Can I really afford a BMW?

[Delta0311]

Originally Posted by Flying Ace

I still think the flaw in many people's thinking is still this:



It's not about "paying the bills". It's about putting money away consistently for retirement, rainy day, etc AND pay the bills. Then if you have extra money left over, then yes, you can afford a $71k car.

Putting money into savings should be a no brainier... To me that is a major part of being able to live comfortably.

[RJ_]

We're in a similar position, you make much more than me, but I'm in a pretty low COL area.

I bought a rental property and have a $15k 335. Even the couple thousand I've burned on that car in repairs and depreciation pains my frugal side. I think I'd punch myself in the face if that number was ~$30k after two years.

[ASBSECU E93]

My situation is likely much different from others here.

I've owned 5 primary houses in my young life, with the first house I bought at 27. I currently have a couple investment properties for long term holds.

I've cleared profit on EVERY primary house, more so than any other investment where I place $$ over the same time period.

Favorable tax laws allow the owner to deduct interest and other items (closing costs, taxes, etc...), coupled with basically free $$ to borrow. I see little downside to placing $ into a real and tangible investment.

Additionally - when the asset is sold, no capital gain taxes...!

How is this not a win/win.

Even if the OP's cash flow is tight, rent out rooms to help cover the mtg, then sell in 2 years and pocket the $$.

[Flying Ace]

Originally Posted by zx10guy

^Truth here.

I actually had to convince myself to splurge on buying the 2013 135i I have now. I was always a car enthusiast but could never break down and spend the cash for a really nice car. Could I have gotten into a marque brand sooner? Sure. But what made me change my mind was some recent life changing events which made me step into the YOLO camp for a bit. My previous cars were a 2006 Ford Focus, 1994 Cavalier Z24, and a 1994 Camaro Z28 bought used.

One thing I wished I had done was to take more advantage of a Roth IRA. By the time I wanted to do more with that account, I was disqualified from contributing based on IRS rules.

haha! tax advantaged savings bruh! I maxed out my Roth contribution limits EVERY year between age 21 and 35. Every year about $5k or so, into an investments that earned about more money on top of it...and uncle Sam says, I don't have to pay taxes on any of those gains? Oh man, that feels so good.

[JasonCSU]

Originally Posted by brandoningram14

San Jose. I already have two roommates.

The car was worthless both before and after 😭

I think my choices for cars for pretty limited given that I'm looking for something a little newer and lower in miles and 6MT

Outside of the advice on saving for a house, paying off student loans, and investing, there are some much less expensive fun new cars out there with a 6MT. Do you want something with 4 doors, or do you ever head up to Lake Tahoe to ski or snowboard? If so, take a look at an STi. Do you want a coupe with loads of power and is also capable on the track? If so, there is the Mustang GT with the track pack. If you want a nimble canyon carver and the lack of a back seat isn't an issue, then check out the new MX-5. It really is a good time to be an enthusiast.

[Flying Ace]

Originally Posted by RJ_

We're in a similar position, you make much more than me, but I'm in a pretty low COL area.

I bought a rental property and have a $15k 335. Even the couple thousand I've burned on that car in repairs and depreciation pains my frugal side. I think I'd punch myself in the face if that number was ~$30k after two years.

you sir, are winning. Rental property, aka passive income will be a major source for your retirement 30 years down the line, even if you're barely breaking even today covering for the mortgage on that place.

[ResoKP]

Originally Posted by Flying Ace

It's not about "paying the bills". It's about putting money away consistently for retirement, rainy day, etc AND pay the bills. Then if you have extra money left over, then yes, you can afford a $71k car.

My view has always been, you need to be banking/investing at least 50% of all residual income after basic expenses like rent/mortgage, food and taxes. IMO, what's remaining is discretionary income.

This is how I do it too. There's no sequence of events that needs to happen before you buy a car, just priorities and where you allocate your cashflow. If you have $ leftover at the end of the month after hitting your targeted retirement goals + paying for all your expenses, there's no reason not to buy a brand new M3/M4.

In OP's case, not yet.

