Living In New York City On $1,200,000 A Year (My Plan)

Sam Parr

Yeah, I just went on a really long walk. I walked around all these fancy neighborhoods in Brooklyn. As I was walking, I started doing what people do: I pulled up Zillow and thought, "I wonder what it's like to live here." When I see a house I like, I usually think, "Oh, I would like to live there," and then I pull it up. It's $8,000,000. That's one number, but then you actually look at how much money you need to come up with at closing. You also need to consider how much money you need to spend each month on the mortgage, interest, maintenance, and things like that. I started thinking, "I think I'm going to live over here in Brooklyn." I wanted to map out how much money I would expect to spend to live the lifestyle I want, and it is astronomical. I wanted to talk about some of those expenses. Do you want to talk about how much?

Shaan Puri

walk me through it

Sam Parr

Okay, so listen to this. First of all, I'm going to talk about the life that I'm going to live when I move to Brooklyn. And all the listeners, there's going to be a bunch of them that say, "Oh Sam, no one needs an $8,000,000 house." Yeah, I get it. You know, all I need is like a bucket of water, some apples, and a pair of Crocs, and I'm happy. But this is the life that I choose to live. So, like, I get it, no one needs this, but I'm picking this, so get off my back on this hypothetical case that might be a reality in two years. I just gotta get that out of the way. But in terms of hypotheticals, it's not entirely hypothetical because I went and talked to a couple of friends who do this. But listen to this: I found a home that I wanted to buy, and I actually linked to it on the MBD master doc. Okay, so it's on StreetEasy. It's a nice house. It's only 3,000 square feet, though, but it's a brownstone in my favorite neighborhood of Cobble Hill. It's $5,000,000. I actually think the range of things I want are between $5,000,000 and $8,000,000, but this one I just found was available. It's $5,000,000, which basically means I gotta come up with $1,100,000 as my down payment. Then I'm going to spend around $20,000 a month in mortgage and interest and things like that, not including maintenance, which is going to be more expensive. It's probably going to be another $2,000 or $3,000 a month. Then I think it would probably cost, on the low end, $50,000, and on the middle end, like $150,000 to furnish it the way I'd like to furnish it. Right? Have you ever furnished a house?

Shaan Puri

Yeah, it depends. If you go like... my wife, she's like, "Oh yeah." I'm like, "What do you like?" She's like, "Restoration Hardware." I'm like, "Jeez!" You know, every item in the store is like $5,000 to $10,000. So, you just add that up per room. You're putting in like $20,000 to $25,000 worth of stuff per room in the house, which is pretty nuts.

Sam Parr

Yeah, totally. So, like, $150,000 is just kind of what it would cost if you want to go that route. If you want to go West Elm, then yeah, you can maybe get it done for $175,000, but it's quite expensive. Then, if I'm going to get this big house, I'm getting it because I have two kids or a couple of kids. So, I need my $40,000 to $50,000 a year nanny. I imagine I would spend around $30,000 a year on food. So, basically, it comes up to where I think I'm spending $600,000 to $700,000 a year to live the life I want to live in Brooklyn. But here's the kicker: if you're making over $1,000,000 a year in Brooklyn—or for sure in Manhattan—it's even more than this. Half your money goes away to taxes. So, basically, if I'm spending around $600,000 a year, I need to make $1,200,000 just to cover my monthly net.

Shaan Puri

breakeven

Sam Parr

Just to break even... I talked to two friends. One friend who lives in Brooklyn told me that he spends around $500,000 a year. Then, another friend who also lives nearby said he spends $800,000 a year. He sent me his list, but he mentioned that he has an additional house in North Rhode Island. If you take that vacation home into account, we are spending around $650,000 a year. To live like this, it's crazy. When you walk on these streets, you know there's a house every block. If you go to Manhattan, there's a fancy apartment every block. How on earth do you think so many people afford this? It's crazy when you actually think about the logistics, right?

Shaan Puri

Well, a lot of the people who own these homes purchased them before they were worth $5,000,000. So, go look at the Zillow history of this property. Ten years ago, what was this home worth? I'm guessing it was less than half this amount—maybe 30% to 35% of this price. What you're talking about here is a home that they bought with a basis of around $1,500,000 instead of $5,000,000. So now, the monthly payment is less, and the property taxes are lower. You cut out your biggest expense in this case; you trim that down. I think that's the answer for how a lot of people manage this. It's either through inheritance or buying 20 years ago or 15 years ago when these homes were worth a fraction of what they're worth today. That's why they can afford to kind of live above their means.

