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Rent where you can buy?

November 24th, 2021 at 05:12 am

It's pretty obvious that it's usually cheaper to rent to buy. Also with the way things have been going it's become very apparent that rents haven't gone up at the same rate as homes.  It's also true that renting typically has always been cheaper than buying.  So if you wanted to say live closer you could usually rent a place cheaper than it would cost you to buy.  This is probably even more true if you have been renting say for 10 years.  The amount paid might definitely be lower than owning in this market.

So my friend who rents in our neighborhood has rented here for about 15 years.  She's gotten a great deal on a rental since she's lived there so long.  But now owning in our neighborhood and surrounding areas have gotten beyond their reach.  Because they've waited so long it's gone up way faster than rent.  And their income hasn't gone up by the same percentage. If you had to ask I would say that prices have 3x but their rental hasn't gone up by that much nor has their income.

So the question should they keep staying here?  She said that she's starting to realize how they don't fit into the neighborhood anymore.  The lifestyle that most people affording living here is substantially more than average.  I agree it's not normal, it's not like most of the US. It's a very priviledged, affluent area.  It's not how most people live. 

What brought this on?  The fact I mentioned that a bunch of our friends are on vacation for the week of Thanksgiving. They've pulled their kids out of the week and they are vacationing somewhere.  Some are going somewhere warm, others are visiting family.   She said most average people need the income of working the full week and I agree that's normal life. 

But at the same time it's part of affording the area.  That if you can afford to buy $1m home you probably have the type of job that affords you the privilege of taking a week off and vacation.  I didn't know what to say because we visit hawaii 2-3x/year.  But our trips to hawaii are cheaper than most since I know when to buy my tickets. I know how to work the system.  We also don't pay usually for hotels/rental cars and eating out isn't as pricey as someone going for  the equivalent amount of time. 

Our expense is paying for airfare but like this Christmas the kiddos and I are using miles and DH is traveling for $549 roundtrip at christmas which is an outrageous deal.  So total for family of 4?  $549.  Not what people usually pay for hawaii at Christmas for a family of four.   This summer?  I think we did miles again and DH came for $400 roundtrip which is again a great deal because of covid.   Hotel?  I think we paid $1000 for a couple days on another island and I did spend a lot on eating out the month with my parents so $1500.  But a month in hawaii for $3000 for a family of 4?  Again not possible for most people.  But would I come to hawaii if I weren't seeing my family?  No I would not. So it's not exactly a fair comparison.  I also watch airfares constantly and have updates can tell you when the price hits $149 or $199 one day per person. Sometimes I buy and sometimes I use miles.

But that being said, typically DH and I can afford our neighborhood.  Yes we live somewhat modestly but for the most part we probably make now what most people make in our neighborhood.  Before we were making a lot more than most of the people we live near.  Now we are average.  So I feel normal.  

But I get what my friend is saying.  They are barely affording their rental and no way can they afford to buy.  But their kids are in 6th and 1st grade and they are becoming more established.  But it's also becoming evident that they can't "keep up with the Joneses" which you don't want to do but it's hard to not notice.  To realize that you don't go to Mexico, Hawaii, Europe or Caribbean for vacation.  That every holiday you don't travel for a week and think nothing of it.  That you can't and don't drive high end cars.  That thrift shopping isn't the norm.  

So how do you deal with it?  I didn't know what to say.  I wouldn't live somewhere I couldn't afford. I would look at moving to be honest where I think I fit in and we are the average income if not higher than average.  Where we could own our house and still afford everything like everyone else.  Meaning the 1 week vacation we take a year is similar to others.  That the car we drive is similar.  

I know that we don't seem like our neighbors (the minivan and legacy) stick out like a sore thumb.  But it's by choice not because we couldn't if we didn't want to.  So I think that makes a huge difference.  Affording a nicer lifestyle but choosing not too I don't feel the comparison or jealousy.  But I think when you know there is a difference it's harder to overcome. To know that you are comparing your lifestyle with their. I can't help but think that it would be easier to live somewhere that you can afford everything everyone else can.  

