Ever get jealous? How do $1M homeowners own that?!
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Real Estate Investor · Shelton, WA · Member since 2013 · 369 posts · 639 votes
9y@Alice K. All i see when i drive by houses like that are high income earners leveraged up to their eyeballs. I prefer to drive by the middle class neighborhoods and ask myself "How do i buy ALL of these?"
"The Millionaire Next Door" really changed my perspective on material possessions like that :)
Keep hustlin'!
- Lloyd
106 Replies
- Investor · Carlsbad, CA · Member since 2012 · 73 posts · 34 votes9y
@Account Closed so true. I bet some people walking on that trail 10-15 years from now would kick themselves for not buying one of those houses for $1.2M when they had the chance. Affordability is a relative term. Most people who left expensive but desirable areas looking for affordability could never go back, unless they buy and sell at the exact right time. When I first started working, an old guy in my office told me to buy the most expensive house I can afford. So my wife and I put down only 10% to buy our first house, and we didn't see half of our salary for a couple of years. That was 1999, almost 9 years after San Diego's RE hit the bottom in the early 90's and most places have appreciated >50% since. I remember telling ourselves that we would take a hit when the market turns. And it did after 9-11 and the internet bubble, but only briefly, and then it just took off like a rocket. Fast forward to 2010, we were ready to upgrade to our 2nd house in the midst of RE down turn. This time we were extremely careful, so we put down 40% and made sure we can afford it even if one of us was unemployed. Fast forward to today, every time we go to the beach, I thought to myself "I wish I got one of those houses when I had the chance".
- Real Estate Agent · Carmel, CA · Member since 2015 · 193 posts · 128 votes9y
I am a Realtor in Carmel. The place where the average cost/sqft is about $1000-$1500 for a 1600 sqft home. (That's 1.6M t0 2.4M for you math challenged folks)
I sometimes get envious, but then I think about the mortgage and amount i have to leverage in order to buy that.
I am happy with my little 500K CA Rancher a few miles down the road. It has appreciated about 100K in 18 months. Maybe a little less. My mortgage is a lot lower and I actually get to eat something more than Ramen.
Now my next goal is to pay down the cars. I'll never lease. Drive too many miles. They're common sense cars. Nothing flashy, but still nice enough to drive clients around.
Hopefully in the next 12 months i do a local fix-n-flip to make some quick(ish) cash, and then to buy/hold. I Just don't know where yet...
- Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes9ySo my buddy that's done what I've done has built up a nice portfolio. He's made millions buying at $8m, selling at $10m. He just sold a property for $24m that he bought for $18m But those buy/sell profits aside, cash flow from his units is aprox $100k/month after everything. $100k/month pays quite the mortgage. And yes even though he could have paid cash for his house he financed it as he's getting 4% money and it would have been dumb to pay cash when he can use that cash to easily make 10%
- 9yDylan VargasPro MemberRental Property Investor · Chico, CA · Member since 2016 · 625 posts · 336 votes
@Alice K. "and live like a small, sad rodent with a commute" LMFAO! Oh some good ones on this thread. I always think the same but never had the guts to knock on the door and ask. Great feedback on this post.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
this is timely I am sitting in my son in law and daughters 2 million dollar pad in Vegas... while I work on my townhouse I own my townhouse free and clear... LOL but he has a great cash flow from multiple business restaurants etc.. so payment is not an issue at least for now... but he they dont spend money on cars.. just nice house and he runs his business out of this house its 10 k sq ft for gods sake LOL.
I think alot of this is regional.. were you have big run ups historically you have thousands if not hundreds of thousands of accidental millionaires ...
From my perspective age has something to do with it... as I age I am very debt adverse.. when I was younger bring it on was the thought process.
but if your just going to compare everything to cash flow real estate then of course its best to stack those up use cash flow to fund your life style.. but there is many many other ways to make big money in RE that does not include rental income.. its whatever floats your boat...
My primary residence in PDX would be considered higher end probably 1 mil.. but I built it and was conservative my payment is less than rent.. so no problem owning it.
