Should A VFX Artist Buy A Home?

VFX Cribs

A common question that vfx artists ponder is whether or not they should purchase a home. My answer is absolutely. If and only if you have the cash to purchase it.

However, the more correct question to ask is should you own the debt in the form of a mortgage to buy a home. My answer is absolutely not. There are many compelling reasons not to own a mortgage even though interest rates are at historical lows:

  • Home values are dropping, and will continue to be flat for probably the next decade.
  • Renting an equivalent house is significantly cheaper even with tax breaks for mortgages.
  • Real estate has generally always been a bad investment.
  • As interest rates go up, principal home prices may be forced to go down.

Also, from a vfx perspective, what is the feasibility of owning a mortgage when you work project to project and your next job could be thousands of miles away?

Along the same lines, if you own a mortgage, you give up negotiating leverage in the sense that you may be tied down to a particular job location even though a better opportunity may exist in a 2 hour commute away.

I decided to take a look at what some senior vfx artists paid for their mortgages and what they ended up having to do in various situations:

  • 2100 sqft house purchased for $800k. Sold for 1.2 million.

This senior artist sold at the peak of the market and made out like a bandit. Those were the glory days of real estate.

  • 1600 sqft house purchased for $750k. Now worth $620k.

With such a huge mortgage payment, this senior artist cannot afford to have much of a gap in between jobs and will be in a precarious situation if they get laid off. This provides a leverage opportunity for the employer to offer no raise in salary. Cutthroat? Yes, but if employers have the leverage, they’ll do it.

  • 1900 sqft house purchased for $850k. Now worth $650k.

This senior artist was not as lucky. With a mortgage deep underwater, the artist unfortunately lost their job and had to move overseas. They chose to do what many would do: Rent the house out for a much lower price than the mortgage payment, and use that money to make up for the cost of living overseas. This may open up a can of worms if you can’t find a good tenant or the cost of living ends up being much higher overseas.

  • 1100 sqft house purchased for $675k. Foreclosed and sold for $550k.

This senior artist also lost their job and tried to sell. After being unable to sell and moving overseas, they decided to default on the loan. While their credit may be ruined, it probably was the correct thing to do given that the artist was going to leave the country.

So what do I advise a vfx artist do?

Save your money and keep saving until you can buy a home to live in with straight cash. You’ll probably be saving until you are 45-55 but in the mean time you can just rent and avoid precarious mortgage situations like the ones above.

Once you do buy your home, you could potentially leave the volatile vfx industry and adjust to a lower salary that offsets for the fact that you won’t have to pay for rent or a mortgage. The advantage of buying a home with a mortgage is you get to have the home now, but you end up paying twice as much for it over 30 years with interest. With a volatile job market, it’s easier to end a lease than to end a mortgage.

15 Responses to Should A VFX Artist Buy A Home?

  1. John C says:

    Nice reverse allegory to the Three Little Pigs. But I’d disagree with you on one point: Real estate is generally a bad >short term< investment. As a long term investment, it's probably better than most, since they're not making any more land, and as long as your location doesn't suck or you're close to retirement age, owning a home is pretty solid, unless you bought at the peak. I don't care who you are, if you're below the line in this industry, you have no business buying an 800k house, period. Your best bet is to find someplace cheap where you like to vacation, buy a place there, and go there when you're between gigs. It's like a retirement nest-egg you can actually live in when you get kicked to the curb by the robots and software that will eventually replace you. If you buy 40 beautiful acres in the sticks for 95k and park a trailer on it, you still get the tax break and you can afford a mortgage on 95k working at Starbucks, not to mention the fact you have a place to decompress after your latest gig at Slaveship FX, LLC.

    • vfxsoldier says:

      I think you are referring to a home as a place to live rather than an investment.

      If you are okay with paying for a mortgage for the next 30 years regardless of what happens with price and your job then yes go ahead and buy.

      The problem is we look at homes like an investment account.

  2. 1-Eyed Stereographer says:

    Excellent article.

    Before you pocket enough cash to buy, there are other asset classes aside from real estate you can drop your cash into in the meantime, e.g emerging market stocks.

    Oh, the irony😉

  3. FedUp says:

    “The problem is we look at homes like an investment account.” Who is “we”? I know that I grew up in a house that my parents owned for over 30 yrs. It’s not unreasonable to think that people, even nomadic VFX artists, would want the same for their own children. And with many earning 6 figures, you would think that could be a reality but alas, not in LA/NY/London/etc. and not with the volatility of this job. But your advice is to buy a house in cash. Really? How realistic do you think that is these days, even if someone is able to save money until they’re 45 or 55 (*gasp* – how old… some of us are much closer to 45 than to just starting out thank you very much).

    John C. – love your post. Sadly, $800k is a starter home in the nicer areas of LA. Which is why I left.

    • vfxsoldier says:

      I meant “we” as in most Americans look at homes as an investment. They want to buy a home and at the same time see the value rise. It would be great if we all just looked at homes as just a place to live but that isn’t the case.

      The job and locational volatility of the vfx market begs the question for many of us: How can you settle down when you are always moving around?

      Lets assume a worker that is 30 and making 100k / year. This is a very crude budget but lets say:

      30% goes to all payroll, state, and federal taxes.
      33% goes to all living costs: rent, food, clothes, recreation.
      13% goes to retirement savings
      23% goes into home savings which can double as emergency

      saving 23k a year in 15 years would put you in the ballpark range of 350k.

