*** The following is a guest post from the wildly successful entrepreneur and real estate mogul Christina “Dr. Preneur” Benjamin. She just so happens to be the youngest winner of the prestigious Minnesota Realtor of the Year award, given only once per annum. She influences hundreds of thousands of buyers every day and specializes in helping first-time homebuyers find their dream homes. You can’t miss this article from the feature pin-up model for Springer’s Journal of Real Estate Finance and Economics 2023-24 Greater Twin Cities Metropolitan Area My Exposed Estate Calendar.1 ***
Buying a Home Has Never Been Easier2
Today, millions are shivering in their boots about the boogeyman of inflation and the “recession”. Some are even complaining that the rot in this country goes through to the core: Wall Street artificially inflates the housing market by using companies like Zillow to buy everything they can get their grubby little paws on; credit card companies are usurious and predatory; young people need a bachelor’s degree and 2-5 years of experience to get an interview for a decent job while the average student loan debt is $32k; electric vehicles are increasingly being mandated while they cost an average of $66k; and buying a dozen eggs will soon require a small loan.
Indeed, this economy has millions down, and it has millions out. But that’s because everyone thinks they need $1 million down just to get out… of their apartment and into their own home, that is!
I wish I could grab all of them by the shoulders and shake them, screaming, “you can do it, too!”
But if wishes were horses, beggars would ride.
That’s why I created the most successful online coaching system for first-time home buyers by any woman under the age of 36 in the greater Twin Cities metropolitan area.
This is why they call me Doctor Entrepreneur, Dr. Preneur, Doctrepreneur, or Chrissy D—I’m a financial wizard in a fit, go-getter shell.
My day-to-day life involves showing people that the life they desire isn’t a dangling carrot but something tangible, and it is within their reach — if only they’d stretch out and grab it. This goes for first-time buyers as well. In some ways, there has never been a better time to buy.
Numbers Don’t Lie
One of my favorite ways to shake people up is to post on Instagram how much salary is needed to buy a home. I will share the crunched numbers3 from a recent Reel—my followers were shocked when they saw the final product:
$50k pre-tax income — $188k house
$60k pre-tax income — $242k house
$75k pre-tax income — $322k house
$100k pre-tax income — $455k house
$125k pre-tax income — $588k house
Their jaws literally dropped!4 Buying a home is not just for rich entrepreneurs, big-league influencers, and C-suite execs. Living in your own home on your own land is not a pipe dream. We are not living in a wretched economy where owning a home is an impossible fiction divorced from reality. Even first-time buyers with little to show for their lives can get into a house, like yesterday!
Pushback
Now, sometimes I get flack for posting these statistics. People find the stats on one or more of my successful platforms and say things like:
This is completely impractical.
This is insane.
The math simply doesn’t add up.
Would it surprise you to learn that these comments are almost always from men? Didn’t think so. It’s time to sit down and listen to the big girls, fellas. Listen and learn, boys, you might learn a thing or two.
Brass Tacks
Let’s get down to them, shall we? I break this down for these silly men and all my mentees with my patented 35-65 Method™5 of explanation.
35 Percent
It is standard practice to assume a first-time homebuyer can spend between 35 and 50 percent of their monthly income on their mortgage. My calculations are done assuming 35 percent, so I’m being conservative—but I’m no Mitch McConnell!6
When spending only 35 percent of your income on your mortgage, you still have a whopping 65 percent left over. That gives tons of room to cover cost-of-living expenses, but also vacations, parties, and general enjoyment of life (impulse buys, ladies—you know what I’m talking about!).
The Rest: 65 Percent
Let us build a monthly spending report with my 35-65 Method™7. Now, I will assume the dear reader is partnered and is the lone full-time worker in a family of three, and your partner does not work part-time. You might be two women who have adopted or used IVF, two men who have adopted, two men, one of whom gave birth, or whatever else. The main point is that you are a family. You are a family. You are a family. You, the dear reader, are a family.8
We will use Minnesota’s cost of living county data, my home state.9 Specifically, we will look at Hennepin County. This is a large county of almost 1.3 million people (almost one in four Minnesotans) that covers the whole socioeconomic spectrum; from the ritzy Minnetonka suburb with tons of palatial mansions to the scary parts of Minneapolis with tons of murder.
The median income in Hennepin County is about $85k. That yields approximately $6500 every four weeks or two pay periods. And based on my 35-65 Method™10, that gives us about $2300 available for a mortgage, property taxes, and insurance.11 An income like this could buy a $377k home, which is almost $70k more than the median value of homes in Hennepin County.
I know, isn’t that amazing? If you are in just the 50th percentile for income, a $377k home could be yours!
