I have a confession to make. I want a bigger house. With a family of four and potentially an au pair, a bigger house would provide for a better lifestyle. Now that we're spending so more time at home post pandemic, a bigger house is also much more valuable. Real estate FOMO is getting the better of me!
The question I have been thinking about is whether it is my ego making me want to buy a bigger house or practicality. I'm hoping it's because we simply want to live a better life.
I recently submitted an offer for a single family home. Why would I do such a thing, especially given I had just gone through the difficult process of selling a single-family home rental the other year? Ego and maybe a little bit of real estate addiction.
In 2014, we downsized from a 4 bedroom, 3.5 bathroom, 2,300 sqft house to a 3 bedroom, 2 bathroom, 1,920 sqft house with a small office. Not only that, we downgraded from a well-known and expensive neighborhood to a relatively unknown neighborhood.
We took our ego squashing quest even further by buying a Honda Fit as well. With simple clothes, a compact car, and a modest house, we successfully completed our mission to go completely Stealth Wealth. It felt wonderful being nobodies!
Then things started to change once our son was born.
Ego Starts Making Me Want To Buy A Bigger House
My wife and I haven't cared about status for a very long time. If we did, we'd still be plugged into society so that we could make more money and boost our identities with our job titles.
But even with Financial Samurai, we don't actively promote ourselves because we don't care. We've always just done our own thing, regardless of whether people think we're strange or not.
In 2014, we could have bought a house 2X more expensive than the one we live in now with cash, but instead chose to purchase a 40% cheaper house. But after four years, I've begun wondering whether we should start living in a bigger house with more amenities for the sake of our boy.
After all, the median size of a new home today is about 2,400 sqft on a 8,400 sqft lot. Our house is only 1,920 sqft on a 5,000 sqft lot. Shouldn't we at least live a middle class lifestyle given we earn way more than the median household income of $85,000 in SF?
Why are we being so frugal when our lives are half over and we have a precious little one to take care of? Once our daughter was born at the end of 2019, then I really started desiring a bigger house.
Stronger Desire For A Bigger House
Given our house size is below the median, by definition, most homeowners will have larger house sizes than ours. One close friend just built a sweet 5,000 square foot house and he doesn't have kids yet. Another friend remodeled his 7,800 square foot house for his wife and three kids. I live in a hut by comparison.
It's strange to suddenly care about our house size since our kid doesn't care about the size or cost of our house at all. All a child cares about is whether he'll be safe and loved and supported by family and friends. We're providing this as stay at home parents.
Maybe we've taken frugality too far. My ego is saying I've worked hard for my money and we deserve better. But my sensibility is saying we don't really need anything more than what we have right now.
It's just that one of the benefits of buying a big expensive house is that you get more value the higher up the price curve you go. I'm seeing great deals in higher end homes and I want to take advantage. Conversely, if you buy a median-priced home in your city, you end up getting into bidding wars because so many more people can afford median-priced homes. As a result, the value in terms of price per square foot is not as good.
The Desire For Profit In Real Estate
The house I wanted to buy is almost 4,000 square feet with five bedrooms and four bathrooms. I saw the house as an insurance policy just in case we have another child and my parents or in-laws finally decide they want to live close to us. It's a house that I'd be proud of, no matter who came over.
The other enticing thing about the house was that at $2.2M, it was priced about 40% lower on a price per square foot basis than all other houses in the neighborhood.
The main reason was that it needed around $500,000 of work – we're talking new electrical wiring, new bathrooms, new kitchen, new windows, and probably new floors because many areas were buckled. It's also next to a haunted looking house that's been neglected. But the owner has been gradually fixing it up.
Submitting A Low-Ball Offer
Not being someone who can resist a deal, I put in a lowball offer for $1.95M all cash and figured if I won, I'd spend the next 8 months remodeling the house and be all in for $2.45M. If I were to flip the home, I could probably get $2.7M with 95% confidence, $2.8M with 75% confidence, and $2.9M with 60% confidence.
A $250K – $450K gross profit before fees and taxes is not bad for one year's worth of work. With these type of expected returns, the only thing stopping me is laziness.
If I don't flip the house, my family and I could move into this home and happily live there for the next 10 years no problem.
So no. It wasn't just ego that drove me to make an offer on this house. It was also the possibility of profit that made me want to take on this project. How could I give up so much expected profit when I don't see any other investment besides real estate crowdfunding that could potentially give me as high of a return?