[ASBSECU E93]

Originally Posted by Flying Ace

haha! tax advantaged savings bruh! I maxed out my Roth contribution limits EVERY year between age 21 and 35. Every year about $5k or so, into an investments that earned about more money on top of it...and uncle Sam says, I don't have to pay taxes on any of those gains? Oh man, that feels so good.

Also a very good point - Roth is a great vehicle, provided you're contributing heavy early in life.

[Flying Ace]

Originally Posted by JasonCSU

Outside of the advice on saving for a house, paying off student loans, and investing, there are some much less expensive fun new cars out there with a 6MT. Do you want something with 4 doors, or do you ever head up to Lake Tahoe to ski or snowboard? If so, take a look at an STi. Do you want a coupe with loads of power and is also capable on the track? If so, there is the Mustang GT with the track pack. If you want a nimble canyon carver and the lack of a back seat isn't an issue, then check out the new MX-5. It really is a good time to be an enthusiast.

why does he have to buy a new car? Depreciation is a bitch...50% in 3 years on average for almost every car.

Seriously, I'm not joking, he should buy my E90 M3 with 52k miles for $30k. That car may depreciate another $5-10k in the next 2 years, and then hold steady from that point on.

[csu87]

Originally Posted by Flying Ace

your problem is, where are you going to go? You're job is still in Colorado, so you're buying back into "inflated" prices. Rental prices also go hand in hand with house appreciation, usually it outpaces the rate of property prices as more people get priced out and is forced to rent, reducing supply.

BTW, IMO, the house appreciation in certain parts of Colorado is organic and sustainable, i.e., it's fueled by long term structural job growth. Don't just look at one number that is house appreciation, look at population, household income and job figures in your area to see if the appreciation is sustainable.

even in a high growth area like I am in, you are starting to see the warning signs of prices dropping within the next few years. Tons of houses flooding the market, rental properties popping up everywhere, and new houses being built like crazy. You are also starting to see the expensive (for the area $1m+) houses sit for a while and are now starting to drop their prices. That will affect the 750k range, then the 500 and so on.

Long term (10+) yes, prices will have gone up, but short term, most seasoned real estate agents i talk to are predicting we are at or near the top of the market and it will drop a decent amount in 2-3 years.

Like I said earlier though, it is location dependent and not everywhere will see a widespread drop in value. if you are thinking of buying now, do the research to make sure your area isnt at the peak.

[jtodd_fl]

Originally Posted by ASBSECU E93

Also a very good point - Roth is a great vehicle, provided you're contributing heavy early in life.

Yeah... really early. The reduced contribution limit kicks in pretty low on those things

[Flying Ace]

Originally Posted by jtodd_fl

Yeah... really early. The reduced contribution limit kicks in pretty low on those things

damn, look at all you rich people in here not being able to contribute to Roth today... #richpeopleproblems

[ResoKP]

Originally Posted by ASBSECU E93

My situation is likely much different from others here.

I've owned 5 primary houses in my young life, with the first house I bought at 27. I currently have a couple investment properties for long term holds.

I've cleared profit on EVERY primary house, more so than any other investment where I place $$ over the same time period.

Favorable tax laws allow the owner to deduct interest and other items (closing costs, taxes, etc...), coupled with basically free $$ to borrow. I see little downside to placing $ into a real and tangible investment.

Additionally - when the asset is sold, no capital gain taxes...!

How is this not a win/win.

Even if the OP's cash flow is tight, rent out rooms to help cover the mtg, then sell in 2 years and pocket the $$.

Was the first property you bought when you were 27 priced at $800K+ (indexed to inflation)? Would you have been able to do exactly what you did if that was the case?

Times have changed.. RE is harder to get in for the 20's in today's market.

[jtodd_fl]

Originally Posted by Flying Ace

damn, look at all you rich people in here not being able to contribute to Roth today... #richpeopleproblems

Hardly rich. Just old. You and ASBSECU E93 were right about contributing while young. Build for a long time that way.

MKSixer and Sugarskulls are the rich ones... they drive i8s. I have an M2, which OP said earlier isn't even a proper M.

[David70]

Originally Posted by csu87

Does no one use the 30% rule anymore? 30% of your annual income is the total price of the car. You can still finance it if you want, but shouldnt be buying a car worth over half your annual income.

