Downsizing to save on housing costs

[SimpleLife]

I've lived in a small house on a semi busy street with ghetto neighbors, a larger house on a quiet street with a ghetto neighbor or two and now in a McMansion in a ritzy neighborhood where the new houses they are building two houses down are selling for 600K+. No issues in this neighborhood.

While I enjoy living where I do, I did not intend to live here forever, I was eventually going to move back into a paid off house or buy another house paid in full. Well, I'm thinking I might want to speed that process up. If I change my mind, I can always move back.

Right now though, not counting principal and tax benefits, I'm paying about 20K a year for housing. Counting principal and tax benefits though, that number shrinks to about 12K give or take. Not as significant as 20K but still...

In any case. I can further reduce that by getting renting out a room or two (I have three unused bedrooms), essentially eliminating my housing costs entirely in the process. My gf is not for it, and losing OUR privacy would not be great. I wouldn't mind it as much if I was single.

In any case, I'm considering buying another house, albeit smaller and older, in a somewhat bad town in the area. I've lived in that are before, and there was crime and I had a few encounters with some seedy characters, but then again, I'm armed so I'm not exactly helpless if someone tries to attack me.

I'm not keen on moving into my old, paid off house because it is on a busy street. I learned how to tolerate the noise for the most part with the use of white noise such as a fan, but ultimately I wanted to move, especially since I worked from home most of the time and am a homebody, living like that was not spectacular considering I'm noise sensitive.

As such, I'm thinking a similar house on a quiet street might be the better option. I actually missed the area. I could walk, bus or bike to entertainment, stores, etc. Close to commuter routes. Would I prefer to live in a safer part of town without the thugs? Of course. But this is the area where you can still get a house for a cheap price. Between earphones, pepper spray and my gun, I am not too worried, I just prefer to avoid altercations with idiots who have nothing to lose. For them prison is an upgrade...

Alternatively, I can buy a more expensive house in a better area, but then I have more capital tied up in housing rather than say, an index fund. Perhaps it's worth it though? I will say though, in my area, along the main freeway, anything less than 500K is going to be in a questionable area to some extent. The area where my first house was is actually quite convenient. Just got to ride your bike through cracks heads and wanna be thugs who are walking down the street shoulder to shoulder. I think I will keep my car if I do this plan.

[steveo73]

I don't know what to tell you. I love where I live now but my house is honestly worth over a million dollars. I live in Sydney Australia and that isn't unusual. I don't really have a really valid alternative.

For me I can't be bothered moving but I also have 3 kids.

[SimpleLife]

I'm actually considering Indiana as an option now. Florida would be nice but deals are better in Indianapolis, IN.

I think living in a HCOL area is a good thing during the accumulation phase. You cash out and relocate to a cheaper area.

[jennypenny]

... and now in a McMansion in a ritzy neighborhood where the new houses they are building two houses down are selling for 600K+. No issues in this neighborhood.

Doesn't that make you the ghetto neighbor?


Is it worth renting somewhere first to make sure you'd like neighborhood?

[llorona]

Depending on your targeted geographic area, this might be a reminder of what it's like to reside in the ghetto or close to it:

1. Gunshots several times a week, far and near
2. High prevalence of home robberies, car thefts, assaults and vandalism
3. Loud parties/music
4. People riffling through your trash on garbage day
5. Crazy dangerous drivers, including hit and runs
6. Pit bulls roaming the streets
7. "Shelter-in-place" orders while police on land and choppers search for armed fugitives
8. Strange people traipsing through neighborhood and periodically banging on your door because "their car ran out of gas."
9. Liquor stores instead of produce markets
10. Hearing neighbors scream at their kids, smack each other, etc.

Is the stress worth it?

[enigmaT120]

Wow. How many of those 10 are required to call a place ghetto? Falls City has 1,3, 6, and 8 that I know of. 7 didn't happen because the armed fugitives were chased out of town by the armed home owner who's home they were shooting up. No liquor stores, just sort of a quick market. It seems OK to me.

[llorona]

@Enigma: Maybe we should create a weighted scale or severity index?

I forgot to mention #11: People stealing cars for a joyride, dumping them, and setting them on fire in the middle of the street.

Point is, there can be psychological, financial, and even health consequences to living in bad neighborhoods.

Falls City sounds kinda tame.

[Tyler9000]

Personally, I think it's fine to prioritze a home location where you feel comfortable no matter how you define it. If the minimum price level required to be comfortable in your city is out of reach, then challenge the assumption that you have to live in that city. The median house price in the United States is only $189k. Surely in a country this big one can find an affordable home in an area they enjoy where they have no fear of neighbors. I can't speak for other countries.

