Best Way for Young Single High Earner to Save for a House

[CHIEF 5076]

CHIEF Jr. has an engineering job, he is able to live at home and rathole money. He has no room and board, vehicle payment, just his lunch and fuel each day. He already has a lot in our subdivision that backs up to six acres we own. Uncle Sam is going to fuck him with no lube. The idea is for him to build a house in 3-4 years. He should be able to sock away $50-75k per year. His big problem is no write offs. We have been trying to come up with ways to use pre-tax money to save up for the house. 401k loan is about all we have come up with, and apparently that isn't really ideal. Is there an avenue we haven't pursued? Looking at trying to put down at least 20% on a $375-400k home.

CHIEF

[tx 3 putt 76869]

Build a four plex and rent out 3 units

[Surly Bevo 24908]

If your kid can sock away 50-75K a year and wants to build a 400K house in 3-4 years you pretty much can put it under a mattress and be fine.  Is that really the question, or is it more about how you save that money for anything you might have a fairly near term need for liquidity and maximize the return?  

Edited October 23, 2023 by Surly Bevo

[CHIEF 5076]

25 minutes ago, tx 3 putt said:

Build a four plex and rent out 3 units

Subdivision is single dwelling units. He would make a shitty landlord, he is too soft hearted. He would fall for every sob story.

 

17 minutes ago, Surly Bevo said:

If your kid can sock away 50-75K a year and wants to build a 400K house in 3-4 years you pretty much can put it under a mattress and be fine.  Is that really the question, or is it more about how you save that money for anything you might have a fairly near term need for liquidity and maximize the return?  

It really is to provide some kind of tax shelter in which he could grow a down payment to put towards the house. I just don't want him to strap himself with a minimum down payment and a huge payment. He can take the mortgage interest off, but a $3500-4500 a month payment is a really big nut for a single person. Just wondering if there is a way for him to grow it at a lower tax bracket. Liquidity is not really an issue until he has to make the down payment. He could put it away for 3-4 years and not touch it.

CHIEF

Edited October 23, 2023 by CHIEF

[Pato del Muerto 52485]

I believe first time home buyers can cash out some pre-tax 401k without early withdrawal penalty-only tax.  Verify that but maybe it helps. 

Edited October 23, 2023 by Pato del Muerto

[bernorange 8359]

Billy and April might have some investing ideas they can recommend.

[destroya 374]

Your math seems off. Saving 50-75 for 4 years equals 200-300 for a down payment. That’s well over 20% on a 375-400 loan.
 

If the target down payment is 20%, why not buy the house when he saves that amount? 

[Rimbo 25911]

buy in the mid-1990s

[CHIEF 5076]

52 minutes ago, BeardIP said:

Further, there is a chance it will be cheaper (lower interest rates, slowly falling costs, etc.).

You have a point. This kinda started with the rising interest rates, and $200/yd. concrete. 

CHIEF

[tx 3 putt 76869]

1 hour ago, Rimbo said:

buy in the mid-1990s

hell, just go back a couple of years when it was 2.6ish%

[Nice Guy Eddie 13508]

Assuming he’s a relatively young guy, the most important thing he should be doing is maxing out the retirement plan. Let the annual $23k grow for 30-40 years. I would argue that he should Roth it, but that would be the reverse of trying to lower taxes.

if he can still sock away $50K/yr for a handful of years, he will be set for a house and a low payment for his income. $150-200k in your pocket gives you plenty of options.

unfortunately our tax system is set up that high earning W-2 earners pay the bulk of the govt tax revenues. Especially as you start to progress deep into the >30% brackets. 

[MonkeyDoughnut 10227]

Only tax write off looks like get a wife with kids. Taxes will be better, savings... not so much

[Gil Bang 25912]

This is a very positive thread.  Nice to hear that Chief Jr. has his shit together.

