[quote=AN][quote=sdcellar]The only other thing I might suggest is making sure you hold on to an adequate cash (or similarly liquid) reserve.[/quote]
That’s key right there. To me, when you truly can afford a $1M house, you should have plenty of liquid reserve as well as all other part of your personal finances set. If you are already there in term of your personal finance, I’d say put down 50%.[/quote]
I agree with this point. There is some good advice throughout this post. Much of what you are asking is all relative to your specific situation. Typically there is never a “one size fits all answer”. But AN’s point about definitely having plenty of liquid cash reserves is important.
I think it’s wise that you’re planning things out. I do understand your point about wanting to buy a “million dollar house”. I think sometimes people hear that and just assume that you shouldn’t be spending that much money on a home or you can get buy with less. But the sad reality is in many areas/neighborhoods in San Diego in good areas, you will spend $1 million or more to get what you want. So definitely I don’t fault you on that.
It’s sad that homes are still so expensive but in most of the desirable areas with great homes in good school districts, it’s still expensive.
I totally agree with the other poster’s point about many accountants or financial advisors improperly giving out advice to their clients to always buy the most they can afford, put the least amount down. I actually disagree with that philosophy as a general rule.
Everything is relative on each person’s specific financial situation as well as the level of risk they want to deal with. It also depends on how well diversified your other assets are and how much risk you are taking on.
For example, you mentioned you’re netting 7% ROI each year. That’s an EXCELLENT return these days in an environment where savings/CD’s are paying almost nothing. So you just need to honestly look at if you will continue to earn that.
I’ve seen plenty of people that put the least amount possible because their financial advisor told them they would earn more in “other investments”. But the people put that money in “other investments” that were super volatile and they lost much of that cash. So it just depends how you invest that money and how conservative you are.
But the answer truly lies in your personal situation. Me personally, I like waiting until I save up enough to purchase properties with Cash. Many would consider that TOO conservative but thus far it’s worked really great. I’ve also never personally known anyone to go broke being too conservative but quite the contrary with people that take on too much leverage.