So should someone rent where they can afford to buy?  Or is it okay to rent where you know you can never buy?

Should you overbid on a house?

October 14th, 2021 at 05:29 pm

That's an interesting question.  Should you overbid on a house?  Probably not.  Does it matter if you do? I think it depends on your reason behind it.   First off sometimes people list homes lower than they know it's worth to get a bidding war.  So prices are not normally that low.  Second the price of homes also change especially in the spring when you see the prices escalating which will carry through the rest of the year.

The house we bought we went 30% above list price to win.  We paid $2500 more with an escalation clause than the next highest bidder.  So in theory we "overpaid" but only by $2500 because there was someone else interested in buying the house for $2500 less than we paid.  

Why did we do it?  We had a reasonable budget for buying a home.  But the market in 2017 was very hot and we had lost out on a few homes that we had been lukewarm about.  Finally when we saw this home we decided we were all in.  Mostly because the location was prime and exactly what we wanted.  It was the smallest house we had seen and needed the most work.  But the location was ideal and prime compared to the other homes we had bid on so we wanted it. 

Because of our budget and our observation from looking for houses for almost a year, we noticed that most homes were going in bidding wars.  Most people were going 20-30% or more over list price.  So we decided the smartest thing to do was not go to our limit but step down our "needs" in a home and bid on lower homes we were more likely to win.  This was probably the biggest factor in getting a home.  Managing our Needs versus Wants.  I find a lot of people have somewhat unrealistic expectations for what they can afford.  The dream house is only affordable the further out they move often times.  Rather than living smaller they move farther.

We did the opposite.  We scaled back our expectation of home size and quality and bought something much smaller and needing work as opposed to moving further.  I'm not sure it was the right decision for everyone but it was for us.  A lot of that stemmed from we had never lived bigger so we just didn't jump into a huge home.  

Even now the 2040 sq ft home feels tight and small.  But it's the biggest place we've ever had with kids or ever and we have an attached garage to boot.  So while it's not a dream home it's pretty lovely and nicer than what we had or grew up with.  I had a carport and DH had detached garages.  Our homes growing up were 1970s tract home 1200 sq ft 3bd/2ba ranch homes pretty identical.  This is substantially nicer than what we both had.  

The cost of buying even overbidding was a wash.  In 2017 the going rent on our place was around $3500-4000/month that's what the neighbors got for their rental.  It's now closer to $4500/month.  Our PITI with a fixed rate is $4800/month but that's likely to go up with property taxes going up.  Currently we are at $4100/month but it's an ARM mortgage and lower PT.  Why was it a wash?  Well our principal in 2017 was $1587 and interest/property taxes escrow was $2998.  So it came out to about the same as renting our place if not a little cheaper.  So overbidding on our place was still the better deal than renting. 

The calculus now?  $1400/month interest plus $1000 Property Taxes = $2400/month to rent our place.  Our principal payment is $1717/month enforced savings.  Also our location is the most resistant to price decreases because of proximity to things and we bought the smallest home in the nicer neighborhood.  All these things were factored into our decision.

I had no idea we would be "renting" our house for what we used to pay in rent $2400/month in 2015-2017.  I guess my point is that housing is a hedge against inflation. It's a great way to fix your costs if you can see yourself staying put. It's if you overbuy or aren't sure if you are staying that it becomes a huge risk.

is this a bubble?

March 25th, 2016 at 12:07 am

A house near to us went on the market for $868k for 4 bd/2.5 ba, 3028 sq ft with a 4400 sq ft lot. It went on 3/23/16. The craziness? It was bought last year 2/20/15, yes 13 months ago for $789.9k and no work has been done.

The house was built in 2012 and sold 6/1/12 for $669.9k. Then sold less than 3 years later for $100k more, but now in 13 months the sellers are asking $78k more than they paid or 10% appreciation. How much longer will this type of appreciation last?

The sellers are moving back to where they are from. They bought because of course you make money and renting is a waste. So if we had bought last summer before DH quit, with our cash and credit would we have made 10% in 6 months? I think maybe.

