Should I buy a house that's way bigger than I need/want?

mtn wrote: The time-from-work vs. cost of home calculations are idealistic, but they're also not unrealistic. It is something that everyone needs to figure out for themselves, but he lays some good groundwork to base your own calculations off of. I happen to agree with his sentiment--but I live in an area where a 15 mile commute can take an hour, even if you live right next to a major artery. While right now we're in the best spot for us, if we're in the same jobs when we have kids and those kids are school age, we will be looking in the more expensive neighborhood than the cheaper one because the cost of commuting would even it out. That is assuming that we'll be approved for a loan large enough to get us enough space.

I have a couple other issues with the calculations.

One, I'm not sure where they are getting 50 cents a mile, but if it's including depreciation on a new car or paying a mechanic for repairs, there's a good chance your average GRMer has a much lower per mile cost.

Two, converting time to money is a bit optimistic. How would the time be converted into money? If you're salaried, not by working overtime, and not everybody's going to take on some extra freelance work because they've now got a shorter commute. In reality, this is more likely to go to a quality of life improvement with more time at home.

I recently moved 30 miles closer to work myself. And went for a house that cost about what we sold the old house for. It would have been awesome if life followed his logic and I was suddenly rich enough to afford a house that cost $450,000 more but with a house payment no bigger than before, but that hasn't happened.

In reply to rcutclif:

I do cost/mile calculations on all of my vehicles, so yes I know the money part. Calculating the value of one's time is an individual opinion and there is no "real" equation that can be used.

Over the years, I've learned to amortize this time in other ways. I work near a good park for mtn biking, so I will often ride there after work. I've recently starting do road rides after work as well, because the roads near the office are more interesting/challenging (hills) than what I have at home. My ex-g/f lived about 30-40 minutes from work, so I would usually go there after work instead of straight home. It's still a long drive, but I split it up and generally do it when traffic is lighter.

Plus, the roads I drive are generally 2-lane back roads and traffic moves well, if not always fast, so it's a pretty low-stress commute.

here is one way to estimate the cost of your time (and follow with me, because I may starting in a familiar place but I think I end up in a different one):

• number of hours you work in a year = x (40hr/week is 2000, 50hr/week is 2500)
• number of dollars you make doing that work = y (varies significantly)

you can do the simple division of y/x (but the argument then is you really can't choose to work more or less hours usually, and I get that).

to think about it differently though, say your commute is 30 minutes. that means you spend 1 hr driving each work day, and though you only get paid for 8 (or whatever) hours, you actually 'spent' 8+1 from your life. That's an additional 250 hours per year driving to and from. Therefore you need to add 250 to x to calculate your 'real' wage. 250 is ten percent of 2500, and my guess is everyone on this board would be pissed as heck about a 10% pay cut.

I also think I'd be pissed as heck if my boss told me that I needed to add an hour to my workday that I wouldn't get paid for, even if the boss told me I could do something that I generally enjoy (like driving).

Datsun1500 wrote:

rcutclif wrote:

NOHOME wrote: Do not underestimate travel time to work in your spreadsheet and quality of life.

I'll repost an idea from mr money mustache: "a rational person would be willing to pay $15k purchase price more for a house for EACH MILE that house is closer to their work." Math is as follows: 1 mile to and 1 mile from equals 2 miles per workday. 250 workdays per year = 500 miles per year. Govt says 55c/mile, but you may be able to do it cheaper, say 50c for easy math (you may be able to do it cheaper still, run your own number). $250 per year in commuting. Say you are worth about $25 an hour, each mile takes 2-3 minutes on average. that's another 21 hours per year, at $25 per hour, or $525 per year. $775/year total. That's an extra $65/month, which can get you about $15k more purchase price on your loan. For one mile. 30 miles closer is $450k. If you and your spouse are 30 both miles closer, that's $900k!!! And that's not even counting the quality of life. Do not underestimate distance from work when buying a house.

That's all fine if someone is in fact paying you $25 an hour, every hour. Without that it's just dumb. If you make $50K a year, the bank will lend you $X, not any more. You can't get a loan for $Y because "it's closer to work and my time is valued at $25"

That's all find and dandy if you're shopping based on what the bank approves you for but that's a dumb idea to begin with. I think what he/MMM is saying is that your $250k house 90 miles from work as actually a lot more expensive that $250k because of the amount of time youre working for free during your commute.

In my case it's difficult. My office is in a really weird remote part of town and I'm extremely limited in neighborhoods that are close/central to everything. I could move down the street from work, live in a cheaper house and have a closer commute but when I switch jobs I would be screwed and from a resale perspective it isn't as desirable.

