With The Current House Prices, How Are You Guys Giving Any Saving Advice?

[Singuy]

There are all kinds of manufactured homes and some of them are equal in quality and would be hard to identify alongside an standard site built home. At the bottom end, there are also some that are pretty close to house trailers on temporary foundations with perimeter skirting, etc.. I'm sure those are not what DS is referring to and / or recommending.

Where do you get that the point of a house is to build wealth? The point of a house is to provide shelter from the elements. If you look at the true cost of a house and include everything; taxes, insurance, your improvement and upkeep costs you can almost always rent cheaper. Sure, many of us have seen our home values increase significantly over time, which gives you a bit more net worth, but soon as you sell it and cash in on those gains you're going to need to find someplace else to live which may be quite costly. Many contributors here don't even like to include their residence in their net worth for this reason. There are plenty of other ways to build wealth that you can actually use and spend without losing the roof over your head.

A house is like the s&p, anyone you know with a house has generally a higher net worth than those without. There are many ways to out a roof over your head, but a house when invested properly also has the benefit of generating wealth, passive income, or at the very least provide one with better luxury. If none of those things apply then there's no point.

I think manufacturered houses at a good location is great and was seriously building them into my lecture when they were under 100k a piece. However they are all on leased lands so its practically renting, with a difficult time of getting them mortgaged and insured. And if there's a housing correction, these houses will decrease the most percentage wise. There's a time a place for them but definitely not what most think is the peak of the housing market.

[Singuy]

So I made $2k and dh made $8k a month. Our mortgage was the $460k because we had a purchase price of $575k with 20% down and $25k kick back for repairs. Our down payment was courtesy of the $150k 1bedroom condo you mocked earlier bought in 2002 with $15k down. The fact we bought a condo which is not wealth building and unnecessary.

Now we were accruing student loans during 2005-2010 and we were not making payments. Second our mortgage was tax deductible along with our state income taxes property taxes and mortgage interest which made our taxable income for married filing jointly I believe 2%.

We also had no car payments, no life insurance, our car insurance was $100 a month, health insurance was $64 a month.

Also the maximum 401k was $14,000 so a little over $1000 a month. Our take home was $8000 a month? I paid no as or medicare on my $24k graduate student stipend but it was taxable. Or $7250 a month but the $800 espp we sold and used for the six

I believe dh also used espp as our short term savings and we made 10% on it selling ASAP upon six months purchase. We had a minimal $5k ef I recall.

So

$2400 mortgage
$400 property taxes
$200 month hoa
$300 a month heating balance billing
$300 a month electric balance billing
$100 a month insurance
$650 roth ira
$50 internet
$60 phone
$100 car gas - I used public transit and dh had free parking but we lived 6 miles from work.

Our basic needs are $4460 before food for a couple and we brought home something like $7000.

Then the rest we spent up to around $7000. Then mba in 2007 and we had loans.

I recall I used to budget $400 food. Then we didn't need fancy clothes, no fancy cars or trips.

We saved. So keep $3000 for a mortgage piti and that's your purchase price of house in Florida.

Our income was $106k minus $25k in deductions, then personal exemptions $8400 then MFJ brackets and it was minimal if I recall in 2005/2006.

Heyi didn't feel super deprived we ate out more than when we were students. We had two paid for cars, we bought airline tickets.

So no we were in debt accrual and not payoff. But since I was teaching medical students and I knew other grad students mostly mba students driving bmw, Lexus, Acura renting nice places and living the life they expected to lead. We poor grad students on stipends always laughed because we knew we'd be poor academics. And those other two degrees like your pharmacists were already banking on living large.

So want to know how to stretch it more? Buy a multi family and rent out half where we lived. Had we done that we'd have been even better.

Instead when dh stared mba the extra rental income helped ends meet in 2007 along with student loans. In 2005 we had no loans since we had paid off my undergrad loans by then and we're instead in me taking on some graduate loans.

You sure your take home was 8k a month? Mine has always been 6k a month on 120ish k salary without state income taxes. Do you not have home and health insurance? 14k plus 8k a month is 110k, you only paid 10k in taxes?