I'm sitting here pondering because we planned on looking this summer. But I'm really nervous this is going to turn ugly. That we'll again buy at the peak of the market in a market we don't fully understand.

Thoughts?

Real Estate questions

March 12th, 2016 at 03:55 pm

Okay everyone talks about how to pick real estate and we touched on bad house in good neighborhood versus great house in bad. But what factors are involved? What's important in buying a house?

1. Condo versus house? Let's assume you can't afford a house in your chosen neighborhood but you can buy a condo. Which is it? Condo let's say is closer to work but house is farther way? How important is a commute?

2. If you did buy a condo what if you can't afford a 2 bd but only 1 bd?

3. If you could buy a house in your chosen neighborhood what if it were only 2 bedrooms instead of 3 bedrooms?

4. What if the house only has 1 bathroom? It also depends if there is a logical area to add a second bathroom. Or is a second bathroom unnecessary?

5. Do you buy a house in the "right" neighborhood but on a busy road? What if it's not in a neighborhood but a commuting traveled road?

6. Do you buy a home with a bad layout and not easily fixable due to constrained lot size?

7. Is it ever worth to buy a home fixed up or better to always buy a fixer?

8. Is it worth looking for a bigger lot with an older house or newer house on a smaller lot?

9. What about buying next to places likes a little strip mall or gas station? It's nice to have things but at the same time is it less desirable to be next to things?

I heard a quote from my old realtor. The time to buy a house and move up in size/price/location is during a recession. Yes you'll sell your house at a loss but you get a better deal. But the time to sell your house is during a boom. Then all the "negative" faults of your house, too small, one bathroom, busy road is more likely to be overlooked by the buyer and bought without question.

What do you think?

Are we in a recession?

January 11th, 2016 at 06:20 pm

Are we in a recession and don't know it? A few of my friends have had close calls with their jobs. They've had layoffs and survived. One friend went back in the middle of maternity leave because her boss called her and told her layoffs were coming please come back so he could save her. She did and she was saved.

I feel like more than a few of my friends in different industries and different jobs have mentioned feeling insecure and looking or switching jobs. It's weird because gas prices are down but food prices are up. The housing market is supposedly still really "hot" but it's hard to tell with the seasonal market and if it hit a peak.

How is the economy where you are? How is the housing market?

new neighborhood

September 11th, 2015 at 04:30 pm

The neighborhood we live in is great. People seem less rushed and less stressed. The houses are very middle class and if I had to guess most people are solidly middle class.

But what struck me is a lot of the phrases I'm hearing. Before we lived in a very upper income, affluent area for the country. Average house price was $1M, condos were around $500k+, so you can imagine that the average salary I think was $100k. Where we lived that was scraping by.

Now the area we've moved to the houses are running around $400-500k and it's considered one of the more affluent areas of the city we live in. Honestly expensive compared to many other suburbs. Most people here are 1 or 2 working professionals like where we lived, and I'd guess the average income is also $80-100k.

But I've heard from a lot of people that they are on a tight budget, living paycheck to paycheck, and stretching it. I don't get it.

I know where we moved from people made a lot of money, but I also know there were MANY two income professional couples trying to keep up with the Joneses. But here people don't seem to be driving Audi, Lexus, BMW, Benz. They aren't sending their kids to tons of activities that cost exorbitant amounts or hiring nannies to pick up the kids and chauffer them.

But they are talking about leasing a new Rav4, not affording activities for kids, and being paycheck to paycheck. I am surprised. I thought that they are living so much more modestly they would be saving more. But it seems that no matter what the house price, income, or area, many people aren't saving and struggling.

I thought it was mostly those who tried to keep up with the Joneses at the highest levels of income that were in trouble. Now I think that at all income levels people are trying to keep up with the "joneses" of their level.

FWIW we fit in better in the neighborhood carwise and stuff. We don't seem so frugal. But I wonder if knowing we can afford more might not encourage us to spend more?

Home Sale and Debt Free

July 9th, 2015 at 04:19 am

Our home sold on Tuesday July 7th. We officially are debt free and don't own a home. In many ways it's very freeing. Since we've been on the road I'm not sure what fees and will look over when we have a chance. But overall life is GREAT.