Alas, despite putting an all-cash offer with a 14 day close and a lovely letter, the seller countered us at $2.3M, a $350,000 difference! There is no way we would ever pay that price. So we rejected the counter and the house still remains unsold weeks later.
Reflecting On Our Rejection: Family
I wasn't too disappointed with our rejection because the counter price had been so far away from our offer price. Besides $500,000 in remodeling cost, my contractor friend said I might have to spend an extra $100,000 for foundation work if the city passed a law that requires single-family homes to be retrofitted for earthquakes.
It's so weird how easily I could rationalize going through the pain of remodeling again. In this case, I told myself I wouldn't be as stressed. This time I wouldn't be living in the house while it was being remodeling. My wife reminded me of all the times I told her, “I swear I will never remodel or buy another fixer in my lifetime,” between 2014 and 2015.
As I reflect on this desired house purchase, I realize that immediate family played a big role in my decision. Because our house is small, housing two parents for longer than a week starts to feel a little strained. We all have our own schedules, sleeping habits, eating habits, and ways of doing things.
If I could own a bigger house with a whole separate floor for my parents to stay, I think this would be a good situation. They'd have their own kitchen, TV, living room, and bathroom. Not only could I spend more time with my parents, but they could also see their grandson grow up. And we could be there for them in case of an emergency. This is a scenario I've dreamed of for a long time.
I don't think anybody has ever regretted spending a lot of time with their parents.
The thing is, the best time to own a nice house is when your kids are at home. We have two little ones for at least 16 more years at home!
Benefits Of A Smaller House
Having a bigger house is nice. But it's good to fight your ego. We have a perfectly fine house for the next several years.
If you find your ego trying to get you to buy a bigger house than you really need, remind yourself of the following benefits of owning a smaller house or a starter home as some call it.
1) Fewer maintenance headaches
The more windows you have, the more potential leaks. The more wiring you have, the higher potential for fires, especially if you have old wiring. The larger the roof, the more costly it is to replace. The bigger the yard, the more time and money needed to maintain. The more customized your home, the harder it is to fix.
2) Quicker and cheaper to clean
Why spend hours cleaning your home when you can spend minutes? Why pay $500 to clean your home when you can pay $80.
3) Maximum utilization
If you live in a house with under-utilized rooms, after a while you'll start feeling stupid having so much wasted space. This is partly the reason why empty nesters tend to downsize. Conversely, if you're using each room every day, you will feel like you are getting maximum value.
4) Less guilt traveling for extended periods of time
Given larger houses tend to have higher ownership costs, every time you go away on vacation or extended travel, you're wasting more money than you would owning a smaller house. You won't feel as married to your house, which makes you more free.
5) Lower property taxes
Property tax is a wealth tax that lasts forever. It makes me ill when I think that if I were to buy this new house, I'd be paying an additional $25,000 a year in property taxes while there's still massive homelessness, poor public transportation infrastructure, and a public school lottery system. I'd be so pissed if my son couldn't get into the local elementary school after paying $100,000 in property taxes.
6) More passive income
With the price difference between the bigger house you want to buy and the smaller home you purchased, you can use that money to earn passive income. Since we won't be spending $2M on this house which we don't need, we get to earn at least $50,000 a year in risk-free income.
See: How To Building Passive Income For Financial Independence
7) No remodeling nightmares
If you end up buying a fixer, you will want to remodel the house. Unfortunately, remodeling is an absolute nightmare, even if you have a great contractor because delays and surprise costs always come up.
See: To Make Money In Real Estate, Focus On Expansion
8) Nobody really cares how you live
Unless you're constantly entertaining guests or run a blog about interior design, nobody will know or care how nice your house is. The only thing that matters is whether or not your home fits your lifestyle. We'd much rather use the $8,000 a month we save on ownership costs for travel and education than spend it on living in a much larger house and one more full bathroom.
9) Less of a target
My friends who live in 6,000+ square foot houses are much more worried about stalkers and burglars than my friends who live in <2,000 square foot houses. After all, if you're going to steal, you might as well steal from the rich.
One such friend has a neighborhood security guard who the neighborhood association pays to sit in his car all evening. Another friend built a panic room with a 10 inch thick steel door. All of them have extremely expensive security systems.
