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  • CYAI - 3rd house?

    We’re back with another Can You Afford It?

    In today’s analysis, our physician owns a home + vacation home but has found a third home and wants to convert home 1 to a rental property. We’ll set aside the consideration of whether owning this “rental” is a good financial decision and focus on the core issue: how feasible is a third home? Real estate is a great investment - the more, the better. Right?

    Read along with my not-too-good writing (tip of the hat to @fatlittlepig :-) ) and XYRAYVSN as we break down this problem. Agree or disagree?

    Got a spending dilemma? Use this link to submit your goal and get a free, candid financial analysis.

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  • #2
    What a joke. Owes money on two houses and wants to buy a third with minimal retirement savings and student loan debt. Not sure how a third mortgage would make anyone a “9” on scale of happiness.
    just my humble opinion
    Fatlittlepig

    Comment


    • #3
      Insanity.  3 mortgages, student loans, furnace loan....  This person should stay put.  Sell the vacation home.  Pay off the furnace.  Pay off the student loans.  Increase the college funding.  Pump up the retirement accounts.  Start really funding a taxable account.  FIRE.  No way without serious changes.

      Comment


      • #4
        I'm sorry, what?

        Outstanding $450k in other mortgages, still carrying student loans, unimpressive retirement balances, almost no cash, and wants to by a house that is 2.5X annual salary?

        Are they really going to end up with $1.1M in home loans and call this smart?

        Very curious how this poster plans to retire early with this financial plan.

        Comment


        • #5
          Again, I don't care if the interest rate is 0%, no physician should ever have a loan for things such as a furnace.

          Comment


          • #6
            So sounds like a no....

            Comment


            • #7
              DO IT

              YOLO

              O oops, thought I was in the WCI facebook group.

              I also vote no for reasons above.

              Comment


              • #8


                Real estate is a great investment – the more, the better. Right?
                Click to expand...


                Johanna,

                Is this a "need" or a "want"? Default to the latter and NO.

                Comment


                • #9
                  Same as always. Most docs can afford anything. But not everything.

                  Comment


                  • #10
                    Not even close. Only $850k saved (sorry 529s don’t count in my world, which seem underfunded anyways), debt in the form of student loans (at age 43), mortgage and a furnace loan (didn’t know these existed). The only upside is the expenses are relatively low compared to income. I’m not sure how accurate the expenses are as I feel they should have more saved at that expense/income ratio.

                    Comment


                    • #11
                      The more I read and the more I talk to colleagues, I'm convinced that if physicians just don't completely screw up the house decision (buying too early, too much house, too many houses), then everyone would be pretty well off. You just tie your hands when you spend half your after-tax income on a house. We bought a house at 1x our income. We're a dual physician household living next to a bunch of single earning families who have 2-3 kids and SAHMs. Apparently, being house poor is the American dream.

                      Also, if you can't cashflow a $7k furnace, how are you going to retire early?

                      Comment


                      • #12
                        Just looking at the initial numbers it's an obvious no. No analysis needed.

                        The scary thing is I think a lot of people are in this situation (early 40s, 500k saved, some equity built up), and think they are doing great--I think you have to think you are doing great to consider buying yet another 700k house with no down payment AND retire in 10 years.

                        It would be good to know if the current "vacation home" is heavily cash flow positive vs just breaking even vs negative.

                        Comment


                        • #13


                          The more I read and the more I talk to colleagues, I’m convinced that if physicians just don’t completely screw up the house decision (buying too early, too much house, too many houses), then everyone would be pretty well off. You just tie your hands when you spend half your after-tax income on a house.
                          Click to expand...


                          One (reasonably priced) house, one spouse would put anybody with a professional income on a path that would take effort to derail.

                          Comment


                          • #14




                            The more I read and the more I talk to colleagues, I’m convinced that if physicians just don’t completely screw up the house decision (buying too early, too much house, too many houses), then everyone would be pretty well off. You just tie your hands when you spend half your after-tax income on a house. We bought a house at 1x our income. We’re a dual physician household living next to a bunch of single earning families who have 2-3 kids and SAHMs. Apparently, being house poor is the American dream.

                            Also, if you can’t cashflow a $7k furnace, how are you going to retire early?
                            Click to expand...


                            agree.

                            you don't go crazy on spending and just max the 401k and you are going to be wealthy by any current or historical standards.

                            this forum is the Pro Bowl.

                            Comment


                            • #15




                              What a joke. Owes money on two houses and wants to buy a third with minimal retirement savings and student loan debt. Not sure how a third mortgage would make anyone a “9” on scale of happiness.
                              just my humble opinion
                              Fatlittlepig
                              Click to expand...


                              I think a third home would put me at -9 on the happiness scale.

                              I checked the calendar to make sure it was not already April 1 again.

                              Comment

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