I can't explain the relief and lack of anxiety I now feel having finished the sale of our home. Sounds nuts but this home sale was giving me a lot of grief and ulcers.

Besides the fact that the packing moving was very slow and a lot harder than I thought. We had 80% done a week in advance of moving. But that last 20% was so difficult. We got to the point of no return honestly. We just started throwing things in boxes and loading the trailer. We ended up with 15' linear feet, a foot less than estimated.

We did hire movers for 3 hours at $60/hr and it really helped move things along. According to the tracker our trailer is in PA waiting to go to Dayton, OH. Sounds crazy fast.

Plan is still to arrive and find a place and have our trailer stored and then delivered end of August.

FWIW, it's a little weird not being a home owner for the first time in 13 years. It's also weird knowing we owe nobody NOTHING. That we have no big debt hanging over our heads. We also have a nice big cash number in our bank accounts so life is a little more rosie. Now onto our road trip.

ABF U Pack and Moving Costs

July 1st, 2015 at 03:07 am

So an interesting thing about ABF U Pack since we are using them, they sell you that things are by the linear foot but in truth it's by 2 linear feet. The measurements for putting up the bulkhead is only 2 linear ft per set up so it's actually $300 per 2 linear ft and it's really easier to take stuff rather than worry about it.

Our costs to move are at $6k. We spent $1962 on an interior painter. We paid $1600 for the exterior painting of our house just the front and 40%. Only $1730 for our foundation repair work!!!! WooHoo!!!! Came in below total cost of the low of $5k. Came in total with engineering at $4326! Amazing. And $714 on 2 hours of moving labor help, buying moving supplies, renting steam cleaner, and storage.

Not bad so far. I think we'll be at close to our estimate 16 linear ft which should put up with a month storage at $4300 for the move. This is not including the gas for driving 2 cars cross country or hotels.

Of course for us it's a vacation but for DH it'll be non-stop hard labor. But since his time at that point is worth nothing and we're saving on shipping the dog. Instead he plans on driving to his parents in Canada and then driving back to the States it doesn't seem like much of a hassle.

This is it!!!!! I've also sold $1890 of our stuff. So I would say that we are paying to move around 1/3 of our stuff and less of it.

T-5 or T-6

July 1st, 2015 at 02:59 am

The insanity. I still haven't figured out if we are leaving on July 5th or 6th. Uggh. I still haven't booked our hotels. I am still hopelessly not packed yet. What have I been doing? Everything else.

Tomorrow I finalize the documents for the repair of our foundation. More about the cost in another post. This will mean that we are officially set on our side to close on the sale of the house by July 7th.

Our trailer has been delivered. I'd say around 85% of our house has been packed. Tonight I threw in the towel for food and are moving to eating take out, leftovers, and other people's food. No more cooking. We cooked Salmon Burgers for our last meal.

I was happy to turn over a bag of fish (2 salmon and 4 pieces of Mahi) to a friend, 6 smoked sausages, 1 bag Kahlua Pork, and that's about it from the freezer. I also gave away our spices, unopened condiments. All we really have left is our snacks and 4 boxes of pasta, and instant oatmeal.

It took me two hours from 7:30 this morning to get the dog's international travel certificate. We are good to go until July 9th. We have 10 days to travel within.

The dog food has been delivered to my in laws and we don't have a booked flight yet. I find myself stressing and tonight I have to backwards outline our trip since we've decided to stop in Toronto and ship him out.

I've organized all our passports, kids medical and school records, my medical records, and I have to pay bills tonight. This is insane. I've managed to pack the kids clothes for the road trip and August. But DH and I are not done. And DH hasn't packed his work clothes yet.

I feel like a hamster on a wheel that can't stop running. Any more tips or ideas? We've set aside all road trip stuff we can think of. Please let us get on our way already.

