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One percenters with "problems."
Funny.
umm...I never said there's a "problem". It's about advice.
I still don't get the "funny" part.
YourMoneycc
2012 May 20, 4:47am
Have you heard of the Infinite Banking Concept (IBC) where you create your own banking system. It works very well. You use a very specifically structured dividend paying whole life policy(s).It does take a bit of time to capitalize your bank.
Singlemom
2012 May 20, 6:47am
Woah --- you should not be looking at million dollar homes. I don't know why you can't live on $100k and spread the rest of the money around to the 99% who can't work because we have 9 kids.
Are you going in for the long haul?
That's the idea.
Do you care if the house value drops another 10%, 20%, 30% after you buy.
Well, I don't expect locations like these to drop that much (the foreign buyers would snap them up in a heartbeat), but if they do, I'd certainly feel bad a lil, but it won't make or break anything.
Are you in a industry that can continue to do well if we really have major economic issues?
I'd say the Federal govt aint "goung out of business" anytime soon, so it should be relatively stable.
your company/income sustainable if the economy takes a crap??
Well...my company does Federal contracting, so it's "relatively" stable.
Woah --- you should not be looking at million dollar homes. I don't know why you can't live on $100k and spread the rest of the money around to the 99% who can't work because we have 9 kids.
umm...ok....
Hey, fellow Washingtonian here. I can agree with you wanting to get out of Maryland. I have a couple questions. Why are you picking McLean/Great Falls? Those zips are two of the most expensive zips in the entire country. There are plenty of nice areas around that don't cost as much. Vienna and Reston come immediately to mind. Also, if you were to spend $1 mil in those areas you'd get more bang for your buck.
Additionally, DC, especially inside the beltway, like the BA, has fanciful housing prices that do not appear to be effected by reality or rational behavior. Is geographical arbitrage a possibility for you? I've started working from home at my job, and will be getting out of this crowded and overpriced area later this year, and moving someplace $500k will buy a palace. If that is not a possibility, have you considered early retirement? Maybe work/rent for 5+ more years, cash out, and retire someplace much cheaper.
DC is crazy in so many ways. There are so many rich people here it is hard to feel that you've "made it". I never imagined that both my wife and I could make 6 figures and still feel so "poor".
DC is crazy in so many ways. There are so many rich people here it is hard to feel that you've "made it". I never imagined that both my wife and I could make 6 figures and still feel so "poor".
100% agreed.
If that is not a possibility, have you considered early retirement? Maybe work/rent for 5+ more years, cash out, and retire someplace much cheaper.
Early retirement?? Why would I do that? I think I'm just entering my peak earning years! And to think of early retirement just because I'm potentially risking $200K on an "asset"? That seems weird. Am I missing something?
Is geographical arbitrage a possibility for you?
Not really.
There are plenty of nice areas around that don't cost as much. Vienna and Reston come immediately to mind. Also, if you were to spend $1 mil in those areas you'd get more bang for your buck.
I'm not really looking for "bang for buck". :-) I'm looking at a long term asset, and I want it to be the most "stable". If that means a smaller house in a top tier neighborhood, so be it.
zzyzzx
2012 May 22, 12:53am
I can understand why you would want to leave MD, but I figure at my income level is isn't worth it yet. That and the paying sales tax on your car every year in VA might make it a wash (and I don't pay much to live in Baltimore City). O'malley has ruined MD just like he did Baltimore City.
I can understand why you would want to leave MD, but I figure at my income level is isn't worth it yet. That and the paying sales tax on your car every year in VA might make it a wash (and I don't pay much to live in Baltimore City). O'malley has ruined MD just like he did Baltimore City.
If the homeowner isn't insulted by your offer...you didn't bid low enough!!!
Nah, the personal property tax on cars in VA is a few hundred a year at best. With the piggyback county taxes in MD, the differences are north of $10K a year. A few hundred, I'm ok with.
zzyzzx
2012 May 22, 12:56am
You probably should have mentioned that the new, higher state income taxes are for anyone making more then 100K per year. Apparently that's now considered "rich" in Maryland???