[CHIEF 5076]

5 hours ago, Nice Guy Eddie said:

Assuming he’s a relatively young guy, the most important thing he should be doing is maxing out the retirement plan. Let the annual $23k grow for 30-40 years. I would argue that he should Roth it, but that would be the reverse of trying to lower taxes.

if he can still sock away $50K/yr for a handful of years, he will be set for a house and a low payment for his income. $150-200k in your pocket gives you plenty of options.

unfortunately our tax system is set up that high earning W-2 earners pay the bulk of the govt tax revenues. Especially as you start to progress deep into the >30% brackets. 

Yep, one of my good friends, that I moved to Austin with in the 90's, was single and a high wage earner. He bitched and moaned about "fuck FICA". I finally just asked him how bad was it? He showed me a pay stub, his net was about 60% of his gross. It took him quite a while to save up a down payment before he purchased a house in Cedar Park.

CHIEF

[Guest]

17 hours ago, CHIEF said:

CHIEF Jr. has an engineering job, he is able to live at home and rathole money. He has no room and board, vehicle payment, just his lunch and fuel each day. He already has a lot in our subdivision that backs up to six acres we own. Uncle Sam is going to fuck him with no lube. The idea is for him to build a house in 3-4 years. He should be able to sock away $50-75k per year. His big problem is no write offs. We have been trying to come up with ways to use pre-tax money to save up for the house. 401k loan is about all we have come up with, and apparently that isn't really ideal. Is there an avenue we haven't pursued? Looking at trying to put down at least 20% on a $375-400k home.

CHIEF

Yeah I think at that stage of life and paycheck situation, it's tough to shield money unless it's for retirement. I don't know if I'd call it fucking with no lube. Given the situation and numbers you cited, I assume he's making around $100,000 a year. Comes out to about 22% a year between income, SS, and Medicare taxes according to ADP.

Obviously would be nice for it to be lower, but aircraft carriers ain't free. 

Good news is that he can earn 5.5% risk free while he saves.

[tx 3 putt 76869]

8 hours ago, Nice Guy Eddie said:

Assuming he’s a relatively young guy, the most important thing he should be doing is maxing out the retirement plan. Let the annual $23k grow for 30-40 years. I would argue that he should Roth it, but that would be the reverse of trying to lower taxes.

if he can still sock away $50K/yr for a handful of years, he will be set for a house and a low payment for his income. $150-200k in your pocket gives you plenty of options.

unfortunately our tax system is set up that high earning W-2 earners pay the bulk of the govt tax revenues. Especially as you start to progress deep into the >30% brackets. 

 

100% he needs to max out his roth all his 20's / for 10 years. it should mature over $1mil 

[Pato del Muerto 52485]

And assuming his employer matches the first few % of 401k that’s free money on top of market gains, that I don’t imagine you’d get from other investments. 

[Nice Guy Eddie 13508]

In the spirit of recognizing this is unsolicited advice, I would caution a younger guy from going all out in building too nice of a first house. I've known more than one guy in his 20s that has bought or built a new house, only to find the girl of his dreams soon after. That wasn't her house or wasn't her dream house, so they were quick to sell and move elsewhere. 

There's something to said about having a six figures in a liquid account. In my 20s, I had periods where I may have had low 3 figures in my bank account before payday. Weird how that didn't bother me. I guess the lack of debt made me realize it wasn't too big of a deal.

[immamac 42835]

10 minutes ago, Nice Guy Eddie said:

In the spirit of recognizing this is unsolicited advice, I would caution a younger guy from going all out in building too nice of a first house. I've known more than one guy in his 20s that has bought or built a new house, only to find the girl of his dreams soon after. That wasn't her house or wasn't her dream house, so they were quick to sell and move elsewhere. 

There's something to said about having a six figures in a liquid account. In my 20s, I had periods where I may have had low 3 figures in my bank account before payday. Weird how that didn't bother me. I guess the lack of debt made me realize it wasn't too big of a deal.

Why would you ever sell a house to buy another one unless it was the irs homestead cap gains hoop you are jumping through.

[CHIEF 5076]

1 hour ago, Pato del Muerto said:

And assuming his employer matches the first few % of 401k that’s free money on top of market gains, that I don’t imagine you’d get from other investments. 