You make some good points. My perspective:

MadScientistMatt wrote: One, I'm not sure where they are getting 50 cents a mile, but if it's including depreciation on a new car or paying a mechanic for repairs, there's a good chance your average GRMer has a much lower per mile cost.

Agreed. The 50 cents comes mainly from easy math and the govt estimate of 55c/mile. I think a GRMer could easily pull off 25 cents per mile. Unfortunately its the smaller part of the equation vs. time though.

MadScientistMatt wrote: Two, converting time to money is a bit optimistic. How would the time be converted into money? If you're salaried, not by working overtime, and not everybody's going to take on some extra freelance work because they've now got a shorter commute. In reality, this is more likely to go to a quality of life improvement with more time at home.

Also agree that you can't necessarily work more hours or do freelance. But, you CAN do other things that you might otherwise pay someone else to do if you didn't have the time. For example, you could clean the house instead of paying a maid. Cook instead of eating out. Mow instead of paying a service, etc. If you start to look at those services that you buy to save time, you can see how much you spend and how much time it saves, and that is another way to value your time. (obviously different for everyone as well though).

MadScientistMatt wrote: I recently moved 30 miles closer to work myself. And went for a house that cost about what we sold the old house for. It would have been awesome if life followed his logic and I was suddenly rich enough to afford a house that cost $450,000 more but with a house payment no bigger than before, but that hasn't happened.

I think if you save the $3750/per year (60 * 250 * .25) and invest it you might be damn close to $450,000 richer after 30 years. Its 115k with no growth!

In reply to Enyar:

You're exactly right in my mind. I'm not trying to tell anyone they need to live right on top of work, I just trying to point out that distance from work should be (and is) a real significance when it comes to evaluating a home. Everyone makes value decisions all the time, the unfortunate part is when someone makes a value decision without seeing all the pieces. Sounds like you are all over it though.

Sorry for derailing your thread, too.

Derail away, I'm glad it got all the attention. Also pretty pumped that MMM can be brought up in a car forum and people know what you're talking about.

Knowledge is spreading.

I'd give a +1 on being close to where you work/where the job opportunities are. I commute 60-70 miles per day (depends on the route), which takes 2-3 hours per day (depending on traffic). I'd love to live closer to work for commuting reasons, but when we moved a few years back we chose to stay in town due to school, cost, and the friendships we've made here. It's all a balance, but with all else equal, being closer to work is a good thing.

Enyar wrote: That's all find and dandy if you're shopping based on what the bank approves you for but that's a dumb idea to begin with.

I agree its a dumb idea.

However, I can tell you from nearly 40 years of experience in construction and real estate, that is exactly what the majority of people are doing, dumb or not.

The travel distance to work is a very important consideration. It has value, but it can't be converted to dollars.

So, let me give an opposite example.

I am salaried. I have a solid job with a good company. My current project has me commuting nearly 3 hours per day. 148 miles. Most of you would say that is insane.

But am I losing money?

I am not paid by the hours I work. I am paid a premium for my knowledge, my managerial ability, my willingness to travel to projects, my flexibility, and my willingness to utilize my personal vehicle for company business. I am on this project for a year. My next project could be closer, or it could be further.

The premium is approximately 30% if I compare it to local salaried positions, and nearly double if I compare it to what I could earn if I stayed local and was paid hourly.

My last job was salaried. I stayed local, but worked nearly 60 hours per week. I could work 40 hours per week and stay local, but it would be a 50% pay cut (when calculated yearly).

Although I now commute 3 hrs per day, I am away from home about 52 hrs per week. That's 8 hrs less than when I was "close to home".

And those 3 hrs are largely my time. I am "on call", and do some business on the phone, but I also call my kids, my Dad, my wife, and some of you. I listen to books-on-tape. I have a chance to have some "wind-down" time every day before I get home with my wife and kids. I am less stressed, and better to be around. I am actually home more, paid more, and better for it.

Are there days that suck? Absolutely. I worked for 20 hours straight on Thurs (hard, physical work in 100 degree heat, not driving), and I will do it again on Tuesday. But I will also turn the next couple weekends into 3 day weekends, just because I can.

So I am not dodging the question, but I firmly believe that the question of commuting is a quality of life question, not a money question.

But, if I DID reduce my commute, I would both reduce my pay, and my quality of life.

How is that a win?

SVR, I think that you are taking his thing too literally. You get his point, but you are missing the forest for the trees.

