I was raised in a 1900 square foot, 1970’s ranch house is a small city.  Looking back it seems like we were pretty poor.  I qualified for “reduced price” school lunch, but I know there as a “free lunch” tier below us, so I guess we were something like lower middle class?  We always had what we needed, but definitely did not enjoy many luxuries.  We did take vacations by car, mostly to see family where we had free lodging.  My mom always brought our own food on those and we literally never ate out at restaurants.   I think I remember going to a buffet restaurant once.

When I go look at houses now in contrast, everything really is like a mansion or a castle.  Even my current 2500 sq. foot patio home which is finely finished with stainless steel everything, hardwoods and granite/stone etc. is quite lavish it seems.

So now I have the dilemma of how much house to buy?  This is really a concern for me at the moment.  I have several competing agendas and thoughts running in my head.  I’m in the enviable position to be able to really choose within a large pool of possibilities given my net worth.  Let me try to run through the competing thoughts and hopefully get your opinion.  This list of considerations is not in any particular order :

• Financial Gain – It’s well documented in my local market that the top end (houses greater than $1M) are in a rough patch and are at a discount currently.  I believe this will reverse, so my thought is that this is where more opportunity lies.
• Lifestyle – Living in a huge nice house sounds, well…. nice.  On the flip side, do I really want to fill up this house with furniture and stuff and start living “that” kind of life? I don’t particularly like stuff and less space means less stuff to fill that space.  My wife also does not like stuff.  You would think we would them opt for a modern home with lots of space and minimalist décor, but we both also hate that style.  I don’t like going home to something that feels like a museum (but I do love museums for a visit).  I like “warm” feeling homes with wood floors, pillow-like couches, fireplace etc.
• Wealth Hiding – Recently a sibling found a brochure for a house with a $1.8M asking price and eyebrows were raised. We didn’t make a big deal out of it and said we were exploring neighborhoods so we understand the market for when we do move.  It hit me that EVERYONE I know will find out about and talk about this huge new house and speculate as to our new wealth.  Along with that comes judgement about how we are spending money and how we are not spending money.  What trips we are taking and what charities we are supporting.  I would much prefer stealth wealth to avoid any drama and keep the same relationships with friends and family that I have now.  A big expensive house makes that pretty hard.  On the other hand, is it healthy to make personal financial decisions based on what other people think?
• Tax Benefits – The mortgage interest deduction and the higher property taxes of a larger house will offset my regular taxes. In addition, there is the $500K gain exemption from the sale of your primary residence.  This point is really a subset of “financial gain”.
• Yard – We have kids. They really could use a yard.  Our sanity would be helped by them having a yard and so would theirs.
• Commute – Looking for short distance here, which means closer “in” and higher price.
• Schools – Top schools come with top (read expensive) neighborhoods.
• Safety – We currently live in a gentrifying area, but it is not the safest place. There is $400K – $1M new builds mixed with older homes (some of which are “crack” houses or “meth” or whatever) all within the neighborhood. There was a drive by shooting one block from me and a car jacking at gun point also one block from me within the last 2 years.  Home burglaries during business hours are normal (though we haven’t been hit personally) and if you leave your garage door open, your stuff will be gone within hours if not minutes (has happened to us).

Ok, so the last few points are pretty much what everybody would want.  We could get everything on our list of “wants” for around $1.6-$2M price tag.  This would mean laying down a large amount of cash for the down payment since we would want to keep our mortgage to around $800K or less.  This would limit our ability to pursue other things, including other real estate deals.   I think after writing this post, I’m leaning towards a couple fixer-uppers in nice areas that would be around $1M.  Most of our friends live like we do ($400K-$600K), so I feel that $1M is not a huge step up and also since it will be a project house, will feel much less pompous.  Leave your comments on my considerations.  Do you share these? Do you disagree with any?