about $35k in retirement.

What the hell is wrong with you? You are what’s wrong with the damn world. Egotistical, humble bragging, woe is me and yet you are set up financially.

Give us a ****ing break and go to hell. You are an absolute douchebag.

 

[Coffee PRN]

So your parents are rich, your wife’s parents are rich, you are gonna be rich and are upper class right now, and yet you are here asking us for advice on how to save money. And then turn around and throw it in our faces just how rich your family is because you don’t like some of the answers? Are you serious right now?
How many of us have parents with trusts And multimillionaire parents? And you still send them money? For what exactly?
I send my parents money each month but they earn about $35k in retirement.

What the hell is wrong with you? You are what’s wrong with the damn world. Egotistical, humble bragging, woe is me and yet you are set up financially.

Give us a ****ing break and go to hell. You are an absolute douchebag.

Damn what did the surgeon do to hurt you 🙁

 

[deleted1183938]

Damn what did the surgeon do to hurt you 🙁

They don’t. I talk back.
This dude is a douche. My opinion and I am sticking to it.
Many of us actually come from very little and actually HAVE TO help our families and he’s over here with the “woe is me, help me” attitude only to throw it in our faces that he really doesn’t need it.

He needs do shut it. This is a complete humble brag from a douche.

 

[pgg]

So your parents are rich, your wife’s parents are rich, you are gonna be rich and are upper class right now, and yet you are here asking us for advice on how to save money. And then turn around and throw it in our faces just how rich your family is because you don’t like some of the answers? Are you serious right now?
How many of us have parents with trusts And multimillionaire parents? And you still send them money? For what exactly?
I send my parents money each month but they earn about $35k in retirement.

What the hell is wrong with you? You are what’s wrong with the damn world. Egotistical, humble bragging, woe is me and yet you are set up financially.

Give us a ****ing break and go to hell. You are an absolute douchebag.

Time for you to be quiet for a while, at least in this thread.

As much as we permit and enjoy spirited arguments here, this is excessive and inappropriate.

 

[skougess]

Time for you to be quiet for a while, at least in this thread.

As much as we permit and enjoy spirited arguments here, this is excessive and inappropriate.

It was a bit much, but he’s not wrong. What is the point of your thread OP? I mean really.

Go buy your $4m house if money is no object. Have a discussion with your wife like an adult and just do it. No one cares. Why post about this pseudo dilemma on a forum?

 

[emergentmd]

Can you guys help me decide what I need to do differently?

I make about 500K a year, but spend alot. I am living check to check because I live in a $2M home, have 3 kids in private school, wife has a golf club membership eventhough she doesn't golf. I have saved very little since starting as an attending because I live check to check.

Oh, I forgot to tell you that I have $1B in the bank after winning the lottery last year. 😊

 

[DirtDocMD]

I think the thing you guys (may) be forgetting is that we are already put $100,000 into retirement accounts alone each year - right now in our early 30s with 25 years to go. Shoot, conservatively that $7-8 million right there. I can't imagine that this will not be enough to live on in retirement with a paid off house. I can't predict the future with job stability, but as of right now we both have good stable jobs that we love.

Even if we lived paycheck to paycheck now with a nice house for a few years (we won't because I'm not jumping in until the next recession, hence why we are hoarding cash on the side), we have forced savings in our 401ks/Roths/IRAs. Not like a house around here is a bad investment either - that $3 million dollar house will be worth $10 million in 25 years.

Other than the house in a trust, we don't really anticipate leaving our kids anything - we are using every last penny we earned. As a matter of a fact, I hope they are supporting us in 30 years. I send my parents money each month and they are multi millionaire haha. That's the way I was raised and the way I will raise my children. They will go to public school throughout and study for SATs every week starting freshman year of high school so that they can get into a UC. If they get into a med/law/business school, then my wife's parent's trust for them will pay for that in whole quite easily.

Again, I know the spending has been way too much this year, but with all that we went through it will come down.

To “sum up”, what another poster said (perhaps slightly more eloquently), it sounds as if your family is “set”, financially. It sounds as though your mind is already made up, as well. Not sure what the point of this was, other than an “academic” exercise, or to (not in a subtle way), tell everyone that your parents are “multi-millionaires”, and your kids already have a trust fund (through wifey’s well-to-do parents). Good day and good luck..

 

[Radar26]

OP is looking for what they can do more investing-wise. Maybe those who live in that VHCOL area should consider investing with a local bank that caters to “elite” clients, maybe a bank like First Republic Bank… oh, wait

 

[DesiredMemberName?]