I think of my time in the day as three buckets: 1. Working 2. Sleeping 3. Everything else

If the amount that I work stays a fixed value, say 11 hours, and I sleep 8 hours, that leaves 5 hours in the day. Get ready for work time/get ready for bed time is about 1 hr total each day, leaving 4 hours for everything else.

If my commute is 1 hr each way, then it allows 2 hours of "everything else" time on a workday, vs 3 hr 20 min when the commute is 20 minutes.

mtn wrote: SVR, I think that you are taking his thing too literally. You get his point, but you are missing the forest for the trees.

His point is pointless.

It's imaginary money that can never be made, and imaginary credit that can never be accessed.

If someone paid me $25 per hour for every hour of the day, I could make $600 a day, because there are 24 of them every day. Right? Wrong.

Time has value because it is time, not because it supposedly has a cash value. It's a completely silly argument.

Living near work can be very nice. Having a long commute can be very nice.

Besides, the original argument is flawed because of compounding interest. His claim is complete slight of hand, because it converts $65 per month to $15,000 of purchasing power (that he doesn't have). That's presuming a 30 year mortgage (which will cost interest).

The math is $65. Do with it what you want, but don't multiply it by 30 years worth of compounding interest and claim it has a value of $15K.

I am sorry you can't see that. You are missing a lovely forest.

Do it.

Looks quite close to Safety Harbor. When I bought my house in Tampa in 2006 (yes, that was not good timing) I couldn't find a house in Safety Harbor for less than 400k.

And... very close to Scientology!

I agree that MMM stretches the point for dramatic effect, but the point of a short commute being worth more that a marginally higher salary.. I agree with all day.

In reply to SVreX:

That pretty much describes it for me. I drive over an hour each way. Sometimes, yes it really sucks. Occasionally, there will be a crash or something and it'll take 2+ hrs. Sometimes during bad storms, roads flood and I literally can't physically get to the office. And I'd be lying if I said I don't often look up various houses I see for sale along my commute. Especially if they have a nice garage.

In reply to Ian F:

I do have a big redeeming quality that you don't.

I NEVER hit traffic. Never, ever, EVAR.

I set the cruise control, and it is the exact same number of minutes, every single time. I call my wife when I leave, and tell her I will be there at 5:42. I am always right. There is one traffic light. Rural route- no chance traffic will ever happen.

I'll admit, traffic would change everything for me. I hate driving in traffic.

Let me update this by saying some really strange things have been happening with the realtors involved with this deal. Not sure which one...

Some issues with this house:

I went through the disclosures and discovered the floor slab had cracks the are the "result of shrinkage of the cementitious materials.... and not the results of the differential movement of the foundations".

In the past this has popped some tiles and cracked the underlying terrazo finish (several with 1/8" gap the rest not so big).

Now, this area is flooded with homes with sinkhole damage. Whether or not those are borderline fraudulent or real, it's a big factor in the neighborhood. In fact, 3 of the 7 homes we've looked at had sinkhole claims on them (only one used the insurance proceeds to actually address the issue). The property also has 2 big ass oak trees and last year the roots had infiltrated the wastewater drain line.

The report is pretty interesting....I just don't know if this tree/settling presents a major liability or if this is normal for a older FL home.

The layout map isn't displaying correctly but here ya go:

I was going to tell you that home inspector is full of crap, that he doesn't know the cause of the cracks.

Then I realized it is an engineer's report. I trust that a lot more.

Those are not bad issues.

So, you gonna buy??

Working on it.... some weird things going on and the seller is budging on price even though it's been on the market for 90 days.

I'd be very tempted with that floorplan to shift the kitchen to the right, and get rid of that "Living Room".

Then, I'd loose the DR, and make it part of the "Family Room", which would function better as the LR.

Those glorious trees are really berkeleying with that house...

SVreX wrote: I'd be very tempted with that floorplan to shift the kitchen to the right, and get rid of that "Living Room". Then, I'd loose the DR, and make it part of the "Family Room", which would function better as the LR.

seems the natural spot for a kitchen, right inside the garage.

OHSCrifle wrote:

SVreX wrote: I'd be very tempted with that floorplan to shift the kitchen to the right, and get rid of that "Living Room". Then, I'd loose the DR, and make it part of the "Family Room", which would function better as the LR.

seems the natural spot for a kitchen, right inside the garage.

Agree with the idea but think it may be very difficult. If I read correctly this house is built on a slab with no basement or crawl space. Makes relocating plumbing a major project.