      350k won’t get you a house in west la, but it can get you a house in other areas of LA, OC, SD or even out of state. One could leave the industry then and adjust your salary down for a less volatile industry.

      Does this suck? Absolutely. However this is my advice for those dealing with the logistics with our industry.

      If anyone has a better idea let me know.

      • 1-Eyed Stereographer says:

        Maybe this is off topic, and I hope it doesn’t sound too rhetorical but I’d like to know how can an artist realistically make any kind of commitments be they (financial or relationship-wise) and have a successful career when to really get the most out of it you gotta bounce around like a pinball with a miniscule amount of possessions in tow?

  4. creative1 says:

    Investment advice can not be made based on your job. It should be based on accrued data, such as how long you have lived/worked in an area, your average annual income, how long you plan to continue to live/work in an area, and what your long term goals are. One should also consider how much cash they have for a down payment vs. their income to support a mortgage vs. their additional savings to cover payments in the event their monthly income dissolves.

    Once all of these factors are considered, an intelligent decision can be made, regardless of profession.

    A better question to ask one-self would be, how much house can I afford?

    Ownership is the key to long term financial freedom, but it should be done in haste, nor should it be done for short-term gains.

    Your point-of-view on this, while interesting, is not based on factual data or calculations that compare renting vs. owning over a length of time.

    In short, renting makes sense when you live paycheck-to-paycheck, are unsure of your future location, family size, and/or you are living temporarily in an area for work.

    If you have spent 5+ years in a field, and can therefore calculate an “average” annual income for yourself AND you have SAVED money AND you are happy with your location AND can see yourself staying there THEN you should ABSOLUTELY BUY.

    Here’s an example of a qualified buyer AND a qualified purchase:

    Sr. Artist averages $85,000/yr ($7000/month), some years that artist has made as little as $50,000, while other years $120,000, but over the course of this artist’s career, they average about 85K annually, and fully expect to maintain that going forward.

    This Sr. Artist has saved around 5% of their annual salary over the course of 6 years, for a savings of about $25,000. Additionally, this Sr. Artist has NO 401K/IRAs or any other form of retirement.

    The minimum down payment for a house is around 10%, but may be as low as 3% for qualified first-time buyers. Let’s say our first-time buyer, Sr. Artist, finds a mortgage that allows 5% down.

    Now, how much house can Sr. Artist afford?

    85K annual salary
    rule of thumb is no more than 30% monthly gross for mortgage, so let’s say 30% of $7000, somewhere around $2100/month.

    What house has a $2100/month payment on a 30-yr fixed mortgage @ 5%APR? A house that costs roughly $400,000.
    We have a down-payment of 5%, or 20K, leaving us with a 380K mortgage.

    Sr. Artist needs to be averaging $160,000 annually to afford an 800K house, with a savings of at least $80K for a down payment and another $40K for payments. This is highly unlikely.

    When people buy things they can’t afford, ie: sr. artist averaging 85K buys that 800K house on credit, they get what the deserve in my opinion, when they finally lose it. They are risky investors, if anything.

    There is no question of IF you should buy, it’s a matter of WHEN and HOW MUCH can you really AFFORD.

  5. rent says:

    any why not when they you can afford?

  6. […] vfx artists signed mortgages and came into work the day it was announced ImageMovers was closing. I point out that buying a home is a bad idea for VFX artists even if it’s affordable because the industry is so unstable and we move […]

  7. Captain VFX says:

    Renting is NEVER a good idea! You are always paying into someone else’s mortgage and they end up being better off. I am currently renting right now, but I am looking to buy, and when I do I won’t stretch to the crazy figures you outlined in your post. If something goes wrong with my job, I’ll find another one – if its not in the same industry, so be it, life comes first. A good motto to have!

    Two tips to folks:

    1. Broaden your skill set! Don’t be confined to one industry, or you will loose out! I did Graphic and web design before vfx, and I keep it up on a regular basis.

    2. Get a mortgage insurance which covers the mortgage for x months should you loose your job and have a period of downtime. Critical!

    • DrFX says:

      Renting is “never” a good idea? Let’s say you knew a massive property crash was coming. Would it be better to rent for a year and then buy, or would you be better paying $250,000 more now to “save” $20,000 on rent?

      Foolishly believing the “renting is throwing your money away” thing, I bought a house in London in 2007, even though I knew London was bubblicious. Had I continued renting, I would not now be stuck being a landlord to a house in another country worth less than I paid for it.

  8. […] also questioned the feasibility of owning a home if you are a VFX artist who is always changing jobs and moving […]

  9. […] VFX artists in general, the prospects of owning a home or even having a family are issues I’ve posted about and Vancouver is no different. In fact, […]

  10. […] even if real estate is affordable, I’ve written that VFX artists shouldn’t buy a home because the nature of the industry is project based. Even if you had gainful employment in Los […]

  11. […] costs of moving are tremendous. You will have to pay foreign taxes, state taxes, and federal taxes. If you own a home you will have to rent in your new region and take upon the burden of paying a mort…. Some regions are so expensive that VFX workers are renting rooms from local families to avoid the […]

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