If I lived out in the mid west I would be stacking rentals at a furious pace as that is the best play there. building and value add is not quite as good in many of htose markets all though its catching up.
- CA · Member since 2016 · 1k+ posts · 1k+ votes9y@ Alice K - if I may share my story... in answer to your question of how "these people" did it.... I graduated from SF State Unic in 1999, and my first corporate job was $28k... 9 month later got my 2nd job at $65k, and another 6 months later jumped again to $85k... By 2004, I had $100k saved up, and bought a SFH in Phoenix for $400k because "I could not afford Bay Area"... Comes 2007, bought first SF condo for $635k, 2/2 in PAC Height...2008, another 2/2 in Russian Hill, 2009 another 2/2 in Noe.....All 3 on short sale or foreclosure.... All 3 at $1.5m ish each... I put minimum downpayment on these as all my money were tied up in Phoenix then... negative cash flow up to $1000 per month per property for a good 3-5 years.... sucked all my w-2 income into it...I was living bare minimum... It was also around that time I got so burned out in Phoenix that I sold at $100k loss, basically giving up all my downpayment.... Looking back, my advise would be buy early when you are late 20...buy as early as you can....buy when you can't afford... literally... When you are into 30/40, yes, your income is a lot higher, but it becomes a lot harder to pull the trigger for some reason... at least that is the case for me ....
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes9y
If you haven't read it yet, you should read "The Millionaire Next Door". The basic premise, which I have found to be very true over many years, is that the truly wealthy do not tend to be out there flaunting their wealth with fancy cars, boats, planes, and McMansions ... you probably pass by them in the street every day and never once think to yourself, wow that dude must be loaded. Rich and famous is for suckers ... much better IMO to be rich and anonymous.
I've had the privilege of getting to know several people like this, a few I kid you not you may mistake for a homeless person they dress so shabbily, and yet literally have 8+ figures in net worth ... once you see the world through this lens, which I think is a lot closer to reality than many believe, then your perspective on life will change. I see people driving around in $100k+ cars and I am not envious, in fact if anything I feel sorry for them because in all likelihood the car probably owns them more so than they own the car. I understand that this view is not the norm, but I encourage everyone to give it serious consideration and dig in a bit under the surface out there to see if it holds true. I find it surprising how often it does.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@David Faulkner some may act that way I know many truly wealthy and they were it well.. multiple homes multiple ferraris .. jets ... all sorts of trappings of wealth.. can't paint a brush and say all mega rich run around like paupers.
and not all rich are are drowing in debt.. one of my business partners who sold his garbage company to waste management for 65 million... owns every thing in cash... homes in Napa valley Tahoe big hunting ranches travels the world.. he does wear levi's and drive a Chevy tahoe.. but one look at wifes jewelry and you get the drift.
Another of my business partner owns a few hundred unit apartment in PDX all paid for... 2 million dollar home in Honolulu .. member of Wailii condo at Nauru tower that is vacant most the time I get to use it when I visit.. drives a Tesla I talked him into buying..
so just can't paint the picture of everyone who has a bunch of toys is drowning in debt that simply is not true. Just like all very rich dont drive prius's and dress up in shabby clothing..
I did know one other fellow though who sold his court reporting business for 10 mil cash and he would show up to Silverado driving his beat up pickup truck but they owned a bad pad..
you hang around napa valley and the desert you will see very wealthy that have true wealth.
People are people everyone does something different with their money.. but generally I find many that are very wealthy to be quite kind and respectful folks. Some are jerks.. I played golf with the CEO of GNC he was pretentious but I also played a round of fold with the number 2 man at Schwab and you would not have known he was who he was.. when I asked what he did he said he was a stock broker... LOL.. but then when he said he was going out to Thermal to jump on his G 4 I knew he has to have some coin LOL.