He is putting in the maximum allowable on his 401k. since he just started, I'm not sure how much, if any, they match. I do know they match heavily with tenure. He went to work for https://sandx.us , still has an interview with Lockheed, but loves the atmosphere of the small company. He is one of the only two engineers in the company, at the moment, the other engineer is an older guy nearing retirement age. Apparently all of drafts used are in disarray, not standardized, and not available on the companies "One Drive" even though they have one. Thats what he is working on for about the first 90-120 days. Also, if you come up with an idea, the company will help you patent it, and split any future royalties with you 50/50. So a great opportunity for some long term passive income.

CHIEF

[Guest]

2 hours ago, Nice Guy Eddie said:

In the spirit of recognizing this is unsolicited advice, I would caution a younger guy from going all out in building too nice of a first house. I've known more than one guy in his 20s that has bought or built a new house, only to find the girl of his dreams soon after. That wasn't her house or wasn't her dream house, so they were quick to sell and move elsewhere. 

There's something to said about having a six figures in a liquid account. In my 20s, I had periods where I may have had low 3 figures in my bank account before payday. Weird how that didn't bother me. I guess the lack of debt made me realize it wasn't too big of a deal.

Yeah, especially when that house backs up to the in-laws. 

[CHIEF 5076]

1 hour ago, FirstTimeCaller said:

Yeah, especially when that house backs up to the in-laws. 

Its about 6-7 minutes away from us. I also don't go over there each day, so I wouldn't be dropping in. He gets all the puppies, but none of the "dogs" in this situation. As an engineering type, he already has his life planned. Not sure if he is the exception, or the rule. Nobody can disrupt his plans unless she is Hanna Barron.

CHIEF

[Gil Bang 25912]

Goddammit.  Now I've got to google Hanna Barron.

[Gil Bang 25912]

 

[fattyflattie 4639]

3 hours ago, CHIEF said:

Nobody can disrupt his plans unless she is Hanna Barron.

 

Lulz.   
 

She’s but one of several million. 

[52-80 19147]

has Little Chief considered marrying into generational money?

[mapplewhite132 309]

I too would like to not pay taxes. I’ll hang up and listen. 

[CHIEF 5076]

5 hours ago, 52-80 said:

has Little Chief considered marrying into generational money?

His last girlfriend was generational money, but too high maintenance. She started cutting into his hunting and fishing time, and wanting him to come to Dallas all the time at the drop of a hat. He wasn't having it. My expectations are probably a school teacher, accountant, small business owner from here that digs his crib, loves the outdoors.

CHIEF

 

[Incredulity 11650]

17 hours ago, immamac said:

Why would you ever sell a house to buy another one unless it was the irs homestead cap gains hoop you are jumping through.

Your answer is in what you quoted

 

17 hours ago, immamac said:

That wasn't her house or wasn't her dream house,

also see wives and stupid shit thread

[High Plains Drifter 11028]

11 hours ago, Gil Bang said:

 

 

Noodlin' in a swimming pool? Wtf is that?

 

[RPM 26316]

14 minutes ago, High Plains Drifter said:

 

Noodlin' in a swimming pool? Wtf is that?

 

You deaf, too?

[52-80 19147]

1 hour ago, CHIEF said:

His last girlfriend was generational money, but too high maintenance. She started cutting into his hunting and fishing time, and wanting him to come to Dallas all the time at the drop of a hat. He wasn't having it. My expectations are probably a school teacher, accountant, small business owner from here that digs his crib, loves the outdoors.

CHIEF

 

Bows over Hoes

[luke duke 6412]

Best Way for Young Single High Earner to Save for a House?

Remain a single high earner.

[ScottS 1061]

Hold it, hold it. Why build? You're better off leasing at a buck and a quarter, a buck and a half a square foot. Take your down payment and put it into CDs, or something else you can roll over every couple of months.

First of all, you have to grease the local politicians for the sudden zoning problems that always come up. Then there's the kickbacks to the carpenters. And if you plan on using any cement in this building, I'm sure the teamsters would like to have a little chat with you, and that'll cost you. Don't forget a little something for the building inspectors. There's the long-term costs, such as waste disposal. I don't know if you're familiar with who runs that business, but I assure you it's not the Boy Scouts.

