Moving to a More Expensive House: When Should You Take the Leap?

I published another real estate post on this blog about a year ago. I couldn’t have imagined how drastically the winds of the market would shift in such a short time. Now, interest rates are soaring, renters are struggling to buy, and the cost of a carton of eggs makes me want to cry. However, despite the economic shift, the privileged among us may still be wondering: is moving to a more expensive house a good idea?

Why Would Someone Consider Moving to a More Expensive House?

Let’s clarify – there are very few people out there who want to move to a “more expensive” house. People yearning to move up are usually looking for more space, a nicer or newer property, a bigger yard, a better neighborhood, etc. But, these perks typically come at a higher cost. The main exception is a situation where you’re relocating from a shoebox in the heart of a major city to a rural area where your dollar will stretch a lot further (geographic arbitrage). And deciding when to “level up” is a highly personal choice that varies dramatically depending on your situation.

My husband and I have been mulling over this question recently. We absolutely love where we live, but there are areas that appeal to us. We’ve certainly seen some gorgeous homes that offer more space, nicer finishes, and other characteristics that draw us in. But we’ve gotten hung up on the age-old question: does it make sense to stay put and save more, or are there justifiable reasons for getting a nicer and bigger place?

Our Decision Was…

To take the leap! Sort of. We did buy a more expensive property, but it was a hybrid of an investment/enjoyment property. We’ll use it as a medium-term rental when there’s demand and enjoy it as our home otherwise. It was a huge decision. I think we spent 20+ hours talking, analyzing, debating, reasoning, and ping-ponging back and forth over this particular purchase.

Pic of the new digs!

{A Quick Aside 🙂 }

**I feel like I need to mention here that it is a privilege to be able to buy any house, let alone an investment property. There are so many people experiencing homelessness in the U.S. and throughout the world. The shocking thing? There are 28 vacant homes for every person without a home right now in the U.S. So as a country, we undoubtedly have challenges with homelessness that need to be solved – but inventory is not necessarily the root of the concern.

I am not a policymaker or a housing expert – but it is my hope that locally and nationally we find ways to support people without homes. As landlords, we’ve worked with programs like Section 8, the Road Home (a local charity), the International Refugee Committee, etc to provide housing for people who may not be approved for rental homes via traditional means. I’d encourage any landlord reading this to check out those programs!**

How We Arrived At Our Decision

People buy larger, nicer homes for all sorts of reasons:

Maybe your household is bursting at the seams. The lack of space is so bad, you’re about to move your kids into the doghouse.

Perhaps you’ve been eyeing the market for months and a home just popped up that checks all of your boxes.

Maybe you’re rich AF and don’t have the same financial constraints as normal folks. 

In our case, I literally had to edit the draft of this post that I had saved from before because I’d already written a whole spiel about why we decided NOT planning to buy a home in this market. Lo and behold…a house came along that caught our eye, and the circumstances lined up in a way that made us feel confident about moving forward despite the iffy market conditions. 

All that said, the jury is still out for me on whether it was the right decision. Buying a home, whether it’s your first property or your dream home, is an act of faith. You never know if the winds of the market will turn or if you’ll get knocked down by a financial blow. Maybe you’ll undergo some major life change or another event that necessitates a move. Therefore, I can’t say with absolute certainty that I made the right choice…and I can’t tell you what the right choice is for your situation either.

That said, if you’re bouncing back and forth about moving to a more expensive home, there are some guidelines you can follow to inform your decision. 

Moving to a More Expensive House: A Few Instances Where It (Might) Make Sense

You Need More Space

Let’s be clear – I know size is not the only factor that impacts a home’s price. But it is a huge part of the equation. If your household is growing and you need more space, moving to a more expensive house is not a bad idea. However, as with any major decision, you should contemplate your options carefully before deciding. Don’t fall into the trap of being “house poor” –  the general wisdom states that your housing costs should not exceed 33 percent of your gross income. And don’t forget that your costs go far beyond your mortgage. You need to consider:

  • Utilities
  • CAPEX (capital expenditures) fund to repair major items like your roof, water heater, or furnace
  • HOA fees, if applicable
  • Property taxes
  • Maintenance fees

A bigger house = more space to maintain, and therefore higher costs. Run your calculations carefully as you evaluate more expensive properties. Meet with a mortgage lender, accountant, or another financial professional to get an outside opinion.

If you’re consistently struggling to make your current mortgage or rent payments on time, having to cut down in other parts of your budget to afford necessities, and have significant “unproductive” debts (such as credit card debt) – it’s probably not the time to make a move.

You Are Very, Very Rich

There are folks out there that make a lot of money. So much money, in fact, that they have to figure out where to put it, and how to structure their finances in a way that allows them to not pay tax bills that equal the salaries of us regular people (and beyond).

If you don’t like capitalism or don’t want to hear about methods the rich use to get richer, now might be a good time to sign off. But the truth is that some wealthy people do a fair amount of tax maneuvering to (legally) avoid paying their immense tax bills.

Enter cost-segregation studies. I am going to give a VERY simplified explanation of this since I’m not an accountant, banker, or financial professional. In a cost seg study, a tax professional looks at all the costs associated with a property and lumps them into different categories depending on their depreciation schedules. They also identify opportunities for accelerated depreciation. Long story short, you can use the results of the study to offset your tax burden. This site gives a good in-depth explanation of how the process works as well as an example.

Let’s say that you have a business, and you’re projecting a killer year. But you know that when the tax man comes knocking, you’ll have to empty your pockets to cover the bill. If you have cash onhand and you’ve been contemplating a move anyway, it might make sense to upgrade to a nicer home, keep your current property as a rental, and hire an accountant to perform a cost seg study on your rental property (you can’t cost seg your primary residence). And if your current home has appreciation or cash flow potential, you have a win-win situation on your hands.

You might be thinking to yourself that this sounds like a headache to save a bit of money on taxes. Truth is, this example won’t apply to average income earners – but if you are especially wealthy, it could make sense.

You Can Work the Property from Different Angles 

We bought our house because of its versatility. Thanks to its location, it has a destination angle that makes it attractive to out-of-town visitors. Further, it has a track record as a desirable medium-term rental, and could definitely be appealing as a long-term rental. Lastly, although it’s technically one house, there are three separate entrances/units. So, there are a lot of ways to cut the pie. Which is another reason why we moved forward with the purchase – it’s rare to find a high-end property with so many different uses. 

If you want to buy a higher-end home but don’t want to bear the full brunt of the expense, look for a place with a mother-in-law unit, a casita, or a basement apartment. Just keep in mind that you may not always have tenants, and don’t forget to research your local regulations to verify that you can rent the extra space. 

Casita in the new place

You Want To 

At the end of the day, you don’t really need a good reason for moving to a more expensive house. If it’s what you want and you can manage it financially, live your life! Just plan carefully, budget for ALL the costs of home ownership (not just your mortgage), and do your research before moving forward. 

Did you decide to upgrade your home? If so, what compelled you to make the move? 

Leave a Reply

Your email address will not be published. Required fields are marked *