Your $1.5 Million Dollar Starter Home: Living Small Making Big Bucks

Expensive Small House

$1.5 million for 1,260 sqft

All real estate is local. Despite San Francisco clearly being the most beautiful city in America (you know it’s true), there’s a steep price to pay to live longer, healthier, and happier lives: expensive homes!

The cheapest single family house on the market in San Francisco’s north-end has three bedrooms, two bathrooms, and 1,266 square feet of living space for $1.5 million. The location is good, but $1.5 million is pricey! The kitchen and bathroom upstairs is outdated, and there is not even a small yard to play around in. Maybe the house will sell for $1.4 million, but even still, that’s a large sum of money to pay for a small house without views.

There are two bedrooms upstairs where a couple and child can sleep. Downstairs is the third bedroom behind the garage. The problem is that you’ve got to walk through the garage to get to the third bedroom. Hey, at least there is a garage right?

I really hope the owners get $1.5 million or more for the house. If so, there is no doubt in my mind that real estate is back with a vengeance here in San Francisco. The funny thing is, my Manhattan friends are salivating that $1.5 million can get a stand alone house with a garage!  Surely they’d have to pay over $2 million back home.


Balcony overlooking Bay

$3.5 million house with Bay View

The second cheapest house next to the Bay is a trust sale for $3.5 million. That’s right, the next cheapest house on the market is $2 million more! I actually think this house is worth it with 4,000 square feet, four bedrooms, three bathrooms, and views of the Bay. It just needs about $500,000 in work to make it sweet. If I was a tech executive worth $15-20 million, I’d buy this house hands down.

The upstairs has a huge living room and balcony overlooking the Bay. There’s even an elevator in the back to help carry older folks with bad knees up from street level.  The house is on a busy street, but that’s OK since the street quiets down at night, when you’re at home and sleeping anyway.

The rest of the 10 or so houses on the market in this area range from $3.6 million all the way up to $36 million. There clearly is not enough inventory for the “average” $400,000-$500,000 a year couple looking to buy a reasonable $1.5-$2.5 million dollar home.

$18 Million Mansion Give Or Take

$18 million mansion give or take a few million


For all you entrepreneurs out there who were able to cash out like Mark Pincus at Zynga at $12/share, here’s a nice $15 million mega mansion for you!  The house is incredible, with views of the Bay sitting high atop Pacific Heights.

In fact, I didn’t realize until recently that I met the owners last year at Marissa Mayer’s party. They sold their company Bebo (yep, never heard of it either) to AOL for some $850 million bucks in cash and they were the majority owners! In 2010, AOL sold Bebo for only around $10 million, a nice 99% loss.

To get rich, remember to always identify the donkey in the room with the biggest empire building aspirations! The funny thing about this house is that even after spending $15 million or so dollars, you’ve still got a neighbor just a couple feet away from you!


The first house for $1.5 million was purchased 7 years ago for $1.21 million. At 1,266 square feet, it’s not exactly spacious for a family of three. However, for so many other people living around the world, 1,266 square feet is plenty! These homeowners will have to pay $75,000 in commissions + another $10,00 in real estate transfer taxes and other fees just to move. That’s just crazy.

The second house for $3.5 million is a trust sale. The owners passed away, and the trust is liquidating this asset which will probably get distributed amongst the heirs. The home has been in the family for decades and has likely risen in value by over 10X, providing a huge windfall for the trustees.

As for the final home, does it really matter? They can do whatever they want with their money and they’ll still have more than enough. The owners are great contributors of Charity Water and are very nice people.

Regular homeowners feel the heat of the rental market and know it’s just a matter of time before property prices head much higher. Given there is a lack of inventory, homeowners don’t want to sell because they can’t buy anything either. There becomes a vicious loop that lasts until a raging bull market returns.

Furthermore, almost everybody I know has refinanced their mortgages lower, making home ownership the cheapest ever for existing owners. I’m personally paying 60% less in mortgage interest from seven years ago for example (5.75% down to 2.625% rate). Imagine the cash flow increase of paying 60% less in interest while seeing a 50% rise in rents in the past 8 years.

Sellers today will punch themselves in the face 10 years from now when they see their old homes go for much higher. The only sellers I see are forced sellers. Don’t be one of them. To easily find values of properties you want to buy, or look for properties in specific locations, check out I check the site 3X a week to see how my properties are being valued by the market and comparables sales.

Recommendations To Save Money And Protect Your Home

* Manage Your Finances In One Place: The best way to become financially independent is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 25+ difference accounts (brokerage, multiple banks, 401K, etc) to manage my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing and how my net worth is progressing. I’ve got multiple properties which I keep updated with my Personal Capital account.

* Check Your Credit Score: Take a moment to check your free TransUnion credit score through, a company I trust. 30% of credit reports have errors, which could put a serious hamper on your refinancing or new loan borrowing abilities. I had a $8 late payment I didn’t even know I owed crush my score by 100 points come up during my last refinance! The average credit score for rejected mortgage borrowers has risen to 729 due to more stringent lending requirements. Landlords will often ask for a renter’s credit score as part of his/her analysis.

