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by itsoktocry 1783 days ago
>They have just bought something else for $1.5M which needs $200K spent to get it to how they want it (renovating bathrooms, kitchen, etc).

They are putting $200k into an asset which is already 10x+ their income? Ouch. I can't wrap my head around a financial decision like that.
2 comments
IkmoIkmo 1783 days ago
If you look at income and ignore their wealth, maybe it seems strange. But they have > 1.4 million in equity. They're allocating < 15% of their equity.

At the end of the day they'd be sitting on a mortgage that's only 2-3x their annual income, that's very reasonable.

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itsoktocry 1783 days ago
>that's very reasonable.

If you look at current prices, and think that they can only rise, that's very reasonable. Otherwise, that equity can be wiped out pretty quickly.

I suppose what I find strange is killing it on an investment (turning 400k into 1.5M) then turning around and reinvesting in the same inflated asset-class. Hence my comment regarding buying a more expensive home AND dumping money into it.

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lepton 1783 days ago
By "income", parent is referring to employment income. But their true income is the real estate investment of their primary residence, which nearly doubles their income.

They are borrowing $300k I guess (1.5m + 0.2m, less 1.4m), and will likely sell their new house for far more than $1.5m when they sell again in another dozen years.

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itsoktocry 1783 days ago
>and will likely sell their new house for far more than $1.5m when they sell again in another dozen years.

Why do you assume this to be the case? It has been the story of the last 20 years or so, sure. But it could be a complete aberration in the historical timeline of real estate, which for many decades had real rates of return around 1% annually. Houses were not investments.

It's wild that people now assume it's "normal" that you buy a house a triple your money in a decade.

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