Related: The Risks Of Upgrading Homes Nobody Talks About
10) Kids can go wild no problem
When you buy a cheaper house, you aren't as stressed about kids scratching the floors. Drawing on the walls or spilling food is no big deal. My friend who just finished remodeling his 6,000 sqft house told me he had a lot of anxiety when another friend came over with their toddler and the kid started putting his hands all over his white walls! My friend even frowned at me when I sat on his new sofa after a game of tennis! You don't want to live in a museum. You want to live in a home.
11) Smaller environmental footprint
It's always funny to hear extremely wealthy people talk about the importance of the environment while they live in mega-mansions and consume massive amounts of water and electricity.
Related: The Ideal House Size And Layout To Raise A Family
12) Help alleviate a housing shortage
If everybody drove a bus to and from work with nobody else inside, there would be a traffic crisis beyond imagination. By living in a home that is being fully utilized, we maximize existing inventory. We also make housing more affordable by reducing demand.
Instead of buying a house two sizes too big, buy a house that's just the right. When your ego clamors to come out, take solace in knowing you can afford to buy a much bigger house. Yet, you don't have to deal with any of the headaches that go along with living in a mansion.
Social Comparison Makes Wanting A Bigger House More Common
Now that my boy has been in school for several years, I've gotten to know more parents. And you know what? The desire to own a bigger house has come up again due to ego.
Before meeting so many parents, I was more settled with living way below my means. However, once I learned how other parents lived, I started thinking to myself, “why not me too?”
At the end of the day, if you buy responsibly, I don't think most homeowners will regret owning a bigger house. I think owning a house is one of the best ways to decumulate and enjoy one's wealth.
I originally wrote this post in May 2020 when I was seriously considering buying a bigger house during the pandemic. Not only did I end up buying a bigger house in July 2020, I bought an even bigger house in October 2023!
The pandemic really did a number on me regarding wanting to spend more money to enjoy life better. So in the end, I decided to YOLO and buy the nicest house I could afford. Here are my reflections after one year of owning it. Overall, I'm poorer because I sold stocks to buy the house. However, I'm richer in satisfaction and experience.
Time is going way too fast. I want to enjoy more of my wealth while also providing for my family before I die.
Invest In Real Estate More Surgically
If you're looking to buy property as an investment or reinvest your house sale proceeds, take a look at Fundrise. Fundrise is one of the largest real estate crowdfunding platforms today. Founded in 2012, Fundrise has over $3.2+ billion in assets under management and almost 400,000 investors.
Fundrise enables everyone to invest in mid-market commercial real estate deals across the country for as little as $10. This is groundbreaking because in the past, these deals were once only available to institutions or super high net worth individuals.
If you're an accredited investor, check out CrowdStreet. CrowdStreet focuses on individual opportunities in 18-hour cities, where valuations are cheaper and cap rates are higher. Due to the spreading out of America, the growth of second-tier cities is growing fast.
I've personally invested $954,000 in real estate crowdfunding to diversify my real estate and earn income 100% passively.
Both platforms are sponsors of Financial samurai and Financial Samurai is a six-figure investor in Fundrise funds.
I do not know if I am going to get a reply to this. But I want to share my situation.
I am Rabbi. 18 and a half years old, have just entered college. I live in a family of 5 in Bangladesh. My father, mother, grandma, me & younger sister.
Till now, we have been living in a small apartment of 1100 sqr ft.(350$ monthly rent). Where my sister shared a room with my grand ma. But she is 16 now and needs her own room, personal space. Thus, we are thinking of moving to a new place.
But if we look for a 4 bedroom apartment(1700-2200 sqr ft), the rent is too much. exceeding 500$. almost 550-600$. Maybe it seems like not much, but here it’s quite a lot. And my fathers earning is also not too high or something. We can manage if we take a bigger apartment.
But if we are to pay 500-550$ month, and 6000$-7000$ a year. Should we buy an apartment, rather than renting one?? it will cost around 90000$. We have around 45000$-50000 cash excluding our other assets. If we then take a loan for the rest, we can pay the rent as monthly payment. But I am a little bit scared, because father’s health is not so great either. There are other costs as well, me & my sisters tuition fees, grandmas medical & stuff.
My question is, Should we look for a bigger apartment with a bit more rent since we need it and live a bit more comfortably? Or Rent a smaller apartment, live compactly(my sister & grandma in one room), hoping to find an apartment to our level and take that risk??
