Should I Buy A $1,000,000 House? 

This is a bad move. Drain ALL the accounts to buy a dream house before you've earned the dream?

The homeowner’s insurance for waterfront property in a coastal county is crazy high….been there, done that. $110/year will be tight to maintain that property.

I grew up in Hawaii and everyone that lived on beach front property has nothing but issues with all the rust and damage from the waves. I personally think it’s overrated living on the beach. They act like they are ballers on $110k. I live in the Bay Area and that’s not much after taxes and bills. Glad Dave told him to pass on this but I’m sure he’s going to prove Dave wrong and buy that money pit he can’t afford

Million Dollar house making $110k is crazy. The yearly maintenance, taxes, and utilities are going to have them house broke.

Making $160k a year, even this makes me uneasy. I don’t know if I could upkeep the house

Liquidating all those assets, savings, that just sets off an alarm in my brain thinking about it. They need to reign in that dream a bit and approach this differently in my opinion.

Sounds like a dumb idea. Trying to look rich. In a few years those investments will be worth more than that house

Doing this on a 110k income would make me nervous. If he manages to save 300k extra in the next few years, the house will have most likely gone up by then

“Hey dave long time listener, i follow everything. Should i go back into debt?.”

absolutely a terrible idea, they didn't even consider the tax consequence of liquidating the investment accounts in a hurry. And as everyone said, buying a house that's 10x of your income is not even close to a good idea unless you are loaded outside of your normal income.

This guy needs to watch an old movie called the money pit, that is his potential future.

This point (no margin) is exactly why I'm considering moving away from one of the most popular places in the country, and back home. 6-figure incomes and $1M houses just aren't worth it when there's nothing left over at the end.

The problem with this is that it makes them asset rich but cash poor - at least in the short to medium term.

Dave asked how old twice. One of them had a birthday in between 😃

I can now see how so many Americans are in crazy debt after listening to this. In what world is buying a $1M house on a $110k income smart?!

I live in the Toronto area. Nobody bats an eye at spending $1m on a home, and in fact will gladly line up to do so. If this guy lived in Ontario, people would say he's crazy to NOT spend $1m on a house- leverage yourself in any which way possible to make it happen. Now THAT'S scary.

Geez my wife and I have a household income of about 220k and I wouldn't buy a million dollar house, but then again I'm in NY and property taxes are about the same as the mortgage payment.

No ! Me and my husband have the same income and the houses we are looking for are 250k and even that makes us cringe . A mill ? And you had to drain everything to do it ? Heck no I thought this guy made 500k a year

“Not amazing if it steals Your peace rather than gives you peace”. 🙌

Unless they have a fully funded retirement already they shouldn’t pull all that money out. That 600k wasn’t saved for the next house. I’d do 6-800k house and keep some of the money invested. Hey I want a million dollar house as much as the next guy but it’s just not feasible without a higher income

Great call on this Dave and Dr. John.

He is "investing" in a house to live in that doesn't produce an income. Making $110K per year is basically middle-class. It would be smarter to buy $1M of income-producing rental property that can produce an additional $100K in income. Then go buy a nice house to live in.

We make more than double of this guy and I would not buy such an expensive house. With half of that money one can buy a VERY nice home. Expensive homes are like buying an elephant, you have to spend tons of money for the upkeep, just the property tax, insurance and power bill eats up so much money.

home boy literally got a year older in the middle of this call 😂

i wonder if there's a guideline ratio for income vs house value that factors in maintenance and running costs so you don't end up over straining your finances

This guy will buy it and next year he will regret not listening to Dave. 🤷🏻‍♂️ truth be told

Houses / property can go down in value too. I assume it is a large house . At 58 and 56, his kids are grown and out in the world. An income of 110K / year is rather low for a Million dollar home's upkeep. The ratios don't make sense to me, even if he has $600K free and clear and a lot saved for retirement. To sink so much into one asset is too rich for my blood. ..... but it is their money, not mine.

Dave, You really need to come up with a number / percentage of your income or net worth that should be in personal residents (single or plural). Maybe a multiple of your yearly income and a factor to consider net worth. There has to be a guide on this. Feeling without an algorithm can result in variable correct answers. I don't consider personal residence as investment, it does go up in value, but so does housing cost in the future.

