I’ve concluded the main reason I can’t convince anyone in real life to FIRE is the desire for more. The moment you hit a $1 million net worth, you start dreaming of $5 million. Get to $5 million and suddenly $10 million sounds reasonable. Hit $10 million and, well, why not shoot for $25 million and higher? The goalposts never stop moving on their own. You have to make them stop.
That’s easier said than done when you went to college with sharp, type-A people who went on to have highly successful careers. And if you then live in a city filled with those same people, drawn from every corner of the world, walking away from a soul-sucking job becomes that much harder.
Since 1999, I’ve only lived in New York City and San Francisco, arguably two cities with the most gung-ho people in America. But I FIREd in 2012 because I was unhappy after 13 years and in chronic physical pain. I took one look at my bosses’ lifestyles, decided it wasn’t worth it, negotiated a severance, and quit the money.
A Nice Home Is The #1 Asset Go-Getters In Type-A Cities Want
One of the things people get wrong about San Francisco is assuming it’s unaffordable. The reality is that it’s incredibly affordable if you have the income and growing assets to pay for it.
Rents and property prices are high precisely because there are thousands of people earning high salaries and building substantial wealth through their investments. If there weren’t, the prices would fall. Economics 101.
This isn’t Canada, where wages are lower but property prices in Vancouver and Toronto are similarly sky-high due to government policies. This is America, where capitalism does the pricing and corruption is more aggressively rooted out.
Once the big money starts coming in, the temptation to buy a nicer home is completely rational.
We spend most of our time there. Add kids to the equation and a home stops being just real estate. It becomes the center of your whole life. And frankly, it’s fun to enjoy your wealth in a way that might also make you more of it.
My Constant Desire For Owning A Nicer Home
I’ve felt the pull of those big San Francisco home prices myself.
In 2018, not having a large W-2 paycheck prevented me from getting a mortgage on a highly desirable single-family home. If only I were earning $1 million a year, I could have snapped up that big beautiful home for $4.5 million!
My son had been born the year before, and we had just finished an exhausting 1.5-year remodel of our fixer-upper in 2016. It was a wonderful 3-bedroom plus office, 2-bathroom home overlooking the Pacific Ocean just under 2,000 square feet. But once the dust settled, I started wanting more.
Here were my calculations on what it would cost to afford a 60% larger house.
Ultimately, we passed on upsizing so we could comfortably remain dual unemployed parents and care for our newborn full-time. We didn’t want to feel trapped being house rich cash poor. Instead, we wanted more options just in case we wanted to move or our financial situation turned for the worse.
It was hard to be satisfied with what I had, partly due to my love of real estate, and partly due to ego. Did I really want to just own a median-priced home in San Francisco, and not something nicer based on my net worth?
But keeping our living expenses down helped us feel a lot more at ease, especially when COVID hit. We also got to invest more in the stock market, which continued to go up.
Buying A $15 Million Home Makes FIRE Much Harder
Recently, there was a lot of buzz about a home in Cow Hollow, San Francisco that listed at $7.95 million and sold for $15 million. It’s a fantastic 6-bed, 6-bath, 5,725-square-foot home with a coveted enclosed front yard and sweeping bay views. Hard to beat. The oversized 4,744-square-foot lot gave it an even more grand feeling.
But here’s the thing: the new buyer will likely need to sink another $1 to $5 million into the home to update it. And that’s assuming no major structural surprises. At 5,725 square feet, a complete gut remodel could run $7 to $10 million. I don’t think a gut remodel is necessary, but still.
Based on my guideline that your primary residence should represent no more than 50% of your net worth post-purchase (ideally 30% or less), you’d need a net worth of at least $30 million to responsibly buy a $15 million home and cover remodeling costs. But ideally, your net worth is closer to $50 million.
As a rational buyer, I’d assume the new owners are in that range or higher, especially if their company equity continues to grow.
But big home purchases make the option to FIRE genuinely harder. A massive equity windfall and fat salary are wonderful, but they don’t last forever. Equity can evaporate, especially if you are at a startup. And if you buy a fixer, the time, money, and sheer mental toll of a remodel can quietly wreck your family dynamics.
Take the numbers in my chart above for a $4.5 million home and triple them. That’s what you’re signing up for.
So in the spirit of FIRE and financial freedom, here’s a different way to think about it.
FIRE With An $8.1 Million Home Instead
Over the past ten years, I’ve stayed in homes worth anywhere from $400,000 to $20 million.
The $400,000 option was my parents’ two-bedroom in-law unit, which I spent six weeks fixing up. Cozy for four people, but it worked for two months. It would not work for a year.
The $20 million home? Paradise on Earth. Pool, jacuzzi, tennis court, basketball court. The only downside: if an axe murderer scaled the multiple security gates up the hill, no one would hear you scream. The neighbors were a mile away.
Every home has its trade-offs. My current residence falls somewhere between those two extremes, after twenty years of climbing the property ladder. I’ve climbed as far as I want to go after finding a home with a big lot and lovely views.
So rather than dropping $15 million plus $1 to $5 million in renovations, for a grand total of $16 to $20 million, consider an alternative.
The Cheaper Option
Here’s an example of a fully remodeled, move-in-ready 4-bedroom, 3.5-bathroom, 3,610-square-foot single-family home in Cole Valley/Parnassus Heights for $8,100,000. I play tennis on the Graton courts a couple blocks away sometimes when the courts in Forest Hill are full.
It’s a great neighborhood, and it’ll get a major boost after 2030 when the $4 billion UCSF expansion brings 1,200-plus jobs to the area. Always look out for local economic catalysts before buying property.
Yes, it’s about 2,000 square feet smaller than the Cow Hollow home. But a family of four can absolutely live well here. Everyone gets a bedroom. Or the parents can share a room and use the spare as an office, at least two bedrooms have en suite bathrooms, and there’s additional family room space on the lower level.
