A $1 million home in some parts of California is a two bedroom bungalow. I watch these home renovation / flip shows and it amazes me the prices of homes out there. Dave is on point with his response here.
Property taxes, insurance, heating, air conditioning, landscaping, etc. etc. is all proportional to the value of the house. So many people buy too much house.
Yep. Most people forget or don’t know that a 1 million dollar house is not a 1 million dollar house. Its more cost for regular expenses and more work, especially if it’s bigger.
@@cowgoesmoo9981 Home value and cost of ownership are two different things I've seen ridiculous homes that are "bargains" but they're extremely high maintenance And I've seen shacks in Key Largo that cost millions, yet are simple and cheap to upkeep
Smaller homes often increase in value more than pricier homes. I don't consider $170k "a little left over" to pay on a $575k home He started talking about a 30 year mortgage. 2:40 Doesn't Dave want 15 year mortgages?
he changed his stance since hope prices exploded 15 year on 25% of your income isn't possible for a majority of Americans anymore unless you live in the middle of no where Kansas
And wait for the lifestyle creep when they move (and you know they're gonna buy this house) when this happens. They will want a new SUV, multiple trips to Pottery Barn, etc etc etc.
A lot of this discussion depends upon how much runway this guy has left in his career. If he is wanting to retire in 10 years, this is probably a bad deal. If he's going to go for another 20 or 25 years, this might make more sense. He would still then have plenty of time to get the mortgage paid off and build investments beyond the value of the home.
Exactly. I do not know how things work in the USA but in South Africa a big house like that probably attracts higher property taxes.Put simply if someone were to bequeath me a mansion I would promptly sell it as I cannot afford the "lifestyle" that goes with living in a mansion.
for that price range in Cali its probably literally a 1500 sqft house and the upkeep cost is tiny. you may be coming from the perspective of a normal state where a 1m home could be 7500sqft, has a heated pool, 50 acres of land etc.
@@15KHPCLUB 7500sqft doesn’t always mean 1M in house. I’d think $25k/yr now in property tax in tx, 10k expenses of upkeep so maybe 35k. What does it cost you are your taxes better ?
Twice the house = (probably) twice the taxes, twice the maintenance expenses, and a significantly larger utility and insurance bill. Plus, their mortgage debt immediately goes up 50%. These things will affect your ROI, and need to be considered!
I dont understand why people dont get it with these houses. The only thing you can do is sell it or pull out the equity (another loan). This is why I live in a BASIC house, its just a sense of security for me.
Same thing for me. I'd like to live in houses jusssst big enough to meet my needs. I don't want extra to maintain, especially once my kids are gone. Might as well just buy a second house in cash to rent out if you want to use it as an investment vehicle.
I don’t get how you can live in some basic house. I get it if you don’t have money, but if you do, why make yourself suffer? What’s the point of working if I’m gonna live in a hut?
@@SDALLE99 exactly! When I hear people say this, it just screams that they are jealous! If someone has 10 million plus, why in the world would they want to live in a shack? This guy is the type of person who feels like everyone should live like him to make him feel better about his life and life decisions!
I admire couples who work together and are intentional. It appears to me that this man and his wife have been on the same page for years, following Dave Ramsey for a long time. Marriage does work if the two people pray together, agree on the most things and have the same vision. This man and his wife are a good example of making marriage wife. Nothing hidden in their marriage.
The biggest issue in America is quantifying value of the primary house. Take a call on living frugally in a wealthy house or living well in a basic house. Never associate your house as part of your net worth. It's a fixed purchase you die in. No mortgages.
It’s also unlikely that someone moves into a new home and the only expenditure is the purchase. With new furniture, remodelling, redecorating etc… the costs usually spiral. That takes even more cash away from investing.
Oh yeah haha and the guy said they have a million in investments. So if they wanted a million dollar home all they have to do is pay off 600 bc they got 400 equity.
@@TartarianTopG Their $million is in 401k/retirement, so it's not really available to throw at a house anytime soon. They'd lose over 40% of it to taxes and penalties.
For those who can and have the opportunity, even in these economic times, should still he saving and investing. Being poor is not a virtue, any more than being wealthy. None if us gets to take it with us
@@johnSmith-uz8nl I've changed my family tree in many ways. But always doing the right thing is better than being poor or wealthy, and economic changes shouldnt change our views of right and wrong. That's all I'm saying.