We also have an offer of buying 4 shops in a popular area of another state.(70000$). If we can renovate it & be patient with it, we might be able to sell it in a higher price or get the monthly rent from there. I really don’t know what to do.
Another fact is, My father is 51, mother is 44. All their life, they struggled. Lived only to live, never prioritizing comfort. I really feel like, they have worked hard enough. they deserve a bigger home, better comfort, some mentally peaceful environment.
I really don’t know what to do, Kindly Offer your suggestion.
#financial_samurai
Hi Rabbi,
There is another option. You can do what we did. We bought a house 7 years ago that we could not afford. My wife and 3 children moved into the largest bedroom and we rented out the remaining bedrooms. After 2.5 years we were in a financial position to no longer need renters to help pay the mortgage (but we still rented anyway because we grew to enjoy the situation).
We bought our house in Silicon Valley (near San Francisco) and paid $730k USD but put down 10%, or $73k, and borrowed the rest from a bank, as is typical in the USA. Our house is now worth $1.6 million. We are currently planning on buying a 2nd house in Mountain View, CA (headquarters of Google and Facebook). Old houses in poor condition is less than $2 million. This time we would live in the living room and garage (for 2 years only), and hope to make another $1 million in less than 10 years. We plan to keep the first house as a rental since 7 years have now passed and rent payments in today’s market would just barely cover the mortgage.
Hello, my house is 1900 sq ft and nicer inside than many of my friends super large homes. If my kids scratched the floor there would be trouble. Your view that larger is a different lifestyle is false. People are people and the way one keeps a home depends on the person not the size if the house.
I totally agree with your post. I loved having a small home. It forced us together as a family & we are super close as a result. We ate meals together, had tv time together etc. Now that my children are adults & on their own, I am so thankful for that together time. They still come over & we all hang out in the living room like old times.
I like that you said one of the reasons it’s a good idea to buy a smaller house is that there are fewer maintenance headaches, such as wiring and leaks. My daughter and her wife want to move out of their apartment and into a house. I’ll recommend that they look into single-family home listings.
Would you ever consider a property with a small guest house? Ideally, that’s what I’d like- we can live in the main house (our current one is 2300) and then guests can stay in the small house and we could Airbnb the space when we don’t have guests. I love all of our parents, but I can’t take their messes in the kitchen!
No regrets on large homes. We’ve had my father and our business at home, both paying rent. Got into much nicer homes and much nicer neighborhoods as a result plus one is fully owned now and rented out, covering the mortgage on our country estate.
But I agree on the cozy comment and our living area in both homes is cozy and we spend daytime hours in the cozy common space. The extra square feet is in bedrooms (5) and mother in law quarters. Our first home functions like a high end duplex that looks like a house.
I enjoy your posts and am a huge admirer of your discipline. I realize after reading your post and the comments that I’m going to sound ridiculous, but my husband and I live in a 6000-sq. ft. house on a 0.7-acre lot in the suburbs of Chicago, and we do not have kids (and don’t plan to have any in the near future). I moved to Chicago 6 years ago from the east coast and was blown away by how much cheaper homes are in the midwest compared to NY/DC. When my husband and I got married, we decided that we may never get another chance to have such low housing costs in a large metropolitan area if our careers take us back to the coastal cities and decided to buy a huge house and really enjoy living a (relatively) lavish life for as long as it can last. For what it’s worth as a counter point of view, I would say we do not regret this decision because we have spent the past 3 years that we’ve owned the property enjoying furnishing each room, taking walks in our large front and back yards, hosting parties, hosting family, gardening, and hopping through bedrooms every week. We could have purchased a much smaller townhouse or apartment for just the two of us and have more cash for investing, but we did not believe that any additional savings would give us more happiness or more financial freedom than we already have. Do you believe there is any merit to YOLO once you reach a certain threshold? I think taking YOLO too far can lead to irresponsibility, but when a certain level of financial comfort has been achieved, is it still ego to indulge in a few luxuries during the short life we have on this earth?
Thanks for sharing your perspective! At the end of the day, what matters most is what you enjoy. The value you can get in the Midwest is truly extraordinary compared to the coastal cities. And I can see why he would want to go big once you got there.
I have friends from Singapore to have to pay a 100% car sales tax. As a result, they come to the United States and by Porsches and other fancy cars because they are “so cheap“ compared to back home.
Please let me know if you still feel the same way about your house in five years. Just curious to know. You can always take turns sleeping in each bedroom to :-) I think having a lot of land is really nice.
