https://www.financialsamurai.com/how-a-big-expensive-house-can-ruin-your-life-and-path-to-financial-independence/
So you’re looking for a big expensive house to upgrade your life. Perhaps the months of lockdowns during the pandemic has made you want to live it up a little. You’re suffering from real estate FOMO. I get it!
Owning a larger, nicer house will make living through rolling lockdowns much more bearable. Further, it might appreciate faster given the demand for larger single family homes is going up. We’re seeing this now in the strong housing market.
In fact, my wife and I bought a big expensive house one month into lockdown in April 2020. We figured, if we’re going to stay home so much longer, we might as well have a nicer house!
Looking back, I don’t regret the decision on bit. The intrinsic value of real estate has gone way up because we’re all spending much more time at home.
However, I want to provide a warning that a big expensive house can ruin your life and derail you on your path to financial freedom if you don’t carefully do the math. Let me share one of my experiences almost buying an expensive house back in 2018 and the numbers.
If you don’t have the appropriate income or net worth, buying a big expensive house can really weight you down.
As a dad, I’d like my parents and in-laws to come visit more, which is why it’d be nice to have a ground floor level portion of the house dedicated just to them. This would make it more comfortable for all of us.
Given I write from home, it’d be nice to have a house large enough so that I can’t hear my boy squealing with joy or crying in frustration. Trying to create while hearing him is one of my toughest challenges because once I hear him, I just want to drop everything and go to him.
Finally, I have some FOMO that if I don’t buy this house now in one of the best neighborhoods in San Francisco, I might never be able to get in. This is my ego talking more than anything else.
In 2018, I found the perfect house in Presidio Heights, one of the most prime neighborhoods in San Francisco.
It had four bedrooms, four and a half bathrooms, an awesome attic that would be used as a playroom, and a ground floor suite for my parents or in-laws. My commute to the tennis club would be cut down from 15 minutes to only five minutes a well.
Here are some pictures:
Pretty nice house right? The house was roughly roughly 3,200 square feet, or 1,300 square feet larger than our existing three bedroom, two bathroom house. Not extravagant, but nice.
Here is the problem problem. The asking price was……………. $4,495,000! Nooooooo.
Believe it or not, buying a single-family home in Presidio Heights for under $5 million back then was considered reasonable. But when I do the math on how much it would cost to own a $4.5 million home, it kind of hurts my stomach.