A five million dollar house is big bucks in every single city in America. Once you cross the $5 million mark, it is classified in the luxury territory, even for cities such as San Francisco and New York. Therefore, I thought it would be fun to calculate the minimum income necessary to own a five million dollar house.

When it comes to buying a home, a good rule of thumb is to spend no more than 3X your gross income on the price of a home house. It is part of my 30/30/3 rule for home buying to help people buy responsibly.

In other words, if you want to buy a five million dollar house, then you should earn about $1.67 million a year. In addition, you should have at least a $1,000,000 down payment and ideally another $500,000 buffer in the form of cash or liquid securities. The buffer is just in case you lose your job or something bad happens to your house.

Does needing a $1.67 million income to buy a $5 million home sound like too high a hurdle? After all, once you make over $1 million a year, you have a lot more disposable income. Just know that in the past, people would buy their homes with all cash. So the minimum income to buy a $5 million home also depends on your net worth and cash balance.

I understand very few people can afford to buy a $5 million home. But it’s always fun to dream as home prices get higher and higher over time. Further, it’s always good to plan ahead. For those of you who currently own a $1-$3 million dollar home, $5 million may be the next step if so desired.

Although COVID has been bad for many of us in so many ways, the pandemic did one good thing. The pandemic helped protect American homebuyers from a resurgence in foreign real estate investors.

Before the pandemic hit, 2020 was shaping up to be another solid year. There were growing talks that capital restrictions out of China would ease. Foreigners wanted U.S. assets, and they wanted them bad, partially thanks to a tremendous current account surplus.

Currently, mainland Chinese residents can convert up to US$50,000 per year on foreign currencies for travel, overseas study or work, but not for buying overseas property, securities or life insurance policies.

But before 2018, Chinese foreign buyers were buying United States property in droves. It was easier for citizens to pull resources to buy U.S. property. Then, the Chinese government started cracking down.

Once lockdowns and travel restrictions were in place in the United States and many foreign countries, it became very difficult for foreigners to transact. As a result, COVID gave U.S. buyers the opportunity to buy up our own real estate with less competition.

In a stunning turnaround, Zillow recently announced it would be getting out of the iBuying business and will shut down its Zillow Offers division. Roughly 25% or 2,000 of its staff will be let go as the company takes a $540 million write-off.

“We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility,” said Rich Barton, Zillow’s co-founder and CEO.

In other words, even Zillow can’t trust its Zestimates!

Given how hot the housing market currently is, let’s look ahead to see what bad things might occur to derail the trend. This post looks at the cities most at risk of a housing downturn so you can better invest your real estate capital.

In brief, here are the things that could cause a national housing downturn:

• Interest rates go up too much too quickly
• Oversupply
• Overly loose lending standards
• A virus that negatively affects fertility rates
• Stagflation
• New oppressive real estate taxation laws

If there’s one thing I love, it’s living in a fabulous house. Nowadays, I spend between 18 – 20 hours at home on average. Robbers beware! Therefore, it’s only logical to own the nicest house I can comfortably afford.

For those who went from being outside the house for 12 hours a day to now working from home and not having to commute, the desire to live in a nicer house has likely also gone up. I’m assuming millions of people started to feel this way since the pandemic began.

My wife and I have been living the majority of our hours at home since we left our day jobs years ago. Spending more time at home is why I wanted to buy a house with an ocean view and build a big deck in 2014. Mai Tai’s while feeling the sea breeze during sunset, check!

Given we’ve been homebodies for a while, our incremental desire to own a nicer house since the pandemic began probably wasn’t as strong as most people’s. That said, we still had enough urge to buy our “forever home” soon after initial lockdowns began in 2020.

Curiously, after only one year in our new house, my desire to own an even nicer home has increased! Talk about lifestyle creep and not being satisfied with what I already have.

For those of you looking to buy the nicest house you can afford, let me share a recent epiphany. Once I tell you what it is, it may seem stupidly obvious. But I also bet plenty of homebuyers haven’t thought about this logic yet.

With all the talk about rising rents and the overall strength of the U.S. housing market, I thought it would be good to see how Fundrise’s various real estate funds have performed in this environment. At the end of the day, we can talk all we want, investment performance is what matters most.

Fundrise is a real estate investing platform that began in 2012. It specializes in private residential real estate, but has investments in various types of commercial real estate as well. The company currently manages over $1 billion in assets from over 150,000 investors.

With permission from Fundrise, let me share with you their 3Q 2021 investment letter to shareholders. Given the strength of the returns, I had to double check to verify the performance figures were indeed quarter-over-quarter and not year-over-year.

You will see a consolidated performance chart at the end of the post.

One of my biggest fears for renters has come true. Rents are surging due to rising home prices, increasing household formation, and declining inventory. The main question now is: How long will rent increases last?

We shouldn’t feel bad for those who’ve been against homeownership for years. You can find plenty of them commenting in my posts:

• Real Estate Vs Stocks: Which Is A Better Investment

• Why Real Estate Will Always Be More Desirable Than Stocks.

All those against real estate have rationally saved and invested the difference in the stock market and other classes. And given most asset classes have done phenomenally well over the years, renters who invested have also done very well.

However, for those of you who wanted to buy real estate but couldn’t or want to buy real estate but can’t, this post is written mostly for you. This post should help you better figure out your future living situation.

I’m bullish on single-family homes due to rising rents, rising home prices, and declining vacancies. I would buy more single-family homes, however, I’m tapped out because I just bought my third single-family home in 2020. Further, with two young kids, I’m at my energy limit in terms of being a landlord.

Therefore, let’s look at how to benefit from the single-family real estate boom without being a landlord. The following is a guest post from Financial Samurai partner, Fundrise. Fundrise was founded in 2012 and is one of the leading real estate crowdfunding platforms today.

I worry for renters trying to buy property and our children who have little or no earnings power. The U.S. housing market might get as hot as the Canadian housing market.

If you think the U.S. housing market is bonkers, you haven’t been paying attention to our neighbors up north. Not only is the Canadian housing market more expensive than the U.S. housing market, but average wages in Canada are also lower.

If the world suddenly finds out the U.S. housing market is one of the cheapest in the world, I fear our children will be priced out of the U.S. housing market forever. If enough renters get priced out, there might just be a revolution!

I have a love-hate relationship with being a landlord.

On the one hand, being a landlord has been instrumental to our path to financial freedom. Rental property income accounts for roughly half of our total passive income of ~$310,000.

On the other hand, having to deal with difficult tenants and maintenance issues is a source of stress.

As I’ve gotten older, my desire to be a landlord has waned. Therefore, I started investing more money in REITs like O and OHI, a real estate ETF called VNQ, and real estate crowdfunding. Being able to invest in real estate and earn income 100% passively without having to deal with any issues is my ideal scenario.

Now, national rents are rising and so are the fortunes of landlords. Once again, I find myself conflicted as a mom- and-pop landlord who wants to provide the best source of housing for my tenants.

At the same time, I also want to do the best I can to provide for my family. To do so requires optimizing rental income to keep up with the market given the cost of almost everything is always rising.