Hello, thank you both for your perspectives. I know you are talking big numbers ( for me ) when referring to houses, for me, I play with lower numbers given my financial situation. My perspective is different since I can only afford a 500K house. I am a 29 yo, also a mother and immigrant who is trying to learn about this country, the language, the culture and I am starting engineering school.
What I like about your comments is the importance of happiness in a house. Each person has a different meaning for happiness and joyfulness, here the main point is how do we feel given the amount of money we have or the belongings we possess. I remember one day when I bought my first car in this country (an old Honda Civic 1994 in 2014) I was super happy. Compare the situation where you had to take the bus to go to your community college every day, take your baby (no husband, he was in Peru) to the doctor’s appointment, by that time, having a car was the most exciting thing ever. Until the car started giving me problems, I made some efforts and bought the brand new and expensive Civic 2015. Extreme joy!
Years passed and I realized it was not the car, it was the quality of life that I got that made me happy. Of course I would be happy in a $2M home, but I don’t need it. Maybe my $250K home is what I need now even when I can afford a $500K home. Maybe I would be happy in both, but right now, I believe is better to focus on my personal goals and my family (you are right, kids don’t matter the size of the house, the just want to play) who give me a more fulfilling life than a bigger space.
Realize I’m late to this thread! Another factor in the expensive coastal metros will always be additional taxes. The left leaning econobloggers I read from San Francisco and NYC are completely obsessed with either a Land Value Tax, the yimby density additions (failed for now), or imputed rent. What if imputed rent passes in the near future in San Francisco and surrounding counties?
I’m curious, why do you think your parents would want to live with you? I love my kids but we have way more money than them and would never want to live with them unless we couldn’t care for ourselves. Even then we would pay for in home care and not burden them. Sure we want to see our grandchildren but we most definitely do not want to raise them or act as unpaid babysitters except occasionally when we choose to offer. Been there, done that for our own three kids. And also wouldn’t you have to make the same offer to your wife’s parents? Ignore my nosey questions if they are inappropriate because they look that way now that I read them but I don’t think many parents really want to live in the same house as their kids or even in the same neighborhood.
Sure, no problem. Because they said they wouldn’t mind if the house arrangement was nice.
Remember, what’s good for you might be Different for someone else.
I was starting to lose a little respect for you as I read this! And then got to the ending and realized all is still good.
But I’ve got to wonder…..what if the owner came back to you tomorrow and agreed to take your original offer? Would you still buy the house?
For what it’s worth, I’ve seen a few marriages fall apart over massive home restoration/renovation projects.
Phew! Good to know. Because the only thing I live for is the respect of others! ;)
Related: Be Unapologetically Fierce About Pursuing Your Dreams
:)
But in all seriousness, what would you do if the home seller came back and agreed to accept your offer?
I would turn the screws even more with an inspection contingency That asks for more credit.
But at $1.95 million, I do think it is good value and worth an investment. Therefore, I would buy it.
Well, if it works out, then it may give you more incentive to have more children. Junior could use some playmates in that big house!
I think our plan would be to invest about $350,000 to remodel, and then list a year later or maybe two years later to try and earn at least $250,000 after fees and taxes. If we can’t get the price we want, then we would move into the house and enjoy bigger house. Weed then rent out our existing house or keep it as a Financial Samurai office given it has a hot tub as well!
This is seriously the case of no risk, no reward. But it’s stressful to think about how much time and money needs to go into the investment to make money. No wonder why so many people don’t bother investing. It can be very scary!
Damn it Sam. I am thinking of buying an old Lexus to replace my old Corolla then I read that you get a Honda Fit!
Bigger is better! At least, that’s what could surmise from my recent behavior. I’m about to close on a 3250 SF house in Seattle and rent the 900 SF house we’re in now. We moved to the small place from a 1900 SF house 5 years ago when the youngest of two went off to college. We thought less than 1000SF would be cool, but learned we aren’t that cool. I still feel a bit silly for buying in this market, but here’s how i make myself feel better about it: 1-the wife is happy. 2- got lucky with rushed downsizing/retiring seller who shocked us and our agent by accepting 100k under asking price, including inspection contingency. 3-selling one of our rentals that’s worth more than double what I paid for it 5 yrs ago 4- HOA-protected west facing ocean and mountain views. 5- can airbnb lower of 2 levels. 6-the wife is happy..and promised to manage the airbnb. :-)
We bought a 5 bed, 3 bath, 3500 sq-ft house in the Oakland, CA. My wife and 3 children lived in the master bedroom for the first two years and rented out the remaining 4 rooms. It’s been a few years and now we have international students living in two of the rooms, our 3 kids are in 2 rooms, and my wife and myself have the master bedroom. Overall we’re glad we bought a huge house that we could not afford (without renting rooms). Also I am extremely introverted (typical high-tech personality type) but I have to admit that I really enjoy sharing our house with international students and being a surrogate parent to them.