* Refinance Your Mortgage. LendingTree Mortgage Refinance offers some of the lowest refinance rates because they have a huge network of lenders to provide mortgage loans, home equity loans, and home equity lines of credit. If you’re looking to buy a new home, consider using LendingTree to get multiple offer comparisons in a matter of minutes. When banks compete, you win.




Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship. Sam focuses on helping readers build more income in real estate, investing, entrepreneurship, and alternative investments in order to achieve financial independence sooner, rather than later.

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  1. says

    Over $1,200 a square foot is over the top. The estate sale is a better deal (less than $900 per square foot). It seems San Francisco is overheating a little. Pricing is coming back somewhat in Los Angeles , but expensive homes are starting to slow down. There are only so many people who can afford those homes and most pay cash.

  2. lurker says

    I live in NYC so I had to laugh at this one. You nailed the nuttiness perfectly. You can buy a nice sized ranch in Texas for the price of a studio apt…

  3. says

    For 1.5 million I’m pretty sure I could get a penthouse condo at one of the many condos on the beach here in Panama City Beach. I could also buy a house directly on the beach I’m pretty sure. Honestly I don’t care though because I’ll never buy a house in that price range. I paid less than $80k for my 2 bed 1.5 bath townhome 3 blocks from the beach :)

  4. says

    In my neighborhood, $1.5m will net a palace. There are some huge mansions to be had here but would I want to spend $1.5m on one? In a word, NO. $3.5m ….. I don’t think I’ve seen a house sell for that much here. It would be a rarity indeed. The Mojave is like that.

  5. says

    The most expensive home currently listed in my city is $1.3 million. It’s 5 bed, 5 bath, with 9,000 sq feet of space. Pole barn, two garages (with a/c and air). You get a beautiful lake in the backyard with 25 total acres so you never even have to talk to the neighbors.

    Next up is just under $1 million. It’s a 6 bedroom house with 8 bathrooms, 9,000 sqft on a 3.75 acre lot.

    Personally, I’d knock off a little bit of the land for a lower price. Another 4 bedroom, 6 bathroom home with 8,500+ sq ft of living space is listed for $675,000. You still get 2.85 acres, which is common in the high-end suburban developments around here.

    You’d love it here. Once you get over $300,000, you start seeing tennis courts in every backyard. ;)

  6. says

    You could buy a ranch with megamansion included for $1.5 mill here. If I was spending that much here, I’d buy 15 rental houses. SF is a beautiful city, but with my doctorate degree, I’d never be able to afford a house there. I guess we’ll just come for vacations. For some reason, I can drive over a mountain pass in a blizzard, but the thought of earthquakes scares me to death.

  7. says

    I could easily pick up a 6,000 sq. ft. house out my way in NJ for a mere $800k-$850k. That would include about 2-3 acres of land and probably a swimming pool, with a well landscaped yard.
    Now, what I should do is get a tiny place there and work in SF, and simply pay all my bills back home. With incomes like that, they’d all be paid off completely (including mortgage) in 2-3 years. :-)

  8. says

    Bahaha. I think I was on Bebo up til about late 2007 shortly after starting university…

    In my suburb (15 minutes from the CBD) $1.5m would get a fairly nice 3 bedder standalone or bigger. In the CBD? A whole lot less. I’m not going to depress myself right now by looking up listings.

  9. says

    I wouldn’t have believed those prices were real if I didn’t live in SF. It’s a burn what real estate costs here, but wow are there some absolutely amazing properties. And it’s nice being able to be in the city too. I was in Mountain View yesterday and although it’s nice, chill, and suburban, I was thinking “get me back to SF!”

  10. says

    Lets see. Currently for sale within 20 miles of my house

    1.5 million 4bed/7bath on 60+ acres w/ 2 ponds, 2 barns, a guest apartment w/ 2bed/1bath

    3.45 million 4bed/5bath on 250 acres w/ 2 lakes 3 creeks 1 waterfall

    If you want square footage instead of property

    3.2 million 8bed/3bath on 400 acres w/ 25 acre pond

    Just for fun the most expensive piece of property within 20 miles is this:

    9.5 million “22bed/22bath” 71,820 Sq Ft on 973 acres Fantastic estate with private 18 hole golf course with clubhouse and pavilion on a stocked lake, equestrian stables & arena, 2 clay tennis courts(one is lighted). Main house with 7 bedrooms 6.5 baths and large outdoor pool. Four 2 bedroom/2 bath guest villas and a 3 bedroom 2 bath surround common area with separate pool/spa and dining hall. Additional 4 bedroom/4 bath house on the property. Sleeps up to 50 people comfortably

  11. says

    In my neighborhood, $1.5mil will get you a very nice “family” home, not a mansion, but not a shack with a great view of the valley (with a steeper price tag comes a higher elevation – or lower if you’re near the coast). For $3.5mil that’s definitely closer to a mansion, but without very much land. And, yes, I think those prices are ridiculous but there are plenty of people who are willing to pay them. ;)

  12. Doug says

    In Texas real estate can be really really cheap. Nearby there is a 15000 square foot castle built on seventy acres up for 2.7 million. They used to hold weddings in the main hall. Also has all of the trimmings of a full equestrian ranch.

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