One thing you could do differently is see if either your parents or your spouse’s parents are willing to gift or loan you the money for a down payment or outright purchase of a home. This is very common in the Bay Area.

Mortgages are 7%. From a familial wealth perspective, it’s kind of silly for them to have money sitting in their account that they plan to gift to you as an inheritance when they die while you’re paying 7% for a mortgage today.

Of course, this assumes they want to give you anything, which is their choice. I don’t know your family dynamics or whether this would be a nonstarter, but it is something else to consider.

 

[POW16]

What a bizarre, useless thread.

 

[gaspusher]

My parents will not gift me anything, nor will they loan me a couple million at 2%. They will spend every last dime they earned and still request I send them money in addition. That is the way I was raised and the way I will raise my children. My wife's parents are more generous, yes. I was not asking for criticism of my family dynamics, simply asking what better way I can manage my money financially. I got some good and bad advice. Thank you for all the comments.

 

[Splenda88]

573 More Ave, Los Gatos, CA 95032 | realtor.com®

View 29 photos for 573 More Ave, Los Gatos, CA 95032, a 5 bed, 4 bath, 4,270 Sq. Ft. single family home built in 2009 that was last sold on 07/17/2019.

www.realtor.com

Our house is a much newer, slightly smaller version of this house. We pay less than they want too. Redfin, realtor, Zillow estimate in the 3.5 million range.

Move to south FL so you can buy a nicer house for only 3 mil.

This is Lou Dobbs' home in south FL and it's on sale.

More bang for your buck.

7112 Eagle Terrace, West Palm Beach, FL 33412 | Zillow

7112 Eagle Terrace, West Palm Beach FL, is a Single Family home that contains 5111 sq ft and was built in 1999.It contains 4 bedrooms and 5 bathrooms.This home last sold for $2,500,000 in September 2024. The Zestimate for this Single Family is $2,444,700, which has decreased by $28,858 in the...

www.zillow.com

 

[GassYous]

Move to south FL so you can buy a nicer house for only 3 mil.

This is Lou Dobbs' home in south FL and it's on sale.

More bang for your buck.

7112 Eagle Terrace, West Palm Beach, FL 33412 | Zillow

7112 Eagle Terrace, West Palm Beach FL, is a Single Family home that contains 5111 sq ft and was built in 1999.It contains 4 bedrooms and 5 bathrooms.This home last sold for $2,500,000 in September 2024. The Zestimate for this Single Family is $2,444,700, which has decreased by $28,858 in the...

www.zillow.com

I think I could live here

 

[nimbus]

Every market is different. The real estate market in certain pockets of Southern California is very different than metro areas of Texas for example.

I live in an area with a red hot housing market, largely due to very little inventory and lots of foreign cash buyers (mostly Chinese) scooping up houses above asking price. My house has appreciated about 25% in the past two years and that’s relatively low for the area. A friend of mine bought a new build for $2.5 million just two years ago and comparable houses in his area are now selling for $4-5 million.

This Orange County city has the hottest housing market in the country

Irvine had the largest surge in U.S. home values over the last year and is defying population and homebuilding trends, in part because of Asian and Asian American buyers.

www.latimes.com

“Driving the recent surge, she said, were foreign buyers from Asia who have long been attracted to Irvine for the K-12 schools, the university and its other amenities. Nearly 40% of Irvine’s population is foreign born, 80% of which is from Asian countries, according to census data. Today, a plurality of Irvine’s residents, 44%, are Asian, the data show.

Irvine’s reputation spreads by word of mouth among Asian families with the means to buy, Calcote said.

“You could talk to a Chinese or Korean person and they would know Irvine,” Calcote said. “They may not even know California, but they know Irvine.”


Foreign buyers, who often pay in cash or borrow outside the traditional mortgage market, aren’t as sensitive to higher rates. These owners may be moving to Irvine or just looking for a safe place to park their money. Orange County is one of the rare spots in the country where investor activity has been accelerating, according to research from Burns’ firm.

Liu Guanyi of Shanghai paid $2 million in June for a new four-bedroom house in Irvine’s Portola Springs community. In the next few years, he plans to move in with his family.

He was already well acquainted with Irvine. In 2019, he and his wife had traveled there for the birth of their first child so she could be a U.S. citizen. Afterward, he bought a house in Irvine, another in Anaheim and the new one is his third in Orange County.

Like many in China, Liu said, he is impressed by Irvine’s schools and low crime rate. He wants an American education for his daughter and 6-month-old son.