Excellent article. You’re absolutely right the ego just makes us desire more than we already have. We currently live in a townhome which is a pretty spacious 2,100 square feet. But coming from our 700 sq ft apartment, it seemed like a mansion. Now since we’ve been in the townhome for 5 years, it’s starting to feel cramped and homes in the 3,000-4,000 sq ft range seem desirable.
This ego is what keeps the real estate industry humming along. If you can recognize its influence, which it seems you certainly have, it will save you a lot of money and let you enjoy life more.
Sold our 1400 sq foot house in Boulder to move to small mountain town of Carbondale CO. At 48 needed to get away from the rat race and settle in to have two twin girls now 4. Took $350K profit from Boulder sale to buy 2.5 acre property on roaring fork river with big views for only $130k. Lots are selling for $550k today. Stretched to build 4800 house for the four of us and 3800 is our space and rest was built as “mother in law wing” for live in nanny that does trade on caretaking for big rent discount. I highly leveraged to build at $1M but feel like comparables would sell for $1.7 three years in. Points- I feel like if you get out of the city bigger lots and homes are more the norm in vacation towns. 3800 gives us guest room and room for four of us-this part feels just right. Extra wing gives me insurance for potential $2400 a month rent if we need it. I work my butt off in the yard constantly improving things & keeping up house but I its my therapy away from kids and I like it. So if I was in city things might be viewed in your light but in smaller communities you get way more for your money. I luck out in that I have worked for 10 years as remote IoT Security expert for large tech company so our income & benefits are $340K. Always risk losing job then turmoil could set in but feel I could get another remote job or if push comes to shove downsize to support different income profile. Just offering another perspective. Love your site- always eager to get educated on next article. Could you do an article that breaks down selling an LLC vaca rental property with 4 partners as one needs to liquidate but how can partners could do 1031 exchange to avoid capital gains tax. Sites outline 4 methods but they are hard to comprehend and seem borderline with IRS. Need your help to simplify so I can figure out. THanks
I grew up in a three-bedroom, two-bathroom 1,700 sqft residence. For a few years as a kid, there were five additional family members in the house. I’ll be honest, it never felt small or crowded to me as a kid – it felt lively and fun. It was home.
I think you’re right. Your child doesn’t mind the size. He will probably love the fact that it isn’t a “museum,” as you put it, because he will be able to be a kid inside of it. Regardless of the sqft of your home, he will be grateful for your love and the fact that you and your wife are able and willing to stay at home with him. You may want to work again when he is older, and that’s okay. Y’all seem like great parents, and your love for him will be recognized.
Keep up the great work Sam :)
Good article Sam. Glad to hear you’ve resisted the temptation (for now). You mentioned doing it in part for the sake of your son, but in my experience, it’s far more important for a child to have loving, devoted parents instead of a bigger/fancier house, and your son certainly seems to have that (and from the pics you previously shared on the work you’ve done on your current home, you guys are hardly slumming :)
Financial question – you mentioned buying the house for cash. Assuming you’d have to sell stock holdings to do that? If so, were taxes on the gains included in your analysis? Just curious more than anything.
Yeah, we’re aren’t slumming it too bad. Just a simple, cozy life at home.
I would look to sell my underperformers, then my stocks will little to no gains, and then positions I wanted to underweight.
But I do have a lot of cash, as raising cash has been one of my main financial priorities this year.
Small homes are for small people.
You want Respect you go Big!
Small crushes you and people look Down on you.
Power and prestige go hand in hand and it’s the only way to get ahead. You want to be admired and looked up to you have to buy the biggest you can. Everything else will flow from that including the right woman for you, neighborhood honors, and entitlement.
I once lived by a tiny old man in a tiny shack and he was crapped upon and treated like doggie doo. When he croaked we all celebrated and it was party time and the dawn of a new era for the town. Nobody likes small and small people in small houses. They’re so yesterday, you gotta get with the changing times if you’re to earn Respect. Little guys in little houses live little jobs with little pay and get little Ugly women, if that.
