![]() Instead, his MIL is now a permanent resident, as were his unmarried daughter and his god-daughter (who's parents live in another state). ![]() They bought the home, but the kids haven't been coming as often as they planned. It was going to be sort of the family destination for holidays and such. I've known retirees who bought a large (>$1.5 million) home expecting it to be the vacation destination for their children and grandchildren. The question at hand is lifestyle inflation and what would BHs do. I should have clarified instead of rounding to 200k. He may find that many people who want to rent a $800K house really can't afford it and may have other issues. In a market like that even when he finds a well qualified renter he may have higher turnover as the renters needs change and they move on. If that is the case then it can make finding good renters difficult since if a well qualified renter could buy a perfectly OK house for $600K most people would rather buy a house like that than rent a nicer $800k house. Reading in between the lines it sounds like in his area his current $800K house is pretty nice and well above the low end of the housing market. The problem with that is that by not freeing up the home equity would mean that the mortgage on his new house would be $400K larger and likely be at around 6.5%. If he has something like a 2.5% $400K mortgage on his current house that he wants to keep that could be part of the reason he wants to keep it as a rental. It was also not clear if he would even be able to get the financing that he needs to buy the next house with a low down payment so it might not even be possible for him to do what he wants. I agree, especially if he cannot come up with a 20% downpayment on his next house. I'd imagine that's the bigger mistake then upgrading. Not selling old home, he plans on renting out. If he has 400k equity in current home, why wouldn't he put down at least 20%, if not the entire 400k equity? I have excess space which 'tempts' me to fill it with more stuff. What would some of you seasoned bogleheads do? Avoid lifestyle inflation at all costs or bite the bullet?Įven though mine is paid off, I now wish I owned a smaller house. His frugal side is telling him make do with what you have, his other side tells him you can afford it why not. He and his family doesn’t need this home, they are perfectly comfortable in their current home. He’s considering purchasing a home for 1.2M and taking out a mortgage for about 1M. Monthly expenses: roughly $6000 including mortgage.Ĭurrently mortgage balance 400k on a home worth 800k His spouse (also under 30) $80,000 year incomeĬashflow from Rental income $53,500 per year A close friend and I were discussing his potential future home purchase and asked for my opinion on if he was suffering from a case of lifestyle inflation.įriend is young (under 30) $310,000 yearly income
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