[ua_guy]

Zoning will vary, but just because a home is of "mobile" (like a single or double-wide) or "manufactured" (modular) variety doesn't always mean it's on leased land or won't qualify for a mortgage. One of the cheapest ways to put a home ON land is to buy bare land and stick a manufactured home on it. Development costs for bringing power, water, and sewer or septic will vary, but sometimes some if not all utilities are already there.

[Singuy]

Zoning will vary, but just because a home is of "mobile" (like a single or double-wide) or "manufactured" (modular) variety doesn't always mean it's on leased land or won't qualify for a mortgage. One of the cheapest ways to put a home ON land is to buy bare land and stick a manufactured home on it. Development costs for bringing power, water, and sewer or septic will vary, but sometimes some if not all utilities are already there.

Yes, gets more and more complex. My friend have been trying to find buildable land in central FL for awhile that's a reasonable price. His take is reasonable priced land doesn't have the foundation for house building use, therefore they are discounted. There are lots of land in FL that require massive rejuvenation so houses wouldn't sink. I see housing development near me that requires over half a year worth of dirt packing just to get the foundation into usable condition.

[scfr]

Singuy Thanks for explaining the course, which sounds very helpful, and breaking down the typical student budget.

A few thoughts:

At what point in their education do these students enter your course? Is there time for them to minimize their student loans? If so, I'd definitely stress that! I only have my BA so I'm ignorant about what pharmacy students' schedules are like. Can they work part-time during the school year and work a full-time and part-time job during summer break while living at home? Can they use those loans only as needed?

Why $1,500 for food/gas/insurance/household?? That seems extremely high to me. USDA Thrifty Food Plan for for male 20-50 years is $302, and $242 for a female. Hey, I get it that students might not want to spend their time soaking beans overnight and then cooking them to add to the homecooked seasoned rice, but even with cushion for the occasional pizza and/or beer, $500 seems reasonable. And if they are facing such a dire financial future, why do they even own a car?? You could suggest going carless while in school, couldn't you? Is insurance high because of their coursework and chosen occupation (this is an area where I lack knowledge)?

And regarding future housing there are several options which overall just require being flexible and thinking a bit outside the box.

• If living in a VHCOL area, maybe just rent. This is the advice I gave my sister who lives in NYC decades ago, and it seems to have worked out for her. Renting isn't the end of the world. Maybe after retirement you'll do what she's doing and move somewhere else where you can afford to buy a nice condo with a view of the sea.
• If living in a VHCOL or HCOL area, consider moving. There are areas that ARE desirable and lower cost. Doesn't have to be "in the middle of nowhere." When my DH and I decided to move away from Seattle, we researched many lower cost options. Many of the very lowest cost options did turn out to be, for us, undesirable. But we eventually found one that was desirable to us, and much less expensive, and happily lived there for 12 years.
• I know some won't agree with me on this, but if home ownership is their priority, they may need to make smaller 401k contributions (maybe just enough to get the full employer match) while saving the down payment. Also, as I've confessed before, some of us only put 10% down on our first place and lived to tell.
• Study the RE market in your area and get your feet grounded in reality. Make the rounds of the open houses and talk to the agents. When you figure out that you can't afford what you initially wanted, spend an evening or two or three sulking & licking your wounds, then come up with a revised plan. That's what we did when we bought our first place. The dream of a close-in house with a view died and by necessity was revised to a condo with zero view. The first house (or condo) doesn't have to be the last.
• Get handy or get creative! If you really want to buy a "better" house to start with, are you willing to rent out rooms? There is a house on my street that has so many living in it though only 2 are on the deed, that I'm pretty sure it's either a group home or renting-out-rooms situation. That's one way to afford a nicer house, get renters who help pay the mortgage. Or buy a beater and fix it up? (Once upon a time not so long ago, some people who wanted a house built it from the ground up. That is what one of my grandfathers did, and the family literally slept in the basement once he had dug it out. Can you imagine? And my great-uncle too. Literally built his starter home with his own 2 hands with the help of my great aunt; they worked their paying jobs during the week and on the weekend they built that house. That may be impossible to do nowadays due to permitting issues, and I wouldn't recommend it, but it might help the students to know what some in past generations went through just to have a house.)

After edit, adding this: Frankly, saying someone will never be able to afford a house because they can't afford a 4000 sq ft home in a HCOL is like saying someone will never be able to take a vacation because a world cruise isn't in the budget.