I arbitraged cities and it worked out great. Made a ton of money in the Bay Area while renting, and ultimately moved back to Texas to buy.

[SimpleLife]

Depending on your targeted geographic area, this might be a reminder of what it's like to reside in the ghetto or close to it:

1. Gunshots several times a week, far and near
2. High prevalence of home robberies, car thefts, assaults and vandalism
3. Loud parties/music
4. People riffling through your trash on garbage day
5. Crazy dangerous drivers, including hit and runs
6. Pit bulls roaming the streets
7. "Shelter-in-place" orders while police on land and choppers search for armed fugitives
8. Strange people traipsing through neighborhood and periodically banging on your door because "their car ran out of gas."
9. Liquor stores instead of produce markets
10. Hearing neighbors scream at their kids, smack each other, etc.

Is the stress worth it?

I had 8 and 3. Loud music was rare at first place, and really not that frequent at second place. But no, the stress is not worth it. However; surely there are areas where you can buy a house on a decent street. It's never going to be as quiet and tame as a half a million dollar home suburb, but considering the majority of the country appears to be pretty cheap cost of living housing wise outside of the big cities, surely the majority of the country is not living in the ghetto. Or are they?

I'm actually looking at houses in Indianapolis, IN now. 35-50K for a 1970's house move in ready? The area seems pretty tame crime wise.

[EdithKeeler]

Depending on your targeted geographic area, this might be a reminder of what it's like to reside in the ghetto or close to it:

1. Gunshots several times a week, far and near
2. High prevalence of home robberies, car thefts, assaults and vandalism
3. Loud parties/music
4. People riffling through your trash on garbage day
5. Crazy dangerous drivers, including hit and runs
6. Pit bulls roaming the streets
7. "Shelter-in-place" orders while police on land and choppers search for armed fugitives
8. Strange people traipsing through neighborhood and periodically banging on your door because "their car ran out of gas."
9. Liquor stores instead of produce markets
10. Hearing neighbors scream at their kids, smack each other, etc.

You know, a person can live quite nicely and inexpensively in a neighborhood that has none of these things. I live in an older neighborhood in Memphis, TN. (Yes, I know a lot people turn up their noses at Memphis, and I understand the reasons, even if the truth is somewhat different from what is often reported in the media). I bought a 3 BR, 1 BA foreclosure sight unseen (well, I saw on the internet and had an inspection), for $37,000. I paid cash; my cost per month for insurance and property tax is about $200/month.

My house is nothing fancy, but it's cozy and comfy. My street is wooded, quiet, and my neighbors are just friendly enough. An elderly couple lives next door, and another elderly couple lives behind me. Single professionals in the 2 houses across the street. Single older graduate student next door. We have had a few car break ins in the general vicinity, and a couple of people were mugged on another block. However, no loud parties, no crack houses, no pit bulls roaming the street (don't get me started on that stereotype--my mother has a pit bull), never had anyone looking for armed fugitives in the area. I live about 10 miles from downtown, and within walking distance of our botanic garden and the Dixon Gallery and Gardens. Not too far from the U of Memphis. Walkable to a mediocre grocery store and a couple of restaurants. On the bus line.

Typical house for sale in my neighborhood:
http://www.realtor.com/realestateandhom ... 1361?row=8


On the other hand, a coworker who lives in Cordova, the "white flight" suburb where everyone moved to, had a drive-by shooting one street over from her, and a couple blocks from her, a lady was beaten up. Another friend's relative who lives in a VERY upscale neighborhood, was the victim of an attempted home invasion.

My point: crime and bad things are not necessarily limited to "bad neighborhoods." Yeah, there are certain places I would not live in Memphis. That doesn't mean, however, that there are not very inexpensive places to live here that aren't part of the 'hood.

Too, while I would not try to sell anyone on Memphis as some kind of Mecca of greatness, it consistently ranks as one of the least expensive cities to live in the US. And if you're a college-educated professional, there are very good jobs here, particularly in tech, banking, etc. It's a good place to live cheaply and save money.

[steveo73]

http://www.domain.com.au/for-sale/3-bea ... 24232?sp=1

This is a typical house in my area.

And this is the price levels.

http://www.domain.com.au/apm/Research/? ... rbId=32572

[sky]

First of all, don' t be a bottom feeder. Find the best neighborhoods and best locations and find the best value. Buy a house you can retire in. When you look at an area, think five or ten years ahead.

[jacob]

Well, you said ghetto ...

I think there's a housing triangle similar to how there's an engineering triangle. You know, you can have "fast, cheap, good", pick two.

We picked "cheap, good" which means that the commute sucks! I could seriously do without it! Without the commute (hopefully soon), the place would be cheap and good