Using any of these "rules" that don't account for expenses, age, savings, and where you live makes no sense.

Example #1 - 45 years old has two kids at home, no savings, no retirement, stay at home wife, and lives in San Francisco, makes $150K per year.

Example #2 - 45 year old, owns home, single, decent amount of savings and retirement, lives in rural TN and makes $120k per year.

Using the "rules", example #1 should buy the more expensive car but reality is should be driving the least expensive transportation he can find.

[zx10guy]

Originally Posted by Flying Ace

damn, look at all you rich people in here not being able to contribute to Roth today... #richpeopleproblems

LOL

[Flying Ace]

Originally Posted by ResoKP

Was the first property you bought when you were 27 priced at $800K+ (indexed to inflation)? Would you have been able to do exactly what you did if that was the case?

Times have changed.. RE is harder to get in for the 20's in today's market.

IMO, I wouldn't buy and flip, I would buy to rent. There are still opportunities to have rental income cover almost 100% of the mortgage + insurance. After 30 years or so, you're banking every single freaking penny.

I learned this recently from my father in law and our own household.

My rental is basically covering all but $1000 per month of costs for the property, including property taxes. I'm also living in parts of the rental property too, so basically my monthly housing is $1000 after property taxes. This is just cash flow perspective here, not even counting the property appreciation, which I will never realize b/c I likely will never sell. Btw, if we were to move out of our rental property, the net would be zero after property taxes, possible eek out a gain. (Again, not a reality b/c still need a place to live)


My father in law is in one sweet fucking situation with his passive income. He owns a 4-unit apartment building (not rent controlled). From rental income alone, he grosses $100k a year. Assume after property taxes, insurance and upkeep, he clears $70k before income taxes. Needless to say, he doesn't have to work today, but he still does and likely clears a good $100k of gross income in his job too...just fucking amazing. Oh, don't even think about property appreciation, he could probably retire forever if he decides to sell, I'm thinking the full building is worth north of $12-$15m today (depends on your IRR assumption).

[Flying Ace]

Originally Posted by jtodd_fl

Hardly rich. Just old. You and ASBSECU E93 were right about contributing while young. Build for a long time that way.

MKSixer and Sugarskulls are the rich ones... they drive i8s. I have an M2, which OP said earlier isn't even a proper M.

and I drive a 10 year old Civic M3...it's not even ZCP!

[csu87]

Originally Posted by David70

Using any of these "rules" that don't account for expenses, age, savings, and where you live makes no sense.

Example #1 - 45 years old has two kids at home, no savings, no retirement, stay at home wife, and lives in San Francisco, makes $150K per year.

Example #2 - 45 year old, owns home, single, decent amount of savings and retirement, lives in rural TN and makes $120k per year.

Using the "rules", example #1 should buy the more expensive car but reality is should be driving the least expensive transportation he can find.

its a starting point. Obviously there are situations that exist that not every financial rule will apply.

But if you are making 100k/year and looking at cars, starting at 30% gives you a good perspective.

[jtodd_fl]

Originally Posted by Flying Ace

and I drive a 10 year old Civic M3...it's not even ZCP!

And you couldn't even afford that last 1.5 PSI of air. To be fair, with all four tires, your savings is 6 PSI, so there is that...

(For all the pedants, I know it is still 1.5 PSI, but it is really the volume to achieve the same pressure in all tires that would be 4x, but that would have been to complicated. #jokefail)

[kprocivic]

it's a bunch of savy people in this thread. It really trips me out when I hear the default rate is close to 30% on student loans.

[Flying Ace]

Originally Posted by jtodd_fl

And you couldn't even afford that last 1.5 PSI of air. To be fair, with all for tires, your savings is 6 PSI, so there is that...

(For all the pedants, I know it is still 1.5 PSI, but it is really the volume to achieve the same pressure in all tires that would be 4x, but that would have been to complicated. #jokefail)

have you taken account of the temperature affects the air volume? You need to brush up on your basic Ideal Gas Laws son! PV=NRT! Tattoo this equation into your brain before you bring this weak shit into conversation.


Do you even Ideal Gas bruh? Glad you ain't designing my Michelins!