[davidg 4036]

He is putting in the maximum allowable on his 401k. since he just started, I'm not sure how much, if any, they match. I do know they match heavily with tenure. He went to work for https://sandx.us , still has an interview with Lockheed, but loves the atmosphere of the small company. He is one of the only two engineers in the company, at the moment, the other engineer is an older guy nearing retirement age. Apparently all of drafts used are in disarray, not standardized, and not available on the companies "One Drive" even though they have one. Thats what he is working on for about the first 90-120 days. Also, if you come up with an idea, the company will help you patent it, and split any future royalties with you 50/50. So a great opportunity for some long term passive income.
CHIEF

We did some projects with his company several years back. Never met the old man as we mainly dealt with the son. For whatever reason, the projects never really planned out. Clash of personalities I guess.

[tx 3 putt 76869]

20 hours ago, luke duke said:

 

Remain a single high earner.

 

this is easily the best way to stay a high earner 

[fattyflattie 4639]

13 minutes ago, tx 3 putt said:

this is easily the best way to stay a high earner 

Marrying into generational money also a good call.  I know it typically comes with the crazy, but hell what doesn’t?  What doesn’t kill you makes you stronger, after all. 

[CHIEF 5076]

45 minutes ago, fattyflattie said:

Marrying into generational money also a good call.  I know it typically comes with the crazy, but hell what doesn’t?  What doesn’t kill you makes you stronger, after all. 

Also, women with generational money are willing to sign a prenup. I am sure he would want to keep the house, since he had it before marriage, and would want to keep all of his retirement.Everything else would probably be fair game. The last girlfriend had 800 acres in Hondo, a house in Albuquerque, and a trust fund. She would have damn well wanted a prenup.

We have a buddy that is a frac consultant that makes mid-six figures. He just has two baby mommas. He never let them move in, so no common law marriage. He has several million squirreled away in retirement and investments. He wanted kids, he pays the maximum child support, and buys the kids just about anything else they want, and keeps them the whole time he isn't out in the Permian. He is a great father, gets along and accommodates the mothers. He just decided that was the cheaper route than to risk his huge nest egg.

CHIEF

[CHIEF 5076]

1 hour ago, davidg said:

We did some projects with his company several years back. Never met the old man as we mainly dealt with the son. For whatever reason, the projects never really planned out. Clash of personalities I guess.

Bruce, the old man, is a great guy. Jerry, the son can be abrasive, but is usually out in the field. He loves his co-workers. They are already planning fishing and Auodad hunting trips.

CHIEF

[Chicken fried bacon 46]

On 10/22/2023 at 10:33 PM, bernorange said:

Billy and April might have some investing ideas they can recommend.

Have not seen a Billy and April reference in awhile.  That is awesome.  

[baboso 6054]

On 10/23/2023 at 4:40 PM, immamac said:

Why would you ever sell a house to buy another one unless it was the irs homestead cap gains hoop you are jumping through.

Because pussy remains undefeated.

[Jkwellborn 6688]

Hold it, hold it. Why build? You're better off leasing at a buck and a quarter, a buck and a half a square foot. Take your down payment and put it into CDs, or something else you can roll over every couple of months.
First of all, you have to grease the local politicians for the sudden zoning problems that always come up. Then there's the kickbacks to the carpenters. And if you plan on using any cement in this building, I'm sure the teamsters would like to have a little chat with you, and that'll cost you. Don't forget a little something for the building inspectors. There's the long-term costs, such as waste disposal. I don't know if you're familiar with who runs that business, but I assure you it's not the Boy Scouts.

Good answer. I Kim like the way you think.

[Nice Guy Eddie 13508]

On 10/25/2023 at 2:33 PM, CHIEF said:

Also, women with generational money are willing to sign a prenup. I am sure he would want to keep the house, since he had it before marriage, and would want to keep all of his retirement.Everything else would probably be fair game. The last girlfriend had 800 acres in Hondo, a house in Albuquerque, and a trust fund. She would have damn well wanted a prenup.