The value of the dollar is tanking and real estate is going up so it's not a terrible idea but you won't have much of a safety net for a few years.

No mention of capital gains tax for selling the paper assets... Just because you have $600k in an account doesn't mean you have $600k at your disposal.

When we lived in SWFL, I remember wanting to live on the water(canals) but the insurance is much much more expensive for that reason also.

Still has to pay taxes on the 600k that he pulls out. Depending on how much the value of that has gone up, that could be a bit of money

Your net worth should be above at least $1M if you are considering homeownership in NYC, L.A, or SF. Some think that’s extreme but when you come to the conclusion that foreclosure or panic selling at a loss is unacceptable you act accordingly and don’t bite off more than you can chew.

That's close to what I make and I wouldn't buy a $million house to save my life. Dude needs to keep his investments and buy a $400k house.

I’m very risk adverse as well and immediately said I wouldn’t buy a $1M house with that income even with nearly no mortgage. It’s funny that 90% of Americans in his situation would have bought that house! If he lived in my state he would have not have to pay properly tax being a Vet and with that I guess it’s okay because he would only have the insurance to worry about. However, insurance cost have sky rocket and Florida is the MOST expensive I heard! Also, he will have to pay for regular maintenance and possible service cost with such a huge house (coming out his income). He will be house poor with all of his net worth in that house. Perfect world for him will be to pay off his house, make a little more like at least $180k annually and save up enough to have $200k of an emergency fund AFTER buying that house. Dave is being extreme again with $500k but having 20% of the house cost in savings will cover any unexpected major housing cost. It’s actually only 10% in emergency fund for us regular people but I just doubled it due to the high cost of the house.

The wife's dream has always been to "live on the water", but yet, it seems like she's not even working and bringing in any income for this "dream" of hers if their household total income is $110k/yr! 🥴 If I were the husband I'd be like, "ummm.... NO". They will really run the risk of being "house poor" if they try to purchase a mill dollar home only making a total income of $110k. They will be kicking themselves. Smh 🤦🏾‍♀️ Draining their assets in order to make this dream home a reality isn't smart either. 🥴 I agree with Dave, this is a stupid decision.

A general rule of thumb is the house should cost about 3x your salary. This is way too expensive for his income.

My wife and I. Essentially my wife keeps telling me.

one most useful conversations I've gotten to listen to

A million dollar house in Pensacola must be a freaking mansion.

My10yo son just told me that “a house on the water is not a good idea because of what we just learned in school” I asked him what did you learn? He tells me: “erosion. Eventually that house will fall in the water”

dave explaining the 600 & 400 with the million dollars was sending me

Happy birthday! Because somebody turned 48 years old within the duration of their phone call with Dave. He said 47 and 46 then 48 and 46 when Dave asked his age for a second time.

It's just tying up too much money in the house. Save like crazy and wait a few years.

Awful idea, especially on the water.

As an insurance agent I’m think about the premium… that could easily be 20k a year easy

They probably have a ton in retirement and they can manage the expenses but I never got people that buy expensive homes, your money is tied up.

I have 1/3rd of my net worth in my SFR and even that makes me uneasy at times, I couldn't imagine throwing nearly everything in it!

I am thinking the investments will return better than the interest on house. that said, 100k is low for mortgage of 300k + property tax on 1M house

Road to being house poor

Yeah. Get ride of investment’s and buy a liability😅

I myself would keep it 6-800K. Pensacola has plenty that I'd live in at that price. I assume they don't need room for kids to live in anymore. And if grands are around the corner they got cute bunk beds for those beachy apartments.

I can't imagine having all your net worth battling the harsh environment of the oceanfront. I wouldn't consider it unless it was a fairly trivial portion of my net worth.

Let's get that cruise back on schedule DaveyBoy

I don't know much about Pensacola, but that sound like more than a water front property, more like a mansion water front. Definitely a bad move. Go on Airbnb and rent one of those once in a while.

The taxes on the investments were not talked about

I didn't hear what is in his retirement investments. He only mentioned the non-retirement ones, so he really doesn't know what his net worth is. That could paint a completely different picture. Also - a beachfront home in Florida? One bad storm or hurricane could wipe that out. Plus would insurance even cover such a catastrophe? Not a standard policy to my knowledge, and hurricane and flood /storm surge insurance often has additional costs/deductibles and would be quite expensive.