@@phatbetbruh I agree. I think I read your post incorrectly. To me, doing the right thing really does not or should not effect your wealth. And I always try to do the right thing... to the point where I am very proud of this. And I try to teach this to my kid.
Interesting. We have a home valued at $2.3M and $1.8M in retirement. But we bought the house at $1.2M. So it's just that the house has gone up in value so much. Hmmmm...
@@paulharsh78 dude where are you coming up with 4k a month outside a mortgage? Repairs every month? Come on! Utilities aren’t going to be no more than 500ish a month. Taxes are probably $1800 a month. That’s $2300 a month on top of the mortgage.
Almost no home is an investment I live I. An area where rent income is considered to be outstanding problem is rent income does not cover maintenance taxes and other things that come up with a home so we now have all these real estate agents telling folks every home has income potential of 70 to 80 k this is a lie most homes produce between 12k and 15k proven results not a projection or a wild as guess base your numbers on real life
Agreed. I live in TX where we have multiple abandoned mansions that were never sold. Owners just walked away. realtors were never able to sell. investors don't want them because they wont have anyone to rent them out to. very few people will be able to afford 10k+ per month
It's amazing how people forget to put a price tag on their time and energy! With their wealth already built, you would think they would just let it ride, downsize and enjoy life/fruits of their labor.. INSTEAD, I heard greed.
I live in California. A 1M home in Sac will get you a slightly above-average home. Its not worth it to have that much of your net worth tied up in a primary residence.
@@rosangelicajuarez6663 Thanks -- I must have missed that part. I still don't know if its a good idea to have that much tied up in house especially in a state where home prices don't increase over time the way they do in California.
In Australia it is no capital gain tax on the owner occupied house, provided that it is used as a main residence. We are thinking of selling our main residence which has no mortgage on it and it is expected to sell for over $4 million . (only selling expenses would come out of the selling price, no capital gain tax). We would use the money for investments. We love one of our investment property and we both agree that we could live in it happily. The suburb we would move into lacks several of the conveniences we are used to, however offer more parks, a creek, large lake, bicycle track along the creek, e.t.c. The more I am listening to you Dave, the more I convinced that it will be fine.
I really don't view my home as an investment. It sucks up maintenance costs, and you have to live somewhere. Too many people are focused on what they live in as "their investment."
I want more space, I want to have another room to convert to a office. That is the crux of the matter. To me it is not about moving into a better area.... it is about moving into more of a home.
@@bettysmith4527 What is "financially sound", I would think this is different for each person. I am extremely cautious and I will wait a few more years... to me, I don't want t mortgage of more then $250k.
I tell people all the time your house doesn't matter its all about your investment portfolio. Your house should never be more then what you have invested when you're retired.
Absolutely. House you live in generates negative cash flow (costs from maintenance and property taxes). If you can't use it to buy a movie ticket, groceries or finance your lifestyle then it isn't liquid. Need more liquid assets than non liquid.
I think we need to stop calling our personal residence an "asset". An asset puts money in your pocket and a liability takes money out of your pocket. So your personal residence is basically a liability. It's essentially a toy that also happens to appreciate over time (unlike a car or a boat). But it's still a liability which is why Dave is vaguely vaguely uncomfortable and has no clue why. Thankfully, Rachel is a little more clued in. So the Ramsey family is progressing forward.
Why would you want to invest in real estate in California? Think Idaho. Idaho is often considered a good state for real estate investors, with low taxes and no property taxes. Homes are not investments. It is interesting that women (wife) always want larger homes, as a sign of status, nothing more. Got a mattress, a TV, a WiFi connection and a fridge most men would be content. I am. Content=happy=joy.
Otherwise, It's kind of meaningless how much your house is worth. If you're not gonna sell it or rent it, who cares how much it's worth. I understand that it is part of one's net worth, but if you're only gonna live in it, it just doesn't matter.
In our case we have lived in the same home for 36 years and paid it off many years ago. The issue of buying up in your home is you keep restarting the mortgage and some will never get out of debt. Even if you end up paying it off it does not make any income for you in retirement. Some of our friends had to downsize in retirement so they would have money to invest and live off. In our case we love our neighborhood and want to stay here in retirement. So we did not buy a bigger home and just stayed put all these years. Not hard to do when living in Ohio where home prices are low. I just retired on June 1st and our home is 22% of our net worth, so we will be fine in retirement.
