By: Revanche

Feeling rich and poor, simultaneously

February 27, 2017

Rich or poor: how much do you need? [Part 1] What would it take for you to feel rich? Specifically money rich? Joe at Retire by 40 asked.

I feel rich and poor at the same time. A very strange feeling, that. I told Joe that we’re at this weird crossroads of nearly being there, for us, and then having the rug pulled out from under us with the house thing. It wouldn’t matter in another COLA but it matters a great deal here.

About 80% of our assets are invested in real estate and the stock market, intentionally. That was a long term plan I developed based on the assumption that we would pay off this mortgage in approximately 7 years. During that time, we’d go on to save at least half the same amount of cash that we do each year now, and invest that cash. At the end of 7 years, I’d legitimately feel wealthy, if all went according to that outline.

Ignoring those categories of assets, as I do in covering a contingency of this size, we’re not near the shouting distance of the neighborhood of rich.

It would be shortsighted to sell off our budding portfolio or rental property and I’m not prepared to toss either of those to the winds. It would require a far bigger catastrophe for me to be willing to liquidate our long-term assets.

On the other hand, a couple weeks ago, I started the conversation with our lender. Apparently he thinks we’re great borrowers and is totally competent as well because after 4 days, he approved our loan for a vast sum. (This is in stark contrast to our refinancing with SoFi that took almost six months. I’m at least a little bitter that I wasted all that time, now!) I don’t even like to think the number, but it’s real: $800,000.

Even with that large a loan, we’re still priced out of most homes in this area. Even smaller places, and more rundown places, than what we have now are running more than $1M. I’m just not willing to take on more debt than that.

Pardon me as I shudder in the corner for a while.

Safe to say, where we are right now? Weird. I also don’t like our financial stability to be dependent on “as long as nothing else goes wrong” because in my experience, that’s an open invitation to my old friend Murphy to come kick me in the ribs.

:: How much do you need to feel rich? Are you on a steady trajectory to that point or is it more of a waltz?

Before: Background

Next on our Home Buying Adventure: Part 2, Part 3, Part 4, Part 5, Part 6, Part 7, Part 8, Part 9, Part 10, Part 11

 

28 Responses to “Feeling rich and poor, simultaneously”

  1. First, those RE values are just crazy. Again, very grateful to live in NC for that reason, despite all it’s problems.

    We feel…okay. Considering our status of semi-retired, we are okay for now. The health care revisions are concerning…we’ve been able to afford decent care through ACA without feeling like we needed to change our lifestyle much. A decent chunk has been put aside for Little Bit’s college education. But that doesn’t mean I don’t worry about future trends.
    Emily @ JohnJaneDoe recently posted…Gone FishingMy Profile

    • Revanche says:

      @Emily: They are totally crazy.

      I’m glad that you’re doing ok right now. Will serious changes to the ACA significantly affect you?

  2. This is prob’ly a dumb question, but oh well: hang onto your hat. Is there any possibility you could move into the rental property? How much longer does your tenant’s lease run? Even if you only stayed there temporarily, it would be a landing platform that would allow you more time to look for a desirable place to live long-term.

    Eight hundred grand makes me hyperventilate. It’s never too late to move to Arizona, kiddo!

    On the other hand, when M’hijito was living in San Francisco — actually, he was in Oakland at the time, just below Piedmont — rent rates were SO high that it occurred to me that if I took the cash out of my house here in AZ and applied it to a $1,000,000 property there (that’s about what the places in his neighborhood cost), I could probably get a place with two or preferably three flats, move into one of them, and rent out the rest of the place for enough to cover the mortgage payments.

    This requires one to think not like my father, for whom all debt was evil, but like my lawyer ex-husband, who believes money exists to be leveraged.