[Singuy]

Singuy Thanks for explaining the course, which sounds very helpful, and breaking down the typical student budget.

A few thoughts:

At what point in their education do these students enter your course? Is there time for them to minimize their student loans? If so, I'd definitely stress that! I only have my BA so I'm ignorant about what pharmacy students' schedules are like. Can they work part-time during the school year and work a full-time and part-time job during summer break while living at home? Can they use those loans only as needed?

Why $1,500 for food/gas/insurance/household?? That seems extremely high to me. USDA Thrifty Food Plan for for male 20-50 years is $302, and $242 for a female. Hey, I get it that students might not want to spend their time soaking beans overnight and then cooking them to add to the homecooked seasoned rice, but even with cushion for the occasional pizza and/or beer, $500 seems reasonable. And if they are facing such a dire financial future, why do they even own a car?? You could suggest going carless while in school, couldn't you? Is insurance high because of their coursework and chosen occupation (this is an area where I lack knowledge)?

And regarding future housing there are several options which overall just require being flexible and thinking a bit outside the box.

• If living in a VHCOL area, maybe just rent. This is the advice I gave my sister who lives in NYC decades ago, and it seems to have worked out for her. Renting isn't the end of the world. Maybe after retirement you'll do what she's doing and move somewhere else where you can afford to buy a nice condo with a view of the sea.
• If living in a VHCOL or HCOL area, consider moving. There are areas that ARE desirable and lower cost. Doesn't have to be "in the middle of nowhere." When my DH and I decided to move away from Seattle, we researched many lower cost options. Many of the very lowest cost options did turn out to be, for us, undesirable. But we eventually found one that was desirable to us, and much less expensive, and happily lived there for 12 years.
• I know some won't agree with me on this, but if home ownership is their priority, they may need to make smaller 401k contributions (maybe just enough to get the full employer match) while saving the down payment. Also, as I've confessed before, some of us only put 10% down on our first place and lived to tell.
• Study the RE market in your area and get your feet grounded in reality. Make the rounds of the open houses and talk to the agents. When you figure out that you can't afford what you initially wanted, spend an evening or two or three sulking & licking your wounds, then come up with a revised plan. That's what we did when we bought our first place. The dream of a close-in house with a view died and by necessity was revised to a condo with zero view. The first house (or condo) doesn't have to be the last.
• Get handy or get creative! If you really want to buy a "better" house to start with, are you willing to rent out rooms? There is a house on my street that has so many living in it though only 2 are on the deed, that I'm pretty sure it's either a group home or renting-out-rooms situation. That's one way to afford a nicer house, get renters who help pay the mortgage. Or buy a beater and fix it up? (Once upon a time not so long ago, some people who wanted a house built it from the ground up. That is what one of my grandfathers did, and the family literally slept in the basement once he had dug it out. Can you imagine? And my great-uncle too. Literally built his starter home with his own 2 hands with the help of my great aunt; they worked their paying jobs during the week and on the weekend they built that house. That may be impossible to do nowadays due to permitting issues, and I wouldn't recommend it, but it might help the students to know what some in past generations went through just to have a house.)

After edit, adding this: Frankly, saying someone will never be able to afford a house because they can't afford a 4000 sq ft home in a HCOL is like saying someone will never be able to take a vacation because a world cruise isn't in the budget.

By the time I get them they are on rotations. Each individual rotations last a month and travel all over the FL for them. Typically they are about 6-9 months away from graduation. They are actually spending the most during this time trying to get temporary housing and jumping cities month to month so being car-less is the last thing they are willing to do.

I am thinking toll and gas is roughly 500/month, insurance is probably 150/month since they are like 26 yos, cell phone is 80, food for 500, and guess what...they are freaken have credit card DEBT.

Don't get me wrong about the 4k sqft house. I have always used a life of a big house, nice cars, fancy vacations to motivate these kids because they are about to enter years of rice and beans. You have to show them that light at the end of the tunnel. I am just saying how that light is no longer as bright and frankly just sounds like a life of pain for wasting all that opportunity cost on almost a decade of school just to rack up 6 figure debt and missed income from mcdonalds..lol.