Saving $10 Million With No Remodeling Is Huge
The $8.1 million Cole Valley home is in a great neighborhood. It’s not perched as high a hill with sweeping bay views, but you know what? You’ll survive. The tradeoff is less foot traffic, less crime (crime doesn’t climb), and about $10 million in savings.
At a 4% to 5% safe withdrawal rate, $10 million in invested assets generates $400,000 to $500,000 per year in income. I have done thorough budgeting for households at every level up to $1 million, and I can tell you with confidence: $500,000 a year for a family of four, with no job required, is a genuinely great life.
You take the kids to school in the morning, then play tennis at your private club for 90 minutes. Brunch with your doubles partners. Come home, shower, nap. Read, write, think. Pick the kids up in the afternoon. On volunteer days, you spend hours at school with your children, with zero pressure to be anywhere else.
It’s a pretty good and healthy life.
Buying Already Remodeled Homes Save Marriages
And as a bonus, a fully remodeled home that’s already been lived in for a couple of years means the bugs have mostly been worked out.
When you buy a $15 million fixer and pour millions into it, you still have to survive a few winter storms before you know if everything actually holds. It usually doesn’t. Something always needs fixing.
I cannot count how many couples I know who’ve nearly divorced over a remodel. It tests everything. Personally, I will never do another gut remodel again. I’ll always buy move-in-ready homes from here on out. The premium is worth every penny. And a divorce could cost even more than a remodel!
A $3.9 Million Home Makes FIRE Even Easier
If bidding $8.1 million on a $6.5 million asking price is outside your budget, there’s another option. A beautiful 4-bedroom, 3.5-bathroom, 2,826-square-foot home in Forest Hill sold for $3,908,000 after listing at $3,295,000.
Forest Hill is quiet, cozy, beautiful, and safe. It is a hidden gem. You can easily walk to the more lively West Portal neighborhood 5-10 minutes away and catch the Muni train from either station if you ever need to commute.
At about half the price of the Cole Valley home, you save $4.2 million. At a 4% to 5% withdrawal rate, that’s $168,000 to $220,000 per year in gross income. If you’re a couple without kids, that’s enough to FIRE right now.
If your lifestyle in San Francisco requires $300,000 to $500,000 per year, you’d need an additional $3.2+ million in investable assets to get there. Doable if you’ve got a dual income household working in tech, finance, consulting, or medicine.
$3 – $3.3 Million Option For A Great Life
If $3,908,000 is too rich for your blood, here’s a nicely remodeled 4-bedroom, 4-bathroom, 2,835 sqft home in West Portal listed at $2,995,000. I’m guessing it sells for $3.1-$3.3 million, saving you $600,000-$800,000 compared to the Forest Hill home.
Walkability is highly desirable, until you realize it works both ways. The easier it is for you to walk everywhere, the easier it is for everyone else to walk past your front door, bringing more noise, disturbances, and crime.
And if you plan to FIRE, partly thanks to owning a less expensive home, then you don’t need to live near a subway stop to grind at work to pay your mortgage anymore.
There Are Plenty Of Great Housing Options To Choose From
You don’t need tens of millions of dollars to FIRE and live well in San Francisco. If you can control your desire for more, you can FIRE with far less.
You’ll still be able to breathe the same air, send your kids to the same schools, play on the same courts, and eat at the same restaurants with those with more wealth.
I left work in 2012 with roughly a $3 million net worth and $2 million in investments. I had no kids at the time, and my wife worked for three more years before joining me in early retirement at 35. Our situation was specific to us.
But thanks to an unrelenting bull market since 2012, our investments grew faster than our expenses increased. Yes, 2018 and 2022 were rough. But with supplemental income and the buffers we built in the years before those downturns, we got through it. You aren’t going to do nothing in early retirement either.
To anyone grinding away in San Francisco, New York, or any expensive city, believing you need to accumulate $10 to $20 million before you can stop: you probably don’t.
An $8.1 million home is more than enough for a family of four. So is a $4 million home. And as someone who raised a baby for years in a home worth under $2 million, I can tell you, that was enough too.
Stop letting the perfect home become the enemy of financial freedom. If FIRE is the goal, follow my income and net worth guide for buying a home at various price points. Hit both numbers first, and you’ll likely never have to worry about money again.
Readers, how much do you think the desire for more house, more everything, impedes people from actually pulling the trigger on FIRE? If you’re sending your kids to the same schools, enjoying the same parks, and soaking up the same San Francisco sunshine as the folks in the $15 million mansion up the hill, what exactly are you still working for? And do you know anyone who’s gotten into real financial trouble by buying too much home?
Invest In Real Estate Without The Headaches
If you want real estate exposure without the remodeling nightmares or debt I described above, check out Fundrise, my favorite private real estate platform. Fundrise focuses on high-quality residential and industrial properties in the Sunbelt, where valuations are lower and yields tend to be higher.
Fundrise manages around $3 billion in assets for over 350,000 investors. I’ve personally invested $500,000+ in their products, and my investment outlook is well aligned with their CEO’s. I also appreciate the transparency and low barrier to entry they provide.
You can get started with as little as $10, and they even offer venture capital investing if you want to branch out. Well worth a look if you’re serious about building a real estate portfolio without ever picking up a hammer.
Fundrise is a long-time sponsor of Financial Samurai, and Financial Samurai is a multi six-figure investor in Fundrise funds.
Buying A Multi-Million Dollar Home Will Make It Tougher To FIRE is a Financial Samurai original post. All rights reserved. Everything is written based on firsthand experience and expertise, because money is too important to be left to pontification. To build more wealth, join 60,000+ others and subscribe to my free weekly newsletter.