    To answer your question: About Donald Trump’s net worth. Even that probably would not overcome my chronic bag-lady syndrome. 😉
    Funny about Money recently posted…Sunday Comings and GoingsMy Profile

    • Revanche says:

      @FAM: No, moving into the rental is definitely not an option, nor is leaving the state, nor even the Bay Area. If it was, we’d have considered it 🙂

      I think there’s always going to be that nagging feeling that it can go all away, isn’t there?

  3. Sally says:

    I think it’s always a waltz, even during the times when it feels like a steady trajectory. Ideally, an upwards waltz, though.

    I don’t think I’ll ever “feel rich.” I’m saying this mainly because I’ve already passed a couple of my milestone savings/investment values, and it’s produced no appreciable difference in how I feel about it. I still mentally fuss about the cost of things, I still decide not to buy things because of the price. I still mentally go over potentialities and am frustrated by bad situations. I think that “feeling rich” is maybe more of a deep personality thing that just isn’t part of who I am.

    What I do have, and have had for years, are savings/investments that are big enough that I can look at the number and remind myself that my worry is coming from habit, not need. And maybe that’s where you need to go with all this? You’re stressing yourself out of habit, but you could choose another response and still be okay. Financially and otherwise.

    • Revanche says:

      @Sally: That’s an interesting and insightful perspective. There’s definitely an element of habitual worry that comes from years of experience that might not necessarily match reality, that’s happened a few times in the past and I recognized that. Though, in this case, running the numbers, this isn’t one of those times. This is going to put a particular stress on our finances and lifestyle that requires quite a bit of cutting back. That’s no fun.

  4. Wow, those are crazy high home values. I know that’s normal in your area but wow. I can definitely see why you feel rich & poor at the same time.

    We are on a slow path toward FI. We are willing to take it slower to invest time and money in people, as well as career/stocks. We are interested in purchasing a rental property but not ready to take the dive yet.
    Kalie @ Pretend to Be Poor recently posted…Are You Ready to Buy a Home? The Non-Financial ChecklistMy Profile

    • Revanche says:

      @Kalie: They are! And they have me always bracing for a crash because surely this can’t be sustainable?

      Good luck when you’re ready for the rental!

  5. I also feel rich and poor. I feel rich for the reasons I said in the comments on the rb40 post you link to, but like you, we cannot afford to buy a house where we would prefer to live (given I would have to leave my job and the income security that comes with tenure).
    nicoleandmaggie recently posted…DH’s company is going on a break from April-JulyMy Profile

  6. Our three bedroom house (admittedly with some flaws) would probably sell for about $180,000. I base that on the fact that Zestimate swears we’re worth $200k.

    I’m just sayin’ Phoenix ain’t so bad.

    But seriously, I’m so sorry the rug got pulled out from under you like this. I’m not sure that I could handle the situation half as well as you are. Even though I’m sure there’s a fair amount of fretting/nail biting/rocking-in-a-corner going on behind the scenes. Still leagues better than me, I assure you.

    I still say a cheaper option is to fly Tim out there. He swears up and down that your neighbor’s body would never be discovered. I tried to explain that you have morals and decency and stuff, but he keeps offering anyway. Well, once his heel’s better.
    Abigail @ipickuppennies recently posted…The decision is inMy Profile

    • Revanche says:

      @Abigail: It might be cheaper upfront but I suspect it might be more expensive long-term.
      I do appreciate the offer, though 😉

  7. Yaay for savings and being awesome, boo to ridiculous housing prices (and of course the circumstances around needing to look for a new place)!

    We live in a comparably sane location where you can buy a house for $500k (I mean, obviously if you’re willing to overlook some flaws…), and the prospect of buying here gives me heartburn.

