30s Grind #4 – “We bought about 10 years ago and took about 9 years to renovate. It is now worth over a mil at least. We make about 85k combined. We struggle most months to pay the bills.”

“We live in Vancouver I work full time, he works part time so that he can manage more of the house stuff, kids etc. We bought about 10 years ago and took about 9 years to renovate (we did most of the renos.. Blood, sweat and tears) It is now worth over a mil at least… We make about 85k (total combined salaries). We struggle most months to pay the bills. There are no extras, vacations, dinners out, babysitters etc. We are so careful with our $$ and it boggles our minds how most families (parents have regular jobs… Nurse, firefighter, teacher, med tech etc) in our circle take exotic vacations, shop at Whole Paycheck, drive expensive cars and have huge mortgages (the bigger the mortgage, the more exotic vacation it seems). We assume that they have parents with deep pockets… We can’t imagine they live off credit..heck these are educated people… Wtf??”
Sandy at thethirtiesgrind.com 31 May 2012 8:17pm

Question: How long would it take this couple to save “over $1M”, after tax? A lifetime? Two?
That was a mental exercise to show how disproportionate the run-up in home prices has been compared with real actual money that people are capable of earning and saving.
If this couple do not realize their paper profits by selling, there is an extremely high chance they will be talking about this missed opportunity for the rest of their lives.
– vreaa

25 responses to “30s Grind #4 – “We bought about 10 years ago and took about 9 years to renovate. It is now worth over a mil at least. We make about 85k combined. We struggle most months to pay the bills.”

  1. If they’re wondering how people do it, I have one word: HELOC. VREAA, I didn’t realize my original hat tip would turn into a plethora of anecdotes for you haha! Good stuff.

  2. Sandy, sorry to say, but your house is not *worth* over 1M. That’s the inflated price that some speculative fool might pay for it at this particular, crazy, anomalous, very temporary moment in time. Your house’s true, sustainable worth is something altogether different. Lower your expectations, because the number is 50-70% less than you imagine.

    • someone is likely willing to pay Sandy over 1mil for her house – but it’s only “worth” 30-50% of this because you personally don’t value it this way? Shouldn’t the house be worth what someone is willing to pay and not what YOU are willing to pay?

  3. Sometimes not wondering is the best alternative. It’s not a race.

    • True, Jesse. But it’s difficult at times not to let it get the best of you.

      “Whole Paycheck.” Why have I not heard that one before? I’ve been there…once. I think we pay about a third the price by doing our Fred Meyer, Cost Cutter routine.

  4. the coming correction will take all that blood sweat and tears and flush it down the toilet. Sell now.

    • their work added value, why would that disappear when the price drops?

      • It wouldn’t, all the variability is in the land prices. I doubt, though, if their time were charged out properly, this investment paid off, unless it kept them from partaking in less productive activities.

  5. Renters Revenge

    If you are making $90k/year, your house should be worth $270-360k. Just saying.

    • If their house falls to $100k, should they buy something more expensive?

      • Renters Revenge

        If their house falls to $100k I doubt they will still be making $90k/year. They don’t call it a “bust” for nothing.

      • are you saying that they should diversify their assets, or that in a normal world they would likely own something in that price range?

      • Renters Revenge

        I’m saying that in a normal world home prices should be in a range of 3-4 times annual income. Hard to own a diverse portfolio when 10-11 times annual income is committed to shelter.

    • they bought a decade ago – their cost is probably not 10-11x their current income.

      “We are so careful with our $$ and it boggles our minds how most families (parents have regular jobs… Nurse, firefighter, teacher, med tech etc) in our circle take exotic vacations, shop at Whole Paycheck, drive expensive cars and have huge mortgages (the bigger the mortgage, the more exotic vacation it seems). We assume that they have parents with deep pockets… We can’t imagine they live off credit..heck these are educated people… Wtf??”

      Perhaps the simplest answer is the one – they make more than you do. These “regular jobs” pay reasonably well, and if there are 2 of them in a household they’re probably earning 120K or more together. You make 85K together. Big difference.

  6. 4SlicesofCheese

    Just came upon this guys profile
    http://www.facebook.com/profile.php?id=713325190

    How do people like this sleep at night.

  7. “We can’t imagine they live off credit..heck these are educated people… Wtf??””

    Okay, don’t imagine it then, but they do.

  8. “Nurse, firefighter, teacher, med tech etc”

    interesting line up. Hard to ship those types of jobs to China.

  9. We have been extremely successful. The 90’s almost broke us, but this decade brought us 4x income. A number of years saw us earning 7 figure sums let alone the capital gain.

    I knew we were doing really well, but I watched others living lifestyles more excessive then ours. Without doubt they were not earning it, so where was it coming from?

    Without doubt it was borrowing against increases in property values.

    As a developer, and after being on the brink of bankruptcy several times in the 90’s, i work slowly and carefully ensuring I’m always within reach of paying at all loans to banks.

    When banks turn on you they are mindless and brutal. For that reason I position myself that if they tried again, then the debt could be repaid immediately. Consequently I’m bottom of their list.

    However when they look at those who have lived on credit, spending their perceived capital gains, they will be the first to go, the first to have their loans called up and first to lose their homes.

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