Ask HN: Should I buy the nicest house I can afford?

https://news.ycombinator.com/item?id=32377643

by engineer_22 • 4 years ago

8 12 4 years ago

news.ycombinator.com

Tl;Dr: conventional wisdom is to buy the nicest house you can afford, thinking that housing appreciates. Is this wise, or would it be wiser to live in a modest home and roll the extra money into a business?

Background: My fiancé and I have been looking at houses. She's in law and I'm in engineering. I currently own a house bought before the pandemic with a small mortgage, which allows me about 50% of my income for discretionary allowance (savings or purchases).

I'm studying full time for a second engineering degree and have about 2 years left, for a transition to high tech. I work full time. She is starting first job in law and has credit card and law school loans. There's a "dream house" on the water near by that we could purchase but worry it would slow down our life goals, so we withdrew our offer. How does HN see this decision?

h2odragon• 4 years ago

Sounds wise to me; in a couple years your dreams may well be different. Unless the place you're in really sucks stay there a bit longer, do the school and then go buy or build you a fantasy castle or whatever.

You might put polish on the home you're in now if you're looking to invest effort that way. Granite countertops are so last decade: How much more valuable would it be if it had a moat?

rubicon33• 4 years ago

I don’t think there’s a “right” answer to this question but here’s my opinion:

But a home that is very affordable using a 30 year fixed rate loan with a low monthly payment and no early repayment penalties. Pay back monthly more than required, such that you’re on a 10 or 15 year repayment plan.

Pocket the rest as savings, with some discretionary spending money.

In 10 years (earliest) you own your home and should have a pretty sizeable investment portfolio.

You now have an option - do the same thing again (2nd home) or double down on stocks / investment knowing that your primary residence is secured.

The trick in finance is avoiding interest and fees over the long haul. Buy, hold, invest. Be patient and modest while you are young. Your dream home will be there for you in your 40s with this plan.

dataminded• 4 years ago

I wish that I had bought a four unit multi-family for my first home. Let someone else pay the mortgage and put money in my pocket and only bought a single family home after I had meaningful equity in that investment property. Banking on the appreciation of your own home feels wasteful as you'd have to put yourself in more debt or give up your home to use that equity.

claytongulick• 4 years ago

One of the biggest stressors in a relationship is money.

I've always made the decision to live well below my means.

This has helped with relationships, and also helped me build savings.

With savings come options.

You can afford to take a risk on a high paying but unstable gig.

This approach has worked pretty well for me.

rdtwo• 4 years ago

Maybe but why are you wasting your time with a second degree?

engineer_22• 4 years ago

I am in civil engineering, I want to realign my career.

mikewarot• 4 years ago

Living within your means is a wise choice.

Personally, we bought a small old farm house, likely the cheapest house in town. We do have an excellent school district, so we thought it was a great idea. We have no mortgage.

I have zero regrets. Our taxes will always be lower than any of our neighbors, which is good now that I'm on a fixed income.

quickthrower2• 4 years ago

That is a complex question.

One thing I will mention that if you want your house to appreciated in value, look for land that can be rezoned, split, and so on, or is likely to change zone in the future, and in a demand trending up location.

I regret not pushing harder for use to live in less-than-ideal house that would have been in a great location. It was a small house, decent land, next door to 5-storey buildings. Get permission for a 5-storey and that would be retirement.

IceMetalPunk• 4 years ago

Don't consider this financial advice by any means, but more life advice: anything you spend money on should be something you couldn't be happy without, as long as purchasing it doesn't ruin your life later. Money is only a means to basic resources; anything above that is just consumerism. So rather than buying the nicest house "because you can" or "because later it might be worth more when I sell it and I'll get more money", don't consider the finances at all, other than "can I afford it?"

What I'm saying is, find a house you and your fiance (and whatever plans you may or may not have for... other people living there in the future) can be happy in, that you can afford, and go with that, regardless of whether it's the fanciest house you can afford or not. That "dream house" -- is it really a dream house if, as you said, it would interfere with other life goals that may be more important to you? Or is it just a "fancy house" that looks nice and comfy but has strongly diminishing returns on the utility curve?

Think of it this way: if you buy a big fancy house, you may make more money selling it later in life. If you buy a more modest house, you will have more money now. So either option leaves you with money, it's just a matter of what you'd do with that extra money now vs later. If you have life goals that are important to you, and that would cost money short-term, buy the smaller place. If all your goals are long-term only and you won't need to pay for them until decades down the line, then sure, go for the fancy house.

michepriest• 4 years ago

I used to have a financial planning business. We helped over 600 clients. I’ve seen it all. Buying dream home right away works for some and not others. Waiting is better for some and not others. Depends on so many things.

The interesting thing we learned was doctors and lawyers tended to be horrible with money. There was a lot of “keeping up with the Jones’s” which caused a lot of stress.

If you’re at all thinking about starting a business in the near future, do not buy the most you can afford. Having a big mortgage impacts how long you can take to get your business off the ground. Having said that, you’ll want to get a mortgage while you have employment income since being self-employed makes it a lot harder to get a mortgage

Where it worked for couples to max out early was with those with a predictable path that had job security with significant increase in pay, those who got a windfall or had help from family, and those who had the right business at the right time. Also, those who bought in the right area. The nicest area doesn’t always appreciate the most.

The fact that you withdrew your offer means something didn’t sit well with you. There will always be another dream home. Another commenter mentioned buying a fourplex, living in one unit and renting out the others. That’s a great option to look into and learn more about.

If you look at who’s wealthiest in society, it’s the business owner. It’s awesome that you’re exploring that avenue. Just make sure you’re managing your risk well. Also, the wealthiest are landowners. Lots to explore beyond conventional wisdom which hasn’t been working like it used to

If you and your fiancé aren’t aligned with this decision it might help to know that you’ll be able to buy a nicer dream home once your schooling is done, your career is underway, and the credit card debit is taken care of

galdosdi• 4 years ago

It appreciates, but you still need a place to live, so you can't ever actually access that value by selling or renting it out. The best you can do is borrow against it, which is a nice option, but doesn't actually give you anything; you have to pay it back.

A much wiser thing to do is buy a duplex or triplex, the "nicest" one you can afford, defining "nicest" in terms of total rent after expenses other than principal.

Then as the value goes up you can access it through rents going up. You may even be able to sell half off as a condo someday in some cases, while still keeping a place to live.

If buying a place that you can rent part of out in the future is not realistic, I would just buy the most affordable home you can tolerate and enjoy. The extra value won't ever be able to help you unless you decide to become homeless, die, or move to a different much cheaper area.

Tl;Dr: conventional wisdom is to buy the nicest house you can afford, thinking that housing appreciates

AnimalMuppet• 4 years ago

You'd be surprised at how often "once in a lifetime" opportunities come around. Especially when it's the option to purchase something.

A lovely house on the water? This isn't your only chance to buy one. It's OK to pass on it now if things don't line up right.

Ask HN: Should I buy the nicest house I can afford?

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