“We feel like the American educational system is still the best in the world, so we thought we would give our kids a broader perspective,” said Liu, 38, who owns a company that makes car window coatings.

The Chinese government’s harsh lockdowns during the pandemic accelerated Liu’s timetable for relocating. He is applying for a green card through the EB-5 immigrant investor program.”

 

[GassYous]

Every market is different. The real estate market in certain pockets of Southern California is very different than metro areas of Texas for example.

I live in an area with a red hot housing market, largely due to very little inventory and lots of foreign cash buyers (mostly Chinese) scooping up houses above asking price. My house has appreciated about 25% in the past two years and that’s relatively low for the area. A friend of mine bought a new build for $2.5 million just two years ago and comparable houses in his area are now selling for $4-5 million.

What this tells me is that your friend is ballin enough to buy a 2.5 million house

 

[thinkorswim]

What this tells me is that your friend is ballin enough to buy a 2.5 million house

Nah, just smart. A 20% down payment for an interest-only mortgage at around 3.5% puts his monthly payment at under $6k. There is no incentive to pay it down further, he’s laughing all the way to the bank.

 

[Arch Guillotti]

Nah, just smart. A 20% down payment for an interest-only mortgage at around 3.5% puts his monthly payment at under $6k. There is no incentive to pay it down further, he’s laughing all the way to the bank.

Why in the world would anyone do an interest only loan?

 

[GassYous]

Nah, just smart. A 20% down payment for an interest-only mortgage at around 3.5% puts his monthly payment at under $6k. There is no incentive to pay it down further, he’s laughing all the way to the bank.

Can you explain how this is advantageous?

 

[thinkorswim]

Why in the world would anyone do an interest only loan?

Can you explain how this is advantageous?

IO mortgages can be good or bad depending on the individual. Some may see them as a means to get more house for a lower monthly payment, and that's when they can be dangerous. But for those who are financially responsible and savvy, they can be great instruments.

If you expect the house value to appreciate and you don't intend on living there for the duration of the loan, why put a dime more than you need to toward the principal? At a 3.5% interest rate, investing the difference would yield much greater returns over the life of the loan.

For others it can help with cash flow. If your paychecks are variable or you rely on a large bonus at the end of the year, it helps having lower monthly payments and then putting a large amount toward the principal at the end of the year.

 

[aneftp]

IO mortgages can be good or bad depending on the individual. Some may see them as a means to get more house for a lower monthly payment, and that's when they can be dangerous. But for those who are financially responsible and savvy, they can be great instruments.

If you expect the house value to appreciate and you don't intend on living there for the duration of the loan, why put a dime more than you need to toward the principal? At a 3.5% interest rate, investing the difference would yield much greater returns over the life of the loan.

For others it can help with cash flow. If your paychecks are variable or you rely on a large bonus at the end of the year, it helps having lower monthly payments and then putting a large amount toward the principal at the end of the year.

Interest only loans work for those who have or can make a lot of money.

Say have an interest only loan of 1 million.

The property goes down 20%.

Do normal people have 200k sitting around in case they need to sell? 90% of normal people do not have assets to cover for the lost in property value.

That’s the issue with Interest only loans.

The mortgage and forgiveness act gave so many scammers a get out of jail card with housing. To forgive 1099-c debt. Want to know why there are no more short sales? People don’t want to deal with owing the irs money for cancellation of debt.

 

[thinkorswim]

Interest only loans work for those who have or can make a lot of money.

Say have an interest only loan of 1 million.

The property goes down 20%.

Do normal people have 200k sitting around in case they need to sell? 90% of normal people do not have assets to cover for the lost in property value.

That’s the issue with Interest only loans.

The mortgage and forgiveness act gave so many scammers a get out of jail card with housing. To forgive 1099-c debt. Want to know why there are no more short sales? People don’t want to deal with owing the irs money for cancellation of debt.

This can also happen with a traditional mortgage and is the reason interest-only loans require at least a 20% down payment.

 

[aneftp]

This can also happen with a traditional mortgage and is the reason interest-only loans require at least a 20% down payment.

We are also talking about down payments as well

Where people got in big trouble interest only and no downpayment

Extremely few defaults during housing crash even with a 10% downpayment. People feel like they have some skin in the game.

 

[nimbus]

If you look at the amortization schedule, conventional loans are basically interest only at the beginning of their term.

 

[pgg]

If you look at the amortization schedule, conventional loans are basically interest only at the beginning of their term.

Depends on the rate.