Oknlets saybsomeone had a house worth 700,000, they owed 200,000 on the mortgage... is it wise to move to a house for less than 500,000 and accelerate being out of debt? The 'moving down to become debt free' strategy. Is it a good idea?
They're already "rich" via their 401k plans, and you only need to get rich once. If they had 10 million in equities and wanted to put a million into real estate then that's one thing, but what he's suggesting is just not a wise move at their current level of wealth.
So this is where I disagree with Dave... I don't consider your wealth is tied to your primary residence. That is, when you look at your wealth do not count your primary residence. I also believe in being diversified but everyone has to start somewhere. I am also looking to upgrade our home to about a million dollar home but we are in a completely different place then this person. Other issues I have with this phone call is... how much is their yearly income? If they make $300K, why don't they have MUCH MORE wealth... Dave again is over exaggerating.
You're wrong because your home is included in your net worth. Net worth is a measure of your equity. Assets-Liabilities. Not some assets - some liabilities...
@@meatball4409 I'm not wrong... I told you what "I" consider. As long as you live in your home it does not offer you much in terms of value and it gives you a false sense of security.
@@johnSmith-uz8nl Well what you consider doesn't really matter because that's just not how net worth is calculated🤣 You can consider the sun to be cold but that does not make it so
@@meatball4409 I agree with you but at the same time I look at your wealth less your primary residence. I feel this is a better gauge on what you can afford in life.
@@johnSmith-uz8nl I agree. I think if you have to count the value of your primary residence in order to be considered a millionaire, then for all intents and purposes, you're not a millionaire. "Net worth" doesn't pay the bills, money does.
I genuinely mean it when I express my stress and concern regarding the market crash and high inflation, particularly in relation to my retirement. I have been experiencing losses for quite some time, and while some may argue that crises can present opportunities, I am feeling overwhelmed. However, I understand that investing is a long-term endeavor, and it is crucial to maintain focus on the bigger picture and the long run.....
He's a fool IMHO for investing in over priced CA. Sell your house and pay cash for a house even better out of state. A million dollar house in CA would cost you 50% less out of state with land
I’m confused by this one. I thought he always suggests paying off the house besides the 15% into mutual funds. I don’t recall him ever mentioning not to. He’s even told callers to sell their income producing rentals to pay off primary residence without asking if they have other investments.
The great benefit of having a paid off house is (obviously) you have no mortgage payment, and it's hard to put a dollar value on the weight on your shoulders it can take off. It means you require less money to sustain your lifestyle...
The whole thing about how the primary residence doesn't produce an income for you is why some people don't even include their primary residence in their net worth statement.
$1m homes, often with high taxes, landscaping bills, snooty neighbors, higher standard of living (elevate your wardrobe, car, home furniture & decorations), where your kids go to school...also, if they're large, you need extra help in the house
Yes, increase in taxes and insurance. But that is it. If you are concerned about elevating your wardrobe, car, home furniture & decorations chances are not living below your means and are not saving any money.
It depends. In Sacramento and other places in California, New York, etc, lots of frugal millionaires who live in million dollar houses that are actually pretty modest looking, live below their means, and grow their net worth through real estate.
Dave- why don’t you rent that land to produce income? e.g. Ranching, farming, with modular house or trailer, etc. your life, no reply expected of course.
This call is stupid. Why do you want to take on a new mortgage, when you should be investing? Where does it say in baby steps, time to sell your paid off home? Plus, its almost $200k that needs to be paid off, in a time of inflation and possible scarcity. Why doesn't he say in the beginning that his wife is listening in on the line? Rachel should have offered more thoughts. Dave is just flexing re his property. What is his income, what is his job, is his wife working? What about cars,
That's not how it works🤣 A millionaire is someone who has $1 million in equity after subtracting their liabilities from their assets... how it's allocated is irrelevant to the math
@@meatball4409 If you say so. LOL Contemplate the phrase, "asset rich, cash poor". Unless you live in a tent on someone else's property or you live with your Momma who pays all your expenses, your home, if net value $1 million, does not make you a millionaire.
@@meatball4409 Let us put it this way then, I have a home worth over $1million and over $1million in cash and stocks, so then I am a multi-millionaire?
$1000000 house, at least have $4000000 NETWORH. Ratios are so important. Dave do not emphasize ratio once someone has done well he give the too much break, I don't think it should stay that way. With $200000 over a period of time people can buy experiences Ruther than 4Walls and a Roof. People are so obsessed with bigger the better. The World is Changing so fast.
