Quote: Originally posted by Teddi on May 14, 2013
- Taxes on a $10M (14,000 square ft) house in Palm Beach county...on the water is $67k. But we can round that up to $6k per month for the sake of this convo.
- Let's pretend you can actually do this and assign $15K per month on utilities (light, water, gas), and you'd probably have to keep every light on 24/7 and run water constantly to get there.
- Security system, housekeeper, gardening, homeowners and flood insurance we can guesstimate to be 15K a month, but let's tack on extra $$ for an umbrella policy...and cable. So put that up $20k per month.
- Now let's add 15K per month for any incidentals on the house. Maybe you'll need to patch the roof or fix a fence.
- For everything, and asuming you're in a party house where lights, water, hot tub are constantly in use, we're up to $56,000 per month. Round that up to $60K for anything else I might have missed like HOA fees, PPV boxing and a butler. $60,000 per month = $720,000 per year. But let's still add an addtl $30K for anything else house-related that could even pop up like an unexpected hike in insurance premiums. Maybe another $50k on top of that for more palm trees, a tricked out grill and a per diem personal chef. Now we've covered EVERYTHING, every conceivable eventuality and we're up to $800,000 per year.
And this is Palm Beach county. Home of Billionaires' Row. Where when police, firefighters and teachers complained that the cost of living was too high, they couldn't afford to live in the county they serve, and the mayor told them to move somewhere else.
Take that $10M house and put it somewhere like Georgia, Tennessee, the Carolinas and your costs go way way way down. Especially if you're not on the water and you don't have to contend with monster flood policy payments.
You could invest ONLY one quarter of your JP CONSERVATIVELY and make enough in interest ALONE to cover that $800K and still have another half a million dollars to play around with. Without ever needing to touch your principle. If you only invested $30M at 5% per annum, that's $1.5m in interest payments per year. That's almost double what you would need to run your $10M home. Invest $40M, $50M, $60M and...you get the picture.
If after you paid every single bill and expense you can conceivably have, and still have anywhere from 1/2 a Million to $2M to play with... money left over AFTER ALL EXPENSES and STILL never ever touching the rest of the jackpot, seriously, do you really and honestly think paying an extra 3% on anything for inflation should put you in a tizzy? I guarantee an extra 50 cents for milk or an extra dollar for steak will not send you to debtors prison. Unless the US turns into a 3rd world country in your lifetime and you have to contend with a 15% -20% inflation rate, you'll be fine. Millionaires in 3rd world countries deal with those inflation rates every year and they're doing just fine. Believe me.
You don't even need to break even with inflation, all you need is enough to pay your bills. Once you have that, why are you fretting about a 3% increase in anything? Whether your home value goes up or down, why would that bother you? It's paid in full. If it goes down, you have less taxes and lower insurance premiums to contend with. If it goes up, you've made a fine investment choice and you can flip it if for a profit if you want to. Either way, you're golden.
The stock market could crash, you could lose the entire $30M you invested and never receive a single interest payment again and still be fine. Still $90M left. Cut back on the butler, personal chef and 24/7 hot tub parties, and you'll still manage to do more than scrape by.
Do I think it's prudent to spend a possible $800K on upkeep on one house. Absolutely not. I'd either have a less expensive house in a less expensive county or allot $10M to my real estate portfolio and buy multiple properties with it. But I'm certainly not going to call it a waste or stupid for someone else to buy a $10M house if they can afford it and it's what they want. Because that's the marvelous thing about a large jackpot lottery, you don't have to be prudent. As long as you've factored in everything, considered all expenses and you can more than afford it, you can go hog wild within those parameters and enjoy life like you never have before.