Counting down the days

June 25th, 2015 at 11:01 am

We are now probably driving out of dodge on July 5th. We'll drive straight through to Niagara Falls, ON and drop the dog July 6th in Toronto. Well the plan is DH will then turn back and we'll do Niagara Falls. I've got him booked for his international health certificate this Tuesday. I had to go to an special vet whose FDA certified. I am paying $80 which is a huge deal since I got a coupon for a free 1st time patient exam and the paperwork is just $80. I have to call airlines and figure out what is the best price for the dog cargo. I also ordered dog food to the tune of $105 from Amazon.ca and it's shipping to my MIL.

Next up is contacting all the utility people, getting medications and records. Also finishing up selling stuff, right now according to my craigslist spreadsheet we've sold $1835 worth of stuff. Almost enough to cover half our expenses in selling our place. I had no idea I had so much stuff to sell. Granted about $1k was big ticket items, but still $800 in "junk" I am impressed. Although we have a few more items to sell.

Booked our movers only 2 movers for 2 hours on July 3rd for $120. I wonder if it's enough. I booked them only to load the big items thinking they can do boxes if they have time but we can manage the boxes ourselves. Plus looking at everything we are pretty well packed. From the tips to be completely packed up and the truck loaded in 2-3 hours I honestly don't think that's an unreasonable time frame with everything in boxes. Right now we are solidly at 80% I'd say and in the next week before the movers I'd say 95%. Most of the stuff unpacked are our beds, TV, Dinner Table, Couch, and some clothes. The furniture we have mattress pads and holders to put the mattresses into. The clothes I need to segregate into road trip and staying in dresser and DH packs his work clothes.

I have a complaint about realtors. Our realtor hired a guy to install Carbon Monoxide detectors because we needed them for our city inspection. It's a crazy inspection for $50 by the city. But their real estate agency hires this guy so they pass in 3 minutes. Sounded fine. But they of course didn't tell me the cost, $450! Had I known I might have had my DH order and install these things himself. Uggh what a rip off.

And we are still trying to finish our frozen food. Sadly I don't think we're as much on track as CreditCardFree, whom I tried to emulate. But on Sunday we are having people over for an eat the freezer party.

Countdown continues

June 24th, 2015 at 01:36 am

Things are insane and crazy busy. We had our DK preschool "graduation"/moving up ceremony. Very cute and quite sad. It's been 3 years at the preschool and they are awesome, wonderful, truly great teachers. I can't say enough about how appreciative we both are to them. They were flexible, accommodating, talented, incredibly patient people. We've actually known most for 5 years.

I think we are 11 days out from leaving, potentially 12 or 13. We close on the sale of our home July 7th or 14 days. We currently are on track to finish our foundation crack issues. The work is done and we are waiting on affidavit from the structural engineer and the building inspector to come out and stamp us as solid. Then siding back on the house and the project should be completed, signed, sealed, and delivered. We are set to close. If we had stuck to our original close date of June 29th I think it would have been tight.

As it stands I believe that we are probably going to close on July 7th. We could do July 1st or 2nd, but this gives us a little bit of a buffer for paperwork.

We are going with ABF U pack and the trailer will be delivered on July 1st. It is scheduled to be picked up July 6th. We have two movers coming to help us move our boxes July 3rd 9-11 am. My DH thought we could do it ourselves but honestly for $120 it's well worth it. We will have enough to do without having to strain our backs doing the big furniture.

I'd say we are at 80% done packing. We still have a quite a bit left but part of the problem is that we have to sort stuff into two road trip piles and still have food left to eat and kids toys out.

Our biggest issue is the dog. Do we ship him before we leave or take him and ship him out of Toronto? There are so many headaches not to mention scheduling his health certificate without 10 days of travel.

We are struggling with the space issue. We are unsure about how much we can carry on our road trip. We just ordered a bigger camping tent. We've had ours for over 15 years and it was a 4 person backpacking tent by coleman. Very tight with kids and dog. We've upgraded to 8 person but it'll only be for car camping. We are planning on camping at potentially St Ignace, MI, picture rock national lakefront, badlands national park (booked site), mt rushmore, yellowstone, and glacier.

It's so stressful since as of right now we haven't booked hotels other than our end destination since we aren't sure how it'll go.

I'm debating resurrecting my site on blogspot so that I may put up pictures easier.