My 2.5% 30-yr mortgage was close to 50/50 interest/principle on day one.

At 5.5% it's more like 80/20 interest/principle.

 

[aneftp]

Depends on the rate.

My 2.5% 30-yr mortgage was close to 50/50 interest/principle on day one.

At 5.5% it's more like 80/20 interest/principle.

Mine is also 50/50 principal interest since I’m at 2%.

I did 10 year arm. But it won’t reset till 2031. I highly doubt I will still be in the house by than. Kids will be gone by than. Or I can just pay off the home in cash anytime I want. But at 2%. It’s pretty stupid to pay off early.

At 7-8%. I’d be more aggressive in paying down.

 

[GassYous]

If you look at the amortization schedule, conventional loans are basically interest only at the beginning of their term.

True but doesn't it come off your income taxes anyway?

 

[aneftp]

True but doesn't it come off your income taxes anyway?

Trump limits interest deduction to 750k mortgage.

 

[Turtlez]

Hi everyone,

Early in my career, have about 25 years left in me God willing. I know this isn't White Coat Investors, nor are we Wealth Management professionals. I would just like some humble opinions of elders who have navigated the financial waters.

Since I last posted months ago, we have moved - albeit to just another VHCOL area.

I still bring home about $25-30,0000 a month post tax and 401k. My wife still brings home about $10,000 a month post tax and 401k. We signed a three year rental agreement for a house that Zillows estimates ~ $3.5 million for $8500 a month (utilities included). The house is 2 years old and our absolute dream house. Yes, I know it is an inexcusably large waste of money to spend this type of money on rent, but for the quality of life my wife wants, it's unfortunately the price here. Student loans are all paid off. I still feel we are making zero lead way to financial stability despite our high earnings (and it's disheartening to see the house next to us bought by a VC punk only 6 years out of COLLEGE).

Please let me know where we are going wrong:

Investments -

1) Tax deferred portfolio:
Max'ing out 401k and cash balance plan (we both are putting a combined nearly $100k away in retirement each year). I'm only getting about 7% on my 401k from VTI/VOO/VXUS/QQQ combo. Do I need to be less conservative and if so what do I do? I will not pay a wealth manager 1% to actively trade, that is a financial death sentence.

2) Taxed portfolio:
HYSA. This is where a majority of our liquid cash goes. Anywhere from $13-19,000 a month. We get about 4.5% APY ROI. I want to be liquid if/when a recession comes and all the VC/PE go under and we can finally get a house for a discount.
We both back door Roth the full amount. Again VTI and some QQQ. We also buy about $2-3,000 in stocks each month (mostly QQQ). After we buy a house we will ramp our stock portfolio substantially (if we can ever get a mortgage for what we pay in rent).

3) Real Estate????:
This is obviously a wish someday, and should get us 4% ROI each year compounded (vs the 8% I hope in the stock market - again I don't know how to get higher amounts without risk in the stock market). Being that I can't even get a personal home, I would safely say investment properties are not happening for us any time soon, nor are commercial or industrial real estate. Neither of us can get a professional real estate license anyway so the tax write off won't likely be enough. The 1% rule for renting is impossible in this area.

Costs -

1) Rent. Easily the largest and most painful expense. I don't get 4% ROI on it, as I would owning and the rent could go up after 3 years unlike the mortgage. However, this house would cost us $22,000 a month with $1,000,000 down to buy with a mortgage at 7.5%.

2) All the expenses included food, baby supplies, car finance payments. About $4,000 a month, but a few larger purchases / international trips in the past 6 months have set us back. We need to be better about this. We only buy top tier items on sale that will hopefully last a long time.

In summary: We are only getting 7% return on retirement investments and only 4.5% on liquid investments (and losing on rent when a house would get us 4% ROI each year). We spend an unGodly amount on rent because it's nearly impossible to buy in the Bay Area with these rates (we would be living paycheck to paycheck with no savings other than retirement - see what I said before about rent to mortgage ratio). I know the answer is to move because physicians will never be able to compete with VC/PE/Wealth Management/Tech IPOs/FAANG but we really like the area and would be willingly to change up our investment portfolio to make it work. I just don't see breaking $10 million by 55 at this rate and reaching financial freedom.

How would you change things (other than moving to Wyoming/Idaho) re: investments. Thank you!

What net worth are you at currently?

 

[nimbus]

True but doesn't it come off your income taxes anyway?

It’s still money out of your pocket, even if you can claw back some of it on your taxes. Paying interest is a money loser unless your borrowed money does better than the interest you pay.