How do investors reach financial freedom in expensive cities?

[Johnathan Alesso]

My fiancé and I are moving from one expensive city to another, albeit much sunnier, city in California.  The housing is expensive in both places, rendering house hacking or fix and flipping almost impossible.  I invest entirely out of state, which has been profitable, but want to incorporate our personal residence into our longer term financial plans.  We want to be financially free within a few years, but expensive housing for our personal residence is a limiting factor. 

Is it generally best to buy in an expensive market to benefit from tax deductions and principal pay-off, or to rent and maintain mobility and avoid a large mortgage balance?  We eventually plan to "retire" in a cheaper city where we can house hack.  For now, though, we will be living in an expensive CA market.

I appreciate your thoughts!

[Jo-Ann Lapin]

Such a hard questions to really answer with out truly knowing your personal finances which cannot be shared over this forum. In this market we are in currently you must look long term. 

[Brit Foshee]

@Johnathan Alesso

I think you could make a similar argument about inexpensive cities.  Generally, the more expensive the city, the greater the opportunity. 

My vague answer would be-do whatever it takes. My wife and I lived with my grandmother for 6 months until we found an affordable option.  That's all while owning 9 homes and making a decent living. It's not that we couldn't afford what was out there, we just refused to overpay.

We stayed patient and found the place we wanted at an affordable price.

[Johnathan Alesso]

Brit - I think that's the best course.  We'll rent for now and buy when we find the right deal in the right area.  Do you currently house hack?

[Mike Hicks]

As someone who moved to florida from DC for financial and lifestyle freedom, i can say it is totally personal preference and how you and your wife set up your finances, your income and the cost of living in the area. I was able to make the same amount of income in FL as i did in DC so we were able to rent for a year and find our ideal area to live before committing to purchase a house and it took that long to find a deal as well. Patience and personal preference. 

[Russell Brazil]

Well I live in a really expensive city, the same one you are in as a matter of fact.  I actually believe it is easier to achieve financial freedom in an expensive city. As far as buying these expensive properties....well we usually make a higher salary to compensate for the higher housing costs.  And once you do own it, depending on where in the metro area you own....it is not all that uncommon for some neighborhood in DC to have experienced a price appreciation in 5 or 6 years of a quarter of a million dollars. So Id say a great method to achieving financial freedom is to identify what areas in expensive locals may have appreciation that will outpace the rest of the area.....often that can be found in hot gentrifying neighborhoods.

Also while housing may take a larger percentage of your budget here in DC....the other costs of living will only marginally rise over other areas of the country. For instance housing may be double another market, but food wont be double etc. This thus creates as a dollar amount a larger amount of discretionary spending...which you can in turn save and invest.

Also even though DC is quite expensive....we have plenty of areas in the metro area that are quite affordable.  I dont live in the cheapest area of the metro by any measure, but I have a mortgage that is probably as cheap as many people in the midwest, because I chose to save a higher down payment, and chose to live in a house that was a lot cheaper than I could afford.

[Johnathan Alesso]

Russell - you make excellent points and offer a fresh persective.  It's very true that salaries are far higher in DC than in most less expensive cities.  That alone has allowed for easier financing.  Also, DC appreciation is far greater than less expensive markets.  Excellent points.

I guess I will focus on the long run.  We will plan to resettle in a less expensive city once we achieve "financial freedom" and can live off of cash flow income.  At that point, it seems a less expensive city would be more advantageous.