Newly minted SpaceX millionaires are preparing for their first big purchases — and luxury real estate is top of mind

One of them is former SpaceX welder Juan Hernandez, who holds 6,500 shares of SPCX, which should net over $1 million if he decides to sell.

Hernandez was offered $10,000 worth of stock when he started working for SpaceX in 2015, he told CBS News.

“I didn’t know anything about it then,” he told CBS News. “I didn’t know it was gonna be this big, at this point.”

But Hernandez is just one of many who have a newfound financial responsibility. And of the others, several have their eyes on luxury homes in California.

Dealing with immediate wealth

Hernandez, and the thousands of SpaceX millionaires joining him, now face a welcome but unfamiliar question: How is the cash best maximized? And how can they resist an ‘instant millionaire’ luxury home splurge that may prove reckless?

“Often when someone experiences a sudden liquidity event, they act quickly on making dramatic purchases,” Senada Adzem, a real estate agent at Douglas Elliman who’s generated $4.5B in total career sales, told Moneywise. “Instead, they need to plan carefully.”

Real estate and financial experts advise that SpaceX employees take time to let the initial adrenaline rush fade to prevent emotionally driven, impulsive financial mistakes — especially if they’re looking for a pricey home upgrade.

Here are a few things worth considering.

Consider a pro

After a sudden windfall, it can help to consult financial advisors and hire a trustworthy real estate agent so you can understand exactly what you can afford, what ongoing expenses would actually cost and any tax implications.

“Also, don’t concentrate too much of your new net worth in a single property instead of considering possible investment opportunities and diversifying your portfolio,” Adzem told Moneywise. “The first year following such an event should be focused on building a long-term strategy and not making impulsive decisions.”

Watch out for a big overpay

A common mistake instant millionaires make when they receive a lump-sum payout is immediately overpaying for a house without considering holding costs.

“You receive a $1 million paycheck and think you can afford a $5,000,000 mansion,” Mike Roberts, co-founder and president of City Creek Mortgage, told Moneywise. “The fact is that when purchasing a mansion, there are still large property tax bills, high homeowner insurance costs and hefty maintenance expenses to keep it looking like a mansion.”

If you receive millions from a stock sale, Roberts advises not spending more than 30% of it on a house.

“If you’re interested in a home, buy it all in cash to save on the interest costs, and invest the rest [into diversified investment vehicles] to supplement your day-to-day expenses,” Roberts noted.

Make insurance a big priority

High-end home buyers in high-cost insurance states like California and Florida, among others, need to manage their home insurance needs thoughtfully and carefully.

“One of the largest errors new liquid buyers make is not paying too much for the home; it’s underinsuring,” Michael Benoit, founder of ContractorBond.org and San Diego-based President of Pacific United Insurance Services, told Moneywise. “Most people superimpose the same insurance assumptions they had when they lived in their former home, and in a place like Malibu, where the property is worth $4 million, that won’t work at all.”

The coverage issue in California doesn’t stop there, Benoit noted.

“Seven of the top 10 admitted carriers in Los Angeles and Ventura counties have ceased new business since 2022, forcing buyers into surplus lines coverage, which can be three to five times the admitted rates,” he said. “I’ve had clients who closed on a home between $3 million and $5 million in value, where they had not yet received a viable insurance quote until two weeks after closing.”

With luxury home insurance, there may be a one-time price, but there may also be ongoing carrying costs.

“Owners of a $10 million home in California can face property taxes and surplus lines insurance and home maintenance for $200,000 or more per year,” Benoit added. “Don’t wait until you make an offer to get an insurance underwriting review. Once you close, they may not be available.”

Answer three key questions

Cynthia Mattiza, a Global Luxury Advisor agent with Sotheby’s in Austin, Texas, advises new millionaires looking for their dream home to emphasize practicality.