A 20% down payment for such a home would be about $75k; a little less than a year’s salary.12 Wrapping all of this together:
Mortgage – $2300
Food – $941
Transport – $818
Healthcare – $561
Taxes – $203
Other – $565
The above totals only $5388. This budget is more than feasible on a salary of $85k since it is less than $65k per year in spending. That leaves more than $20k for savings, vacations, Christmas shopping, big birthday parties, and so on, and so forth. Suppose even that, God forbid, the 28-year-old refrigerator your home comes with craps out, the septic system needs work, or a pipe bursts in the basement during a January stretch of sub-zero temperatures; any of these issues can be covered by the $20k as well.13
Picture It Now
Soaking up the sun on your own lawnmower,14 cruising through your 0.21-acre plot that houses your 1600 sq ft, 3 bed, 1.5 bath, 48-year-old rambler, while your partner and child are off at soccer practice. Your neighbor waves from his driveway about 20 feet away from you, and you wave back from the middle of your lawn.15 Let me emphasize again that this is your grass that you are mowing.16 A couple of days ago, your boss informed you about yet another annual bonus of $2500, so you are thinking of putting in an above-ground pool.17 Soon, you will go inside to have a beer and watch the Minnesota Twins lose.
You can do this. Your dream life is achievable. You need only reach out and take it.
Eram quod es, eris quod sum,
Chrissy, your fav Doc, xoxo
Sold out.
Ed: House rather than home is the proper term here, as one makes a house into a home but does not buy a home. However, the title is grabbier with this misphrasing. The author repeats this misphrase throughout the article.
The principal, or present value, of a loan is equal to the cash outflows over time discounted to the beginning of the term – which in the commonest case for mortgages is monthly payments for 30 years – yielding an annuity-immediate product. Thus, with a down payment of 20 percent, the remaining principal, which is 80 percent of the value of the home today, is repaid with 360 level payments, issued at end of each successive month, and these level payments are determined by dividing the principal at issue by the annuity. The assumptions of this model (not me, I mean — the model for the loan! Hehe, only kidding. After the calendar, my modeling days are over; it’s a hard gig!) are thus: an annual effective interest rate of 6.7 percent, which of course is adjusted to reflect the monthly effective interest rate rather than annual terms (6.7 per month would hurt!); the aforementioned 20 percent down, to avoid locking the buyer into pesky private mortgage insurance that is a shield for the lender (rats! – but I suppose they must hedge their risk, or musn’t they?); Minnesota’s effective property tax rate of 1.12 percent (Bankrate) of the value of the home at time-0, which would likely yield an underestimate of the property taxes paid in the future but suffices for the present case (unless the Twin Cities continue their descent into madness! No, only kidding. That’s just what my husband says because he was laid off in 2020 and has been spending a lot of time on the Internet.); Minnesota’s average monthly insurance premium, which Bankrate says is $157; these two factors, property tax and insurance, are simply added to the level payment and do not factor into the annuity-immediate or terms of the loan in any way (a rather crude variable in the final product, but what am I to do?); biweekly paychecks imply gross annual income is divided by 13 for an estimate of monthly income over the m-thly payment period, which is in this case monthly: 13 because annual income divided by 52 and 40 yields an hourly rate, which must be carried over the biweekly 80 hours, but this is equal to annual income divided by 26, and there are two of these paychecks in most months, so another factor of 2 is removed from the denominator; and gross annual income is used in place of net annual income because bigger is better!
Being that I carefully maintain a strictly parasocial relationship with my followers and even mentees, and rarely interact with them in any way, I cannot and refuse1 to see their physical faces, and the sentence this footnote annotates is meant to be taken as a figure of speech.
Many first-time homebuyers do not have a home because they are poor, and poor people often have even poorer hygiene. Since people with poor hygiene tend to be odorous, it is syllogistically quite straightforward as to why I am perceived as far more stringent and reclusive than the average mogul in the real estate tech space.
Pending.
I want to send your money to the bank, not Ukraine. Your taxes will go to Ukraine, not the interest or principal of your loans.
Pending.
This bears repeating.
I was legally advised to inform the dear reader that I now spend most of the year on the Gulf Coast of Florida, near Lehigh Acres, often visiting my husband and children back “home”, but I have to spend at least 6 months of every year in Florida to be considered a resident and thereby participate in their tax rates.
Pending.
See footnote (3) for the property taxes and insurance.
Of course, this does not include closing costs, realtor fees1, et cetera; so, you know, just plan for these things or whatever.
I have to get paid somehow. I certainly can’t afford multiple homes as a writer.
Not simultaneously, though. Don’t let all the bad things happen in the same year. It’s better to spread out calamities so they are planned for and easier to manage.
If the reader is actually in Hennepin county, this will only occur between late April and early November, at best.
Even after your house is paid off, you will have to pay property taxes, which means you are paying to maintain your ownership of the home. In some sense, then, you are still renting this land from the local governments. But you still own the home, technically.
Depending on how much equity you have accrued since the beginning of the loan term. With 20% down, the lawn is at least 20% yours at any given moment between the move-in and the 360th mortgage payment.
Next year, after putting this and three more quarterly bonuses into your 4% High Yield SavingsSM account, which you opened in a desperate attempt to stop the bleeding from inflation. Although, this account acts potentially as an emergency fund as well (e.g., the septic, an appendectomy, sepsis).