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes9y
Originally posted by @Jay Hinrichs:
@David Faulkner some may act that way I know many truly wealthy and they were it well.. multiple homes multiple ferraris .. jets ... all sorts of trappings of wealth.. can't paint a brush and say all mega rich run around like paupers.
and not all rich are are drowing in debt.. one of my business partners who sold his garbage company to waste management for 65 million... owns every thing in cash... homes in Napa valley Tahoe big hunting ranches travels the world.. he does wear levi's and drive a Chevy tahoe.. but one look at wifes jewelry and you get the drift.
Another of my business partner owns a few hundred unit apartment in PDX all paid for... 2 million dollar home in Honolulu .. member of Wailii condo at Nauru tower that is vacant most the time I get to use it when I visit.. drives a Tesla I talked him into buying..
so just can't paint the picture of everyone who has a bunch of toys is drowning in debt that simply is not true. Just like all very rich dont drive prius's and dress up in shabby clothing..
I did know one other fellow though who sold his court reporting business for 10 mil cash and he would show up to Silverado driving his beat up pickup truck but they owned a bad pad..
you hang around napa valley and the desert you will see very wealthy that have true wealth.
People are people everyone does something different with their money.. but generally I find many that are very wealthy to be quite kind and respectful folks. Some are jerks.. I played golf with the CEO of GNC he was pretentious but I also played a round of fold with the number 2 man at Schwab and you would not have known he was who he was.. when I asked what he did he said he was a stock broker... LOL.. but then when he said he was going out to Thermal to jump on his G 4 I knew he has to have some coin LOL.
True enough, not everyone who has flashy stuff is all hat and no cattle, but of what I've seen it is more often than not ... I submit that my view may be eschew having lived in LA-LA land for so long ... the birthplace of all show and no go ... LOL.
- Lender · Santa Barbara, CA · Member since 2017 · 76 posts · 14 votes9y
First off, Love the photo name "gollyGoshGee.jpg". Gave me a good laugh!
In some areas, like here in Santa Barbara, real estate costs are very high (Median cost here is $1,050,800) and forces almost a dichotomy between the home owner vs. renter. It has had a profound impact on my appreciation for the "where and when" of real estate. For the price of a $1M+ property here, you could find a similar property for ~300-400k in states like North Carolina and even lower in others! I think sometimes the idea of liquidity and diversification is lost, but for some it's not a problem!
However, I don't claim to judge those who spend the money on those properties, after all some of us are forced to live where we do or just enjoy a house that echos... Let's be honest, we all want to reenact risky business in a large living room. - 9yAlice K.Investor · San Francisco, CA · Member since 2015 · 306 posts · 211 votesOP
@Manolo D. - Prop 13: Damn, how I want to put myself up to my eyeballs in debt to take advantage of that.
@Greg Hamer - Laughed @ ramen - my galfriend who lives in an apt and pays 70% of her income on rent is a big fan of ramen. We were sharing notes the other week.
Carmel is so gorgeous, I do wish you the best for a future flip in that area! Fantastic you have a place that's gone up, completely believe it's appreciated 100k.@Cody L. - Someday, I dream of being a cougar with a story like that. I’ll never wear makeup ever again. haha
Also, do you have any gold pro-tips he's ever shared with you / how he did his first deal?
- 9yAlice K.Investor · San Francisco, CA · Member since 2015 · 306 posts · 211 votesOP
@Dylan Vargas - YOU KNOW. For all intensive purposes, I just imagine it’s rage in the doors of the home owners.
The "highlight" is my landlord’s girlfriend situation. They don’t know that they aren’t the only one. It’s better than going to see a movie.
@Jay Hinrichs - That’s so great your daughter / son in law have their own business in LV! And, that they were at least smart enough to do 10k sq ft > don’t have bugatti veyrons. Smarter than my friend circle.
@Diane G. - Thanks for the share. Esp the salaries-- that resonates with me. Took me many years to even get close to where the “boys in tech” were. Even still I’m lagging a bit behind.
Did you do the condo with a <20% down? I'm one of those overly-cautious people when it comes to condos and PMI. But, maybe I'm just a prude. Estimates are that appreciation for 2017 will just be 1 - 2% on Zillow which historically has been pretty accurate so I might not be able to refi until much later. All that aside, congrats! So wonderful you have those!
