[Back in February I wrote about how our house cost us $24,000 in mortgage interest & taxes alone last year. It was pretty eye-opening! But even more so were the comments of this anonymous guy telling me what it's like to live in a mansion. I wanted to share it with you because a) it shows just how expensive home ownership can be, esp as you upgrade higher and higher! and b) it's just kinda fascinating. At least if you're anything like me :) You'll have to excuse the organization of it though since I had to mash-up all the comments to make it as coherent as possible. Enjoy!]
Most people have their own ideas on the housing market/pockets, and I tend to think that my neighborhood isn’t totally instep with most places. (But doesn’t everyone think they are the exception.) It is one of 3 true old money/old neighborhoods in our beloved state with the best schools and some famous denizens including your congressman, the owner of a pro team in the area, and other illustrious, “old money” folk. I’m definitely an abnormality who managed to make money in the stock market while in school.
I pay roughly $2,200 in mortgage (30 year at 4.75%) after having 500k+ in equity ($1.2 million equity at bubble), then $1,024 per month in taxes and $1,000+ in maintenance. I also pay in an extra $2,000 plus to keep PITI at 5k and it can hurt. (That’s a total payment of $6,200 a month)
The problem with having an expensive house in a mature/wealthy community is that things are expensive.
- Problem with plumbing, gotta bust through very expensive marble that you order from Italy.
- Problem with AC, got to put something high end to match the house for later buyers. (we’re talking $18k+)
- Need a window, well too bad it’s a custom sized high end Anderson at $1900.
- Need a roof, well a big/steep roof runs $25k.
- Got marble, natural stone, granite, ceramic, different grouts–well you need different cleansers and sealants that run as high as $90 per gallon.
- Got neighbors with exquisite yards–yours needs to be too unless you want to be the douchebag in the neighborhood. And weed treatment/overseeding/airration isn’t cheap if you buy your 30 bags of Scotts a year at Costco.
- Have exotic plants, well good luck pruning exotics that cost $4000 each, especially since there is no book or internet information. You might need to call up the one person that specializes in pruning the at $120 an hour.
- Need anything new: can’t put the McMansion builder’s grade crap next to customized stuff.
- Oh and we have a Homeowner’s association because I live in a fancy gated community.
Even though my DI (Debt to Income) ratio is roughly 20%, it’s still a stress! Given the overall costs of transactions, though, I don’t think it is worth it to sell as I can afford it just fine, have some money in the bank and just enjoy living here. The DCF (Discounted Cash flow Models) are becoming more difficult to justify as I contemplate spending $18k to replace an AC system, but overall they still work IMO and I actually like the house and my lawn that I tend. Or “my little box.”
I’m not wealthy and feel outclassed by the women driving Cayanne turbos in my neighborhood. Income is roughly $220k per year, but increases come steadily. I might actually be taking a substantial pay cut just to ease the stress, and the added income seems to go to taxes and makes it impossible for me to contribute to an IRA anyways.
On the other hand, I am not a snob. I bought a 1,000k Volvo last summer. But it failed inspection so I bought something for 8,000k in cash. I dress cheaply, and have inexpensive furniture. On the other hand, I’ve bought several $1,000 bottles of wine that I remember and appreciate, but think: “if only I bought XYZ stock when I felt they were a strong buy.” I’ve also pushed all-in several times with 3/4 suited. Go figure. (Editor’s note: I’ve done this too! I think it’s the whole “adventure” part of it that’s so damn appealing) I still have student loans (small, but helps with taxes) and struggle to gain control of my budget so I find your blog inspirational and helpful, especially with a baby on the way and thoughts of starting a company.
Being in control of your money is a greater boon than having a pretty good income. I often roll my eyes when I listen to D. Ramsey, but heh, following grandmas advice is a more successful approach than 95% of the other schemes and 95% of the population. So I’m learning not to quibble over the exceptions if he’s neglecting stochastic models and various valuation methods.
And yes, I was an actual investment banker and not an employee of an investment bank. It sucked.
(Photo by andy castro)