[docstudent]

I’m in SoCal, and I don’t know where to look to find there affordable starter homes. Case in point, I purchased a studio, less than 500 sq feet in 2009, for $235,000 and it left like a steal back then. Fast forward today, and the unit goes for $430,000 to $450,000. A one bedroom is my community is about $560,000 and up, and two bedrooms around $590,000 to $610,000. I recently relocated to a different region (which is two hours outside of LA county and prices are somewhat cheaper but it lacks job opportunities. In LA cheaper means, living away from the job epicenter and most aren’t able to do that. If you wait to save up, prices will continue to increase and you will be stuck in a very vicious cycle. I have friends that have been waiting almost 7 years for the drop to happen, and they are still renting (both make over $100,000G, which means little to nothing). I know 20% is most ideal, but it’s hard to do that in areas like Los Angele or New York, unless you have support from family or other avenue. But, for testimonial first generation home owners, it’s a real stretch.

[LivingAlmostLarge]

Like I said I need to be at home which I'm not to pull but yes we paid $32 a paycheck for health insurance and we were 26 and healthy. We didn't go to the Dr. I put in my $100 a month car insurance for my PAID for Corolla and focus that we bought and finished payments on by 2005. I did NOT have any student loan payments making $120k because I was accruing our student loan debt NOT paying on it. I did NOT have any cc debt. I did not have parents footing any bills they were too busy trying to retire and make sure they were fine. I told you I had a massive itemized deductions with the mortgage, property taxes, and state income taxes plus two personal exemptions and maxing out a 401k. Our taxable income was $105k before the itemized deductions. I had a $25k stipend along with writing off my tuition paid for my by scholarship. So my taxable income was close to $50k for a married couple? Throw in our tuition credits and we paid pretty close to $0. Again I was racking up student loans.

My dh and I are second generation homeowners and our parents homes cost $28k and $47k. They were the exact same track home 3 bd 2 bath 1200 SQ ft homes built in the in 1970s. To me what we grew up in were starter homes our parents didn't leave.

Third I definitely recall eating around $400 a month for a couple because that number was in our budget for years. It budged to like $600 with kids. I cooked all the time and $1500 seems outrageous to me now with 2 kids eating like adlike. I can do $1000 easily for my family of four in a hcola without beaking a sweat. I can do $500 of rice and beans for the family of four with a tween and teen and $800 with conscious decision making. So how is a single person eating $1500?

Also if it's a single person and not a couple how does their $120k budget look like? If it's a couple their income is more than $120k if that's what the pharmacist in the relationship is making....


Also docstudent in the same area bought a condo for what I sold my 1 bd for. And like monkeymama and myself the starter condo = starter home in hcola is what flipped into our down payments. And it's a LOT easier to save $15k for 10% down or $25k for docstudent 10% down on a condo or starter home than eating rice and beans for 7 years!!!!!


The advice of starter home and 10% down is applicable EVERYWHERE. Not just hcola but starting out with saving a smaller down payment on a starter place no matter where you live is easier than waiting to buy these forever 2800 4bd 3 ba homes.

No one said that has to be the starter home just you saying it is doesn't make it so.

Again it's advice that works no matter where you live. Buy where you can afford and what you can afford. Buy further out. Buy fixer upper. Buy lesser neighborhood. Buy a condo. Maybe live for a year as a couple in a 1 bd. And you both are making 120k...paying $2000 but grossing $240k....well if you can't save a down payment something is wrong even after paying student loans.

When you think outside the box you'll come out ahead. We took a shot and bought something not desirable a 1 bd condo for a couple. Even our realtor tried to get us to buy a 2 bd condo but we couldn't afford it without renting out the other room so we didn't

[MonkeyMama]

And like monkeymama and myself the starter condo = starter home in hcola is what flipped into our down payments.

No, that is not what we did. We personally bought a forever home (condo). It was 3 bedrooms. We wanted to buy something we were comfortable raising kids in, if we couldn't afford more later. We saved 70% of our income out of college (continued to live on our college incomes and bank bigger post-college incomes), until we had a 20% down payment. Then we made a lateral move to a house that cost the same (in a lower cost city). We didn't end up earning any equity in the condo because we decided to sell the week of 9/11. We just had terrible timing. So we have never cashed out any real estate gains. We just re-used our original down payment (when we sold the condo). Plus put some more down because we had been saving my spouse's income for 2 years. (We maybe saved an additional $60,000 and put $20K of that down on our current home).