- 9yAlice K.Investor · San Francisco, CA · Member since 2015 · 306 posts · 211 votesOP
@Jesse Goldberg - I forgot I named it that! (haha) The “dichotomy” and struggle are real.
Realized you are a lender-- I was reading Paragon trend reports for 2017— we’re in somewhat of a plateau in SF. (No longer 40 offers for one property as it was 4 years ago). Do you think we’ll be seeing a slight dip in 2018?
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes9y
Originally posted by @Greg Hamer:
I am a Realtor in Carmel. The place where the average cost/sqft is about $1000-$1500 for a 1600 sqft home. (That's 1.6M t0 2.4M for you math challenged folks)
I sometimes get envious, but then I think about the mortgage and amount i have to leverage in order to buy that.
I am happy with my little 500K CA Rancher a few miles down the road. It has appreciated about 100K in 18 months. Maybe a little less. My mortgage is a lot lower and I actually get to eat something more than Ramen.
Now my next goal is to pay down the cars. I'll never lease. Drive too many miles. They're common sense cars. Nothing flashy, but still nice enough to drive clients around.
Hopefully in the next 12 months i do a local fix-n-flip to make some quick(ish) cash, and then to buy/hold. I Just don't know where yet...
To answer the question posted by the OP, many of those folks don't have the mortgage and leverage in order to by that today ... they bought back when it was a little 500k Rancher in Carmel. Someday somebody may be looking at your little Rancher a few miles down the road wandering "how did that guy afford that?" ;) Time is a friend to a wonderful property in a strong market, and the enemy of not so wonderful one in a weak market.
- Lyndhurst, NJ · Member since 2017 · 19 posts · 6 votes9y
Why waste time worrying about it.........Never fret about what we don't have - and truly appreciate all that we do!
Wishing all continued success and best of Health & Happiness, always Keep the Faith - Mike
- Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes9yA $1 million home doesn't buy you much in the Bay Area or L.A these days . I recently looked at house prices in Santa Monica and there were modest sized 3 bedroom fixers for $2 million or more . Even in Echo Park which used to be known as a gang area average home price is $800,000 .. As others mentioned many buyers bought when homes were a fraction of the current price . In the late 90s home were 1/3 of the price or less . During the crash homes were about half of what they are now even . Luckily I purchased one as a primary but not a $1 million home unfortunately . I try not to get jealous but inspired by seeing those that have obtained significant wealth . I like to find out their story and the path they took to obtain their wealth and success . I always enjoyed reading different biographies of different entrepreneurs and investors . The stories of those that really built something from nothing are always the most inspiring .
- Rental Property Investor · SF Bay Area · Member since 2016 · 234 posts · 103 votes9yAlice K. Interesting and honest post, I like it! 😁 Currently working in downtown SF so I see those luxury condominiums and posh houses. Also living in the Bay Area, there's a lot of million dollar homes so I made it a habit to ask myself how can I add tremendous value on what I do so my income stream allows me to buy it comfortably (20-25% of my income). We just have to keep hustling to reach our goals, listen and learn to BP Podcast and take massive action. I'm starting up my REI journey, outside my primary residence bought a Property with my sister and had a lot of lessons learned, it was painful so I'm doing my diligence, networking with people here in BP and learning a lot. Happy to connect.
- Real Estate Agent · New York, NY · Member since 2017 · 66 posts · 26 votes9y
In NYC, where studios can be upwards of $1.2, I wonder the same thing -- but sometimes i see the salaries and some starting doctors are over $500,000 base + 150,000 bonus.... bankers -- front end + traders are at this... all at age 29.... real estate sales people, depending on the deals you do and who you know can make $500,000 on a few deals...