    Sending warm thoughts!
    Felicity (@FelicityFFF) recently posted…How to Get Free SSL Certification, and Why That MattersMy Profile

  8. Crystal says:

    I feel that we’re financially well-padded but not rich (yet). We just passed the $500k mark in our net worth last year and half of that is real estate. We are aiming for $1.5 million plus real estate for our financial independence. Obviously we have a ways to go. But $100k of our assets are in savings/cash…that makes me feel safe in self employment. As for home values, we live north of Houston, TX. Our 1750 sq. Ft. 3 bedroom, 2.5 bath rental house is valued at $125,000. Our 3750 sq. ft. 5 bed/4 bath home is worth around $310,000. Obviously we have different monetary needs here…

  9. From what I understand you live in La La Land… and not the movie. It seems to be a bubble that will always be a bubble.

    Aside from that, we feel the same way you do. I say it is like having “tea” and “no tea” at the same time – a nod to the text-based Hitchhiker’s Guide to the Galaxy game from the 1980s. (Yes I’m very old.)

    I estimate that 90% of our net worth is in retirement accounts and real estate… things that we can’t realistically touch.
    Lazy Man and Money recently posted…Compound Interest is a RiverMy Profile

    • Revanche says:

      @LMM: We really do live there 🙁

      Hah I never knew the Hitchhiker’s game, we didn’t get to play any games that weren’t math games back then.

  10. Sense says:

    Good luck. Real estate bubbles that never pop can be a tough pill to swallow. (Just ask any Aucklander.)

    I also feel rich and poor. I make $40K a year where the average COL is around $75K. However, I chatted to my supervisor who is my same age–he makes 3x my salary and has zero savings (he has 3 young kids and a stay at home wife), so my $130K net worth makes me feel rich. Plus, just the fact that I have a roof over my head and plenty to eat in a first world country…I feel quite lucky/rich most days!!

    I’m pulling for y’all to find a hidden gem with amazing neighbors in a fantastic school district close to work and lots of amenities. 😉

    • Revanche says:

      @Sense: So true, I do think it’s tough in international locations like Auckland, Toronto, etc.

      May your wishes go straight to the real estate fairy! 🙂

  11. SP says:

    Your current home must be riding the bubble too though, which should help.

    I hate how expensive housing is here, but the only tiny comfort I have is that I will likely be able to cash out and move to any part of the country I wish to, with a handful of exceptions, even with a modest correction. (Like, your neighborhood is probably still an exception…)

    How much do I need to feel rich? A lot more than I expect I’ll ever have. I say that at about $3M (including RE equity that i can’t touch) I’ll feel secure. Just ask me when I get to $3M if that is still true 🙂 The real estate piece clouds things though, since housing is ridiculously expensive.

    We were approved for much more than I feel we could afford, and didn’t take it all. But we still took on enough that I believe in pre-paying the mortgage, despite letting other low interest debt hang around unnecessarily for years and years when we could have paid it off long ago (see: student loan).
    SP recently posted…Belated January Wrap-up / Money UpdatesMy Profile

    • Revanche says:

      @SP: I hope it is! It won’t be as much as these places we’re looking at (damn needing to find a good school district!), but it will help.

      We’re going to be close to our limit, which makes me antsy and I’ll be doing the same with prepayment as much as we can, once our emergency cash is rebuilt.

  12. This requires nothing short of a miracle in the bay area. My parent’s friend’s daughter (really think of her like my cousin) and her husband just bought a mint-condition 1975 rancher in San Jose. Mint meaning one-owner, avocado appliances still inside! It’s in very good shape, but otherwise looks a bit like a fixer upper would on HGTV. Cost them $749K.

  13. Mary says:

    I’m in Alameda so I totally understand the housing situation. We’re long term renters and even if I was approved for 800K, it’s very hard to swallow the mortgage payment even with 20% down. It’s crazy!

  14. I feel like I’m on track and ok, but I don’t think I’d feel rich until I had enough in the bank to reach Financial Independence, which is definitely about 30 years off.
    Mel @ brokeGIRLrich recently posted…Financially Savvy Saturdays #184My Profile

  15. […] read Revanche’s contemplative post recently about feeling rich and poor at the same time. It struck a chord because I know all about getting close to a goal and then having the rug pulled […]

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