Of course, being a tax professional, taxes were a huge factor in the 'rent versus buy' math. I have no doubt that LAL's taxes were $0. We could have paid $3,000/month to rent the same condo *and* also paid a crapload of taxes. Our mortgage was only $1,500/month, in contrast. But all of the HOA dues, insurance, property taxes, maintenance, etc. was completely offset by tax savings. I don't remember the number but was probably at least $8K per year income tax savings. I am just talking about the tax savings on a $200K mortgage. (Though fair enough, interest rate was 8%+. If you have a massive mortgage but a low interest rate, you might not be paying as much interest as we were. It's the interest that is tax deductible).

But this brings up a good point. Managing taxes is an important part of fiscal efficiency. Something to factor when running through 'rent versus buy' math. For single individuals making $120K, it's pretty much going to be mortgage deductions and retirement contributions (obvious ways to save on taxes). & obviously a lot more N/A in recent years with low interest rates, but at least there's some financial trade-off with the higher interest rates.

[Singuy]

Like I said I need to be at home which I'm not to pull but yes we paid $32 a paycheck for health insurance and we were 26 and healthy. We didn't go to the Dr. I put in my $100 a month car insurance for my PAID for Corolla and focus that we bought and finished payments on by 2005. I did NOT have any student loan payments making $120k because I was accruing our student loan debt NOT paying on it. I did NOT have any cc debt. I did not have parents footing any bills they were too busy trying to retire and make sure they were fine. I told you I had a massive itemized deductions with the mortgage, property taxes, and state income taxes plus two personal exemptions and maxing out a 401k. Our taxable income was $105k before the itemized deductions. I had a $25k stipend along with writing off my tuition paid for my by scholarship. So my taxable income was close to $50k for a married couple? Throw in our tuition credits and we paid pretty close to $0. Again I was racking up student loans.

My dh and I are second generation homeowners and our parents homes cost $28k and $47k. They were the exact same track home 3 bd 2 bath 1200 SQ ft homes built in the in 1970s. To me what we grew up in were starter homes our parents didn't leave.

Third I definitely recall eating around $400 a month for a couple because that number was in our budget for years. It budged to like $600 with kids. I cooked all the time and $1500 seems outrageous to me now with 2 kids eating like adlike. I can do $1000 easily for my family of four in a hcola without beaking a sweat. I can do $500 of rice and beans for the family of four with a tween and teen and $800 with conscious decision making. So how is a single person eating $1500?

Also if it's a single person and not a couple how does their $120k budget look like? If it's a couple their income is more than $120k if that's what the pharmacist in the relationship is making....


Also docstudent in the same area bought a condo for what I sold my 1 bd for. And like monkeymama and myself the starter condo = starter home in hcola is what flipped into our down payments. And it's a LOT easier to save $15k for 10% down or $25k for docstudent 10% down on a condo or starter home than eating rice and beans for 7 years!!!!!


The advice of starter home and 10% down is applicable EVERYWHERE. Not just hcola but starting out with saving a smaller down payment on a starter place no matter where you live is easier than waiting to buy these forever 2800 4bd 3 ba homes.

No one said that has to be the starter home just you saying it is doesn't make it so.

Again it's advice that works no matter where you live. Buy where you can afford and what you can afford. Buy further out. Buy fixer upper. Buy lesser neighborhood. Buy a condo. Maybe live for a year as a couple in a 1 bd. And you both are making 120k...paying $2000 but grossing $240k....well if you can't save a down payment something is wrong even after paying student loans.

When you think outside the box you'll come out ahead. We took a shot and bought something not desirable a 1 bd condo for a couple. Even our realtor tried to get us to buy a 2 bd condo but we couldn't afford it without renting out the other room so we didn't

The more you write the more it seems you were in a pretty unique situation when you didn't need to pay taxes...however bragged about how you make it work in a high income tax state...that is just misleading. That's great for you but this is not going into my lecture.

These are single kids with a heavy tax burden. Their student loan interest is not deductible due to them making over 80k/year.