The elimination of deductions probably won't affect me much because I basically don't have any anyway.
GUAB
2012 May 22, 2:16am
I have considered it and we might even be able pull that off. However, the price of the house doesn't change whether you're doing 10 year or 30 year loans. And with the cost of money for 30 yr loans this low, why would I not take that?
Is this a serious statement? I surely hope not... if it is -- you need to do more homework -- and run, don't walk away, from buying anything.
Go calculate what you pay for the home on each loan... you're in for a treat.
I have considered it and we might even be able pull that off. However, the price of the house doesn't change whether you're doing 10 year or 30 year loans. And with the cost of money for 30 yr loans this low, why would I not take that?
Is this a serious statement? I surely hope not... if it is -- you need to do more homework -- and run, don't walk away, from buying anything.
It sure is. Please expand on yours.
Go calculate what you pay for the home on each loan... you're in for a treat.
Is this a serious statement?? Do you REALLY think anybody holds a house for the entire term of the mortgage? And that nobody ever pays more than the mortgage? And that nobody CAN pay it off a few years down the line, without waiting for the full term to be over?
If that's the case, I have a bridge somewhere....
Nah, the personal property tax on cars in VA is a few hundred a year at best. With the piggyback county taxes in MD, the differences are north of $10K a year. A few hundred, I'm ok with.
Additionally, a good portion of the vehicle taxes are waived due to some "tax relief act". I pay about $100 a year in property tax for my car (it is a $7000 car, though), which is waaay less than the difference in MD's income taxes.
Early retirement?? Why would I do that? I think I'm just entering my peak earning years! And to think of early retirement just because I'm potentially risking $200K on an "asset"? That seems weird. Am I missing something?
Sorry, I may be superimposing my personal goals in your situation. Although I enjoy my job, I still look forward to the day that I don't have to do it anymore. And if I was making your income I could do achieve that goal a bit quicker.
DC fosters an especially toxic "keep up with the Joneses" mentality, especially among high earners, that is hard to avoid. Even though you might have a high income, by buying a $1 mil home and not buying it outright, you're not too far away from the wage-slavery that average people endure. Personally, if I had that kind of money available I would invest it in rental property, stock, growing my business... anything that would generate positive cash flow rather than a single, possibly depreciating asset such as an awesome house. But then again, my priorities are different from yours. And your goals are fine, I'm not disparaging them in any way.
Tenpoundbass
2012 May 22, 4:32am
Save up a million and move to a country South Asia, set up a business that caters to Australians or other English speaking expats.
Save up a million and move to a country South Asia, set up a business that caters to Australians or other English speaking expats.
I guess you guys haven't been to South East Asia lately...A million doesn't go too far there either.
And on a personal note (applies only to me) - A million is certainly not enough to retire on. And I say that "knowing" that I have an inheritance coming in the next few years, that is north of $5M. But I'm not taking that into account for these decisions.
bubblesitter
2012 May 22, 4:43am
I have an inheritance coming in the next few years, that is north of $5M.
Man! why are you even on this forum. You are asking advice from people much poorer then you on this forum. LOL.
Man! why are you even on this forum. You are asking advice from people much poorer then you on this forum. LOL.
But, that's the thing. Your net worth should have no effect on your decision on "when" to consider housing a good decision. That's dpendent on the typical ratios, and the ratios remain the same whether you make 50K a year or 500K.
Man! why are you even on this forum. You are asking advice from people much poorer then you on this forum. LOL.
But, that's the thing. Your net worth should have no effect on your decision on "when" to consider housing a good decision. That's dpendent on the typical ratios, and the ratios remain the same whether you make 50K a year or 500K.
Not true at all. If you are in line to inherit 5M, you have almost no risk!!
This whole time I've been asking about your networth, if you are expecting to inherit 5M dolllars, a 1M dollar house with your income is a non issue. No wonder you haven't felt the need to save more.
End of story.
That's dpendent on the typical ratios, and the ratios remain the same whether you make 50K a year or 500K.