Sam Parr

Well, so I had four takeaways when I started thinking about this. The first was that there's a story behind everything. All these people, like a simpleton like me, think, "Oh, you just gotta earn this much money," and they did it by starting a business. It's like, no, that's not the reality. Zac Crockett, who works at The Hustle, and I were talking about this. He was going to write a story on it and said that he researched a bunch of these homes. What he did was, for all the $5,000,000 brownstones in NYC, he used a tool called Melissa to look up the property records. Then he googled the names of each person who "owned" it and looked at their family records. He just did this all through sleuthing and found out that a bunch of them—like seven out of ten—were teachers, artists, or professors. These are jobs where you could earn a decent amount of money, but you're not earning enough to buy this home. What he surmised and concluded was that they just get a lot of help. So, it's hard to own a $5,000,000 brownstone when you're a reporter at The New York Post or something, you know, with a $120,000 a year job. So, I think there's a story behind everything. The second thing is, I think you just have to earn a lot of money. Dude, listen to this: if you earn... hang on.

Shaan Puri

hang on that was a killer insight

Sam Parr

what

Shaan Puri

the you gotta earn a lot of money

Sam Parr

yeah

Shaan Puri

where'd you come up with that

Sam Parr

That you gotta earn a lot of money. But listen, let's put the math on this. How many years do you think you need? How long would it take you to save $10,000,000 if you lived in New York?

Shaan Puri

to save $10,000,000

Sam Parr

yeah to get a portfolio of $10,000,000

Shaan Puri

I have no idea I don't know let's say 20 years

Sam Parr

Okay, so if you make $1,500,000 and you're spending around $25,000 a month in living expenses, it's going to take you around 15 years to be able to save $10,000,000, which is pretty crazy. Now, you've got to figure out how to earn at least $1,500,000 for 10 years or for 13 years, which in itself is impossible... or not impossible, but very, very, very challenging.

Shaan Puri

The hold on your... your first thing was like these people are teachers and artists. You said they gotta have some help. You're talking about like family help. You're not talking about like there's nothing else, right? You're saying you have a rich family.

Sam Parr

yeah

Shaan Puri

okay alright sorry carry on

Sam Parr

I think that I just underestimated this. When I think about it, I'm like, whose parents would give them $2,000,000 for a down payment on a home? I think the answer to that is actually a lot. I can't imagine that, but that was hard for me to accept because, you know, I don't know. My mom and dad, the best gift they ever gave me was when I turned 21. They gave me $1,000, and that was like the last birthday present I ever got.

Shaan Puri

I don't even think it's a down payment. It's okay, you're a teacher, great! Your down payment is covered. Where are you coming up with $25,000 a month for your monthly payment just for your home? I think it allows...

Sam Parr

I think

Shaan Puri

There, this is an all cash offer. Here's your house, free and clear. You get to live here and you cover your life expenses. If you're paying for a latte, that's on you, but I'll buy you this brownstone. I think that's gotta be what it is.

Sam Parr

I think that's what it is. Or the second thing is, you gotta earn a lot. The third thing is, I wonder how many of them do you think sell a business? I think earning a lot, like a big nut of $10 million to $20 million, seems impossible to do without selling an asset.

Shaan Puri

You gotta be in finance, law, maybe medicine, or consulting to be pulling in a $1,000,000 a year in income. I don't think there are many other jobs that do that. We're not talking about athletes or entertainers because that's just a small portion of the population. But if we're discussing jobs that a normal person can get that will make you $1,000,000 to $2,000,000 a year, I'm pretty sure you gotta be either a banker or a consultant if you're employed. Alternatively, you gotta be self-employed as a doctor or a lawyer or something like that to be able to pull that in. So, that's like... am I missing one? That's like...

Sam Parr

those are

Shaan Puri

non better

Sam Parr

Those are, yeah, those are non-entrepreneurial jobs. The other way is you just start a small business.

Shaan Puri

Yeah, exactly. You own a small business, you own a big business, you know, you own a contracting firm, you do construction around the city, whatever it is. Those are the other ways where you can do this. And usually, you're not earning a steady $1,500,000 per year. You're earning like nothing, nothing, nothing, a lot, a lot, a lot, huge, and then back to nothing. You know, like that sort of thing. It's this lumpy curve that an entrepreneur has where you're basically broke until you're very unbroke. So, yeah, but okay, what else you got to say about this?

Sam Parr

And my third and final takeaway here is that there is so much out there. There is so much money and so much opportunity. You walk by all these places, and again, Ben's laughing at me—this is obvious—but when you see it in real life, I walk down the street and I'm like, "Oh, that apartment that costs $12,000 a month to rent on the top floor of that brownstone." There are three of those in there, so like, there are three people each paying $12,000, and they're just like, "Home, home, home, home, home." It's astronomical! There is just so much money out there to be made. It's just so much opportunity. So anyway, I went on this three-hour walk yesterday, and I just felt enlightened. I wanted to come to the table and fill you in on that.