If I married a wealthy woman I wouldn’t decline signing a prenup. I wouldn’t sign a “I get nothing” prenup but take into account how long the marriage lasted, if I gave up any potential earnings/retirement, etc.

i would also want clarity on how much she’s picking up on major joint expenses like housing, cars and vacations.  
if she’s wealthy enough, maybe she pays 100% of those. That would be part of the benefit of signing the prenup.

now where do I find this woman?

Edited October 28, 2023 by Nice Guy Eddie

[Not that Bob 735]

Tell me about this 5.5 risk free. 

[52-80 19147]

20Y US treasuries are yielding 5.2, and all the <1Y bills are yielding ~5.5.  Which also means money market funds should be giving you something similar.

[baboso 6054]

Any number of banks are offering FDIC insured 1 year CDs at 5.5 to 5.65.

[EastHorn 281]

I really like this marry rich idea.  Just remember there is a difference between a girl whose dad owns the jet and one whose dad leases the jet.  You want the one whose dad owns it.  Hope this helps CHIEF.

[CHIEF 5076]

1 hour ago, EastHorn said:

I really like this marry rich idea.  Just remember there is a difference between a girl whose dad owns the jet and one whose dad leases the jet.  You want the one whose dad owns it.  Hope this helps CHIEF.

My only worry is the Dad wanting to get her expensive ass off of his dole, and onto CHIEF Jr.'s. We have a friend that just loves CHIEF Jr., always trying to hook him up with his daughter. He sold a pharmaceutical company for millions. She has very expensive hobbies, English saddle competitions, art, etc. She bought a $15k fur coat when we went to the Dallas Safari Club expo. CHIEF Jr. told our friend that he has no interest in funding those kinda items, and if she wants them, he would still be on the hook for those kind of things. 

I think the best idea so far, is to stay a single wage earner.

CHIEF

 

Edited October 30, 2023 by CHIEF

[TwiceHorn 31438]

On 10/28/2023 at 8:29 AM, Nice Guy Eddie said:

If I married a wealthy woman I wouldn’t decline signing a prenup. I wouldn’t sign a “I get nothing” prenup but take into account how long the marriage lasted, if I gave up any potential earnings/retirement, etc.

i would also want clarity on how much she’s picking up on major joint expenses like housing, cars and vacations.  
if she’s wealthy enough, maybe she pays 100% of those. That would be part of the benefit of signing the prenup.

now where do I find this woman?

The other thing about someone with generational wealth.  Unless they are a high-earner (trust fund distributions don't count), they will not be contributing significantly to the community/marital estate.  The one exception is if they make contributions to purchases of major assets like houses.

Marriage doesn't generally grant keys to generational wealth, at least by divorce.

A friend of my Mom's through various hen party organizations was married to a Meadows/Caruth (family that owned most of North Dallas before it developed).  She got divorced relatively late in life and, although she was provided for adequately by voluntary payments of support and a modest property settlement, she took a major step down in lifestyle, because none of the Meadows/Caruth money became part of their marital estate.

[CHIEF 5076]

30 minutes ago, TwiceHorn said:

The other thing about someone with generational wealth.  Unless they are a high-earner (trust fund distributions don't count), they will not be contributing significantly to the community/marital estate.  The one exception is if they make contributions to purchases of major assets like houses.

Marriage doesn't generally grant keys to generational wealth, at least by divorce.

A friend of my Mom's through various hen party organizations was married to a Meadows/Caruth (family that owned most of North Dallas before it developed).  She got divorced relatively late in life and, although she was provided for adequately by voluntary payments of support and a modest property settlement, she took a major step down in lifestyle, because none of the Meadows/Caruth money became part of their marital estate.

Know a lady in the same position. She was divorced, and married a rich widower. All of the generational money is from his deceased wife's family. They live a lavish life, private jet, vacations, expensive jewelry. The way her prenup was set up, she only gets the house they own when he is deceased, or $250k for a house. You can't buy shit with $250k. So we sold them a lakefront home for $750k, as his final home. The thing is, she really doesn't have any retirement savings, so she will probably have to end up selling that home, and move in with her adult daughter and SIL.

CHIEF