Except, someone making $350k per year, 5x the median, probably doesn't spend 5x as much on food, gasoline, clothes,etc. I make more than the median income but I bet I spend less than average on gas, due to driving less in a car with better than average mpg. The average new car price is about $25k, but someone making $350k won't necessarily spend $125k on a new car.
Also, as was pointed out, there's more buffer in case of a loss, for the same reason. if a 1%er loses 50% of their savings, they still have enough to eat. If a 95%er loses 50% of their savings, they will be hungry.
Kapone, it is great that you are in this position. I'm actually in a similar position and chose to pull the trigger on a house. but, if it makes you uncomfortable, or petrified, then don't do it. If it makes you (and spouse) happy, then it would be worthwhile. It's not all about minimizing expenses, otherwise we'd all rent 1 bedroom apartments.
Kapone, it is great that you are in this position. I'm actually in a similar position and chose to pull the trigger on a house. but, if it makes you uncomfortable, or petrified, then don't do it. If it makes you (and spouse) happy, then it would be worthwhile. It's not all about minimizing expenses, otherwise we'd all rent 1 bedroom apartments.
Yeah, I'm having a tough time deciding if the so called fortress neighborhoods are a good buy right now, or not. I'm willing to spend er...leverage the money, but confidence is still a bit low.
GUAB
2012 May 23, 3:54pm
Go calculate what you pay for the home on each loan... you're in for a treat.
Is this a serious statement?? Do you REALLY think anybody holds a house for the entire term of the mortgage? And that nobody ever pays more than the mortgage? And that nobody CAN pay it off a few years down the line, without waiting for the full term to be over?
If that's the case, I have a bridge somewhere....
"And with the cost of money for 30 yr loans this low, why would I not take that?"
Your statement seemed to imply that a 30 year loan was so cheap that it was no big deal -- but in reality, even if you carry that only 10 years -- it's not really that cheap, and you're wasting a ton of money (low-mid $XX,XXX). I'm not implying you can't figure that out yourself -- but it sure sounds like you were not aware of that... thus I was encouraging you to run the math as you would be surprised (if you believed what you wrote).
Also, yes -- lots of people carry mortgages to the full term. I know several of them. And yes, if you take a loan you pay more than mortgage. The longer term you take, the more you are going to pay for the house. Thus your statement that the house price doesn't change is not correct. And yes, people pay it off in a shorter period -- again, wasting money by not simply taking the shorter term in the first place.
The only thing the longer term does for you is give you flexibility when you need it -- at a price that isn't worth the cost.
Sorry, wasn't trying to be a dick. You asked an honest question and I was giving you an honest answer. Your 30 year comment does scare me a bit though but perhaps you weren't being serious or had another concept in mine -- I'm not sure. Regardless, the math doesn't lie.
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Well, we are fortunate enough to be in the upper bracket income earners (>350K a year) however, we have been prudent enough to sell our house back in 2004 and been renting ever since. However, the "situation" seems to have changed. Lemme explain.
1. We live in MD which is one of the highest tax states and on Wed this week, the MD house passed a new legislation raising the state taxes EVEN more. Especially for high earners. They completely eliminated exemptions in our income bracket. Ugh.
2. We have been looking to move to VA for a while and keeping on eye on things there. The state is running a surplus vs maryland which is runnng a huge deficit. The property values for the 1M+ properties "seem" to have come down enough and "seem" to be consolidating. I'm talking Mclean, Great Falls etc.
3. The difference in the tax bill by just moving to VA (all else remaining the same) would be over $10K a year (payroll taxes are lower in VA as well).
4. There is this house that we have been eyeing that is sitting at just the $1M mark. They probably would accept a 900-925K offer. It's been on the market for over a year.
In that price range and given our income, the PITI is ~15% of our income, and yet I'm scared to take on that big of a liability. We have enough savings, that's not the issue, but the fear facor is still there. However, there aint THAT many properties in those neighbourhoods that come around for sale and to find one at a decent price is pretty difficult. As a measure, houses like that usually rent for $4200 or so if they ever are offered for rent.
We are pretty much at that point where we WANT to buy (as a lifestyle decision) but still apprehensive.
Are we being too scared/conservative?