In NY most good houses are $799 and up with average household income 140k there’s barely 500k houses in my area and they need 150k work

Jon laughing at the “almost “ 😂

Are we just going to gloss over the fact he said they were 47 and 46 the first time he asked and 46 and 48 the second?

Lol it sounds like here in Toronto only people are making 65k and trying to figure out how to buy a million dollar house

"You already don't do, some of the stuff we teach"😂

This guy is talking about spending all his money, and he doesn't know how much the house will cost him?

Way too much house for their income.

"It doesn't generate income". If not, why would you recommend anyone pay down a mortgage with a 2.25% rate? He does that on a daily basis, but in the same breath you day IT DOESN'T GENERATE INCOME! That's speaking out two different sides of your mouth.

Surprised Dave agreed initially and his counterpart had a different view he came around to. Might be possible but definitely does not sound balanced.

Behind most costly home purchases are wives. Remember the squalor of a place your husband lived in when you met him??? Realtors always present homes that are above the budget because they can appeal to the woman's emotions. The formula is the same kitchen and bath. These men need to learn to say no

NO!!!!

What advice do you give about putting money into remodeling ?

If that guy does that he is one small disaster away from debt Like the A/C or plumbing.

It’s Florida on the water. It’s likely a small house, so repairs would be cheap.

You can also find waterfront property for a lot less than a million

They can do it but they are going to be house poor.

How much is insurance on a million dollar house in a flood/hurricane prone area?

Happy birthday caller!

"Liquidating" investments generally generates a big tax bill. A tax expert needs to weigh in here before paperwork is signed. Today -

Dave Dave , I live in nyc average single family house in nyc is 800k, and which would need a lot of reno, a million and up houses are ok and maybe move in ready. What should I do. Rent or buy. My rent is 1200 a month, should I just keep renting and invest?

They didn't ask how much he has in retirement savings. If he has a million in retirement, I'm sure that changes the answer.

$1M house here in San Diego is a regular Harry homeowner house. Its what a $600k house is in the rest of the country.

I agree with the recommendation not to buy the house. I do wonder, though, why taxes were omitted from the conversation.

Don't do it

“Hey Dave can I get a million $$ house with absolutely no wiggle room.” Sure, if you want to YOLO…🤑

One question they didn’t ask is if that home is under market value, and a real opportunity. That changes everything… not enough information about the house, to give them an advice.

Wonder if he did this how the insurance situation has changed, it's a totally different insurance world for million dollar houses on the water in Florida these days. This could be one expensive house to insure, maintain and afford the taxes. Hope they're naking it if they went for it.

Wonder if he was also thinking about putting some of the loan into customizing the home…

Or sell the house throw in investments and put 10% down on the house. Way safer when debt is so cheap

$110K income cannot truly afford a Million dollar house period!

Just wait until you have to revamp the seawall, living on the water. Super expensive 40-50k

“It’s been our dream”. Don’t do it! He is living above his means.

One thing I didn’t hear is how much is in his retirement fund .. if it’s like 2-3 million , may be not bad .. I thought I heard he is a veteran and they get pensions too .. but someplace peppery tax can be a lot ..

The answer to Johns question of why do you want to buy this house should have been, "to keep up with the Jones". There is no other reason to buy a million dollar home on a $110k income!

Ummm buying a WATERFRONT property in Pensacola Florida?! Isn’t sea level rise a massive problem there? Noooo thank you.

$1M isn't an expensive house in many areas. It might be great value in the location it is in.

2:12 maybe the caller is saying it will be less after capital gains are paid on the stocks and house

This has to be a fake call. His numbers don't add up. Dude is 47 with a 110k income and had saved up 600k plus retirement accounts plus a paid for 400k home. They Dave asks simple question about the numbers and he can't answer and just moves on.

The uneasy feeling is your answer to NOT do it! Good luck!

There are taxes on liquidation of investments...

If the house is on the water, it may not be the biggest or fanciest house. So upkeep may not be much more than his current home. The land value is prob most of the cost.

Just go on a holiday twice a year near the water😂

It doesn't make sense