Also I didn't say 1500 for food but 1500 for all other living expenses beyond rent and utilities. I have broke that down from the post above.

[ua_guy]

Putting a cap on SALT deductions sure didn’t help with high home prices and now high interest rates.

[scfr]

By the time I get them they are on rotations. Each individual rotations last a month and travel all over the FL for them. Typically they are about 6-9 months away from graduation. They are actually spending the most during this time trying to get temporary housing and jumping cities month to month so being car-less is the last thing they are willing to do.

I am thinking toll and gas is roughly 500/month, insurance is probably 150/month since they are like 26 yos, cell phone is 80, food for 500, and guess what...they are freaken have credit card DEBT.

Don't get me wrong about the 4k sqft house. I have always used a life of a big house, nice cars, fancy vacations to motivate these kids because they are about to enter years of rice and beans. You have to show them that light at the end of the tunnel. I am just saying how that light is no longer as bright and frankly just sounds like a life of pain for wasting all that opportunity cost on almost a decade of school just to rack up 6 figure debt and missed income from mcdonalds..lol.

Thanks for the explanation; I had no idea, interesting stuff and I can see how life would be pretty grueling during those 6-9 months!

It makes perfect sense about needing a car and the overall budget, although I can still imagine that there might be room for a bit of economizing here and there. And by scrutinizing their budgets they can probably identify a few places where they can cut back.

Do you lay out options for them to keep housing costs down during those 6-9 months? Do they investigate Air BNBs, VRBOs, motels, etc. for their temporary housing? Seems like a good opportunity to talk about "true costs" of adulthood (all those annoying things like security deposits, rental application fees, utility hookup costs, etc). And hopefully they aren't trying to maintain both a "home base" apartment in addition to the temp housing! My suggestion would be to make due with bare minimum housing, sharing when possible, during the rotations. It's only temporary.

As far as long term motivation, it's probably true that big house, nice cars, AND fancy vacations are no longer in the picture. Maybe they need to pick their top 1 or 2. Getting 1 or 2 of those 3 is still a pretty nice lifestyle!

I hope people continue to pursue careers in pharmacy. We need them!

[LivingAlmostLarge]

Actually singuy, check out taxes paid in Massachusetts. I'm pretty sure the northeast is very high tax states. But again it works with our advantage. Tax efficiency is extremely important depending on where you live. I've always calculated our tax burden upon decide to buy a house.

Second like I pointed out we were accruing our student loan debts not paying on them. The extra $800 a month would have influenced our decision to purchase a house for $550k but you are having people try to buy $750k 2800 sq ft home on $120k and student loans.

Third are these only singles? Our combined income was $120k. Makes a difference. Singles don't live as cheap ay couples but couples with lower income have to work harder for the same amount of money. 2x work for same salary seems like a good deal to me.

By the way for me? If not have a car if I were on rotation. I know many consultants who live like that without cars. They live right next to the hospital or office for 6-9 months and then rent a car for 1x to move. Why is it necessary to own a car during rotations? Why is it necessary to own a car during a period you know is temporary AND single (if they are in a couple then where is the second income)? To rent more than a room next to their rotatiorotation

My bestie is a pharmacist and she did the rotations on different islands in Hawaii....she never took a car and instead just rented a room temporarily during her rotation to minimize expenses. Then she flew and rented a car to move....it was very cheap living during her rotations. She still single and was then too...she also said she doesn't understand why pharmacist coming out need 2800 SQ ft homes?

[LivingAlmostLarge]

I think if you posted this on the early retirement board you'd get a lot of suggestions for minimizing expenses during pharmacy school. Also a lot of pushback as to what is average or normal housing. And a lot of people in Florida able to speak to cost.

[optimist]

I have always used a life of a big house, nice cars, fancy vacations to motivate these kids because they are about to enter years of rice and beans

This is the problem. You promised them something, but now the economic conditions gave changed and they can't afford it. The truth, however, is that nobody is "entitled" to anything. You buy whatever you can afford, however small. Or you don't buy. The world does not owe you a 4000 sq ft home or a big car. If the home prices go up, you buy less. And that applies whether you are a doctor, pharmacist or a dishwasher. Common sense.