- Rental Property Investor · SF Bay Area, CA · Member since 2014 · 352 posts · 543 votes9y
I know a couple who are both high paid physicians living in SF. However, they live in a 2 bedroom condo with 2 adults and 2 kids. My guess is that their combined salaries are in the range of 600-700K/year
That friend told me he can afford a $10,000/month mortgage (1.8 million dollar 3 bedroom home) but that's the limit. If he lives in the city, he would want to send his kids to private schools since the quality of public schooling in SF is not good which would cost around another $60,000 ($30,000 x 2) minimum. When he starts adding all these other costs, BUYING a decent 3 bedroom (1500 sqft) home in SF seems incredibly daunting.
So what i think is driving the home prices is the high tech jobs that pay $150,000 but get a huge stock option payout of $200-300K+ which allows them to leverage as much as they can.
- Investor · San Francisco, CA · Member since 2016 · 192 posts · 95 votes9y
My wife's parents bought a few SF houses in the 70s for around $130k, and now they all have an extra comma and fund their retirement as rentals, allowing them to stay in SF with no money worries. One of them was a historical landmark, but it had crazy water damage and ceilings missing. Now it's one of those "fancy houses" on the art deco tour, but it's all sweat equity. They lived in it and scrimped and saved over the last 40 years to fix it up. People see the fancy house and think they are rich, but there's a long story about a lot of hard work behind how they got there.
Her grandparents did the same, although I think they paid $15k for a house in Haight/Ashbury. Seems like every gen adds a zero.
Just another anecdote to quell the feeling that everyone here is a Zuckerberg. ;)
- Charlotte, NC · Member since 2017 · 2 posts · 0 votes9y
This thread by far is the funniest. Keep on spitting the knowledge! Loooove it:]
- Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes9y
My first wife and I moved to the Bay Area for my job in 1995 right out of school. My cousin told me: buy a house from day one. He would even lend me the down payment. I wasnt ready to do that. But the advice was good. She got a job in 1996 and we banked her entire salary for a down payment. By 1998 we were ready to buy and bought an outrageously expensive (in my mind) home for $340K in West San Jose/Campbell. Total income then was about $100K and mortgage rates were like 7%. Fast forward to 2004, divorce and appraisal came out at about $800K. Took my share and rented for a couple of years. Bought another townhouse for $620K in 2007 in around the same neighborhood. Income at that time was zero (between jobs...the good old days). Lived there until 2014 and with new wife bought 1.3M home in Berkeley with hefty down payment (incomes had risen and we saved money). But kept the town house as a rental. New wife also had her own home in Berkeley which she bought for like $550K in 2006 on an income of less than $60K (good old days) and rented out rooms to make the mortgage work. Also kept that as rental. So fast forward to 2017 we have a primary home valued over $1.5M and two rentals valued at almost $1M each, all three with a lot of equity.
So thats how we end up with three $1M properties in the Bay Area. Two rentals generate about $1K+ per month positive cash but of course we still have a mortgage on the primary home
I can hear you all saying but we cant do that now. Prices will not continue to go up. Its the top of the market. Wait for the downturn. All I can say is that when I bought the first home for 340K I was sick to the stomach and couldnt sleep. Every penny we had was in that house. And the mortgage ate up a lot of the income. But you have to get in the game to win.
- Residential Real Estate Broker · Portland, OR · Member since 2017 · 40 posts · 18 votes9y
I live in portland and the prices are still rising. My rule is "just because you can buy it, doesn't mean you should."
- CA · Member since 2016 · 1k+ posts · 1k+ votes9y@ Alice k. Yes I had PM I, and my rates were like 8%.... that was why I was paying $4k ish a month into these properties from my w-2.... for 3-5 years..... but then tide turned... rents went up, rates came down... and my $600k purchase all become $1.5m....now I have about $60k cash flow a year... So, to your initial question, I think most of those $m owners are average people like you and me... they just had the guts bought early in their career, sat thru the first few years of tightness...that is really the only secret of building weather on Bay Area.... Every time I hear people say they can't afford Bay Area and have to go OOS, I know they will regret later, just like my Phoenix purchase... buying OOS is the sure way to price yourself out
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