Keep up with the changing times, my man, or be left behind.
Don’t buy more than you can afford. If you need 2000 sf but but 5000 sf with cash so be it.
If you have a mortgage you are not an owner. You are just in debt and the bank owns you.
If you own cash or have the liquidity to pay cash (that means you have 24hr access to cash for the value of your house) then you truly can afford it.
If not, welcome to the Jone’s.
We bought our second house 10 years ago. It’s 5 bedrooms and 5000 sq. feet. I was looking for 4 bedrooms and around 3000 sq. feet. 2 adults and 2 big dogs at the time. But it was the right curb appeal on the right size lot in the right neighborhood. So we did it. And I wondered for years if it was a mistake, even though we love our home. We were able to host large family gatherings, parties and some charitable functions as well. Then 4 years ago a family member had a health crisis. We were able to move her and her son and husband in with no problem. Then my mother moved in to help and friends came to visit. We had plenty of room for everyone. It made an awful situation less stressful. Ever since then, I have been nothing but grateful that we made this purchase and can easily afford to live here.
Having a large house as an insurance policy to help family members is definitely a good thing. Glad it worked out for y’all!
It’s not about maximizing utility for me; houses that are too large just feel lonely. We like our 2300 sqft 4 story townhouse… visitors can have their own floor when needed, but everybody still comes together to hang out.
It’s OK to get a bigger house when you have the people to support it… which means waiting until your parents are actually thinking of moving in.
In 2009 we bought a 1500 sq ft town home for $800K in one of the most expensive neighborhoods in bay area, at that time we could’ve sold our pretax ~$2M stocks and bought a much nicer home, but we decided to keep most of the stocks and paid for the modest home instead.
Now in 2018, our stocks+other investments has grown to ~$7M, and our home has appreciated to only $2M (had we bought a $2M home in 2009, it’d be $4M now). Even though we’d like to get a bigger home, our kid is leaving in 4 years to college and we’d rather wait till our stocks appreciate to $8M in 4 years so we can comfortably retire and travel, instead of living in a $4M home, <$1M stocks/401K and having to work forever because of the property tax (which was exactly what some of our friends did, e.g. one sold ALL his stocks to buy a $3M home PRE-2008 financial crisis, now he's living in a $5M home but no stocks other than 401K and still working because his property tax is $60K/yr.)
S&P will 2x every 7-10 years, but even if our home does the same, you can't live off it. We'd rather be like the 90 yr old secretary who lived in modest apartment and left $10M to charity, then most corporate slaves who live in expensive homes and drive tesla but living from paycheck to paycheck.
I think Sam just had a recent article as to what defines a normal house price.
Per your post you seem to imply that a $2M house does compare as a modest Appartment from 96 year old Silvia Bloom from NY. She gave away $9M
I guess it’s all relative.
Great article FS. I personally get tempted myself but always remind myself that I paid everything off for a reason – to get out of debt and increase my net worth. After all, my kids are moving their way out leaving the nest almost empty so downsizing even more makes sense.
I’m in the mindset that there is no need to show off. It’s best to be content and happy with what you have.
I think the older you get, your ego will deflate a bit especially if you have a family and just need enough space to house them. Having too much space in your home will make you feel empty figuratively and literally. Can’t make sense for a family of 3 to have a 5-6 bedroom, 3 bath home if your going to use 2 of the bedrooms and 2 baths unless you plan to visitors stay over constantly or plan to use it for extracurricular activities(home gym, entertainment room, etc..). I think the perception of wanting a bigger home comes from watching TV and see millionaires owning homes where they may only use half the space. And thus it effects others that sees that as something they ‘need’ to have when in reality it’s a ‘want’
I think I know what house you bid on as I have walked by it many times. What do you think the value of the house is (as is)? and what do you think the house will ultimately sell for? Seems like the seller has backed themselves into a corner where they started at the lowest possible price (& unable to cut to draw interest). What do you think of the realtor?
Your post omits 2 important facts as to why it hasn’t sold: 1) the house next to it is a dilapidated eye-sore (easily the worst-looking house within a 1-mile radius) and 2) it doesn’t have a backyard or a usable front-yard (a feature that a family with kids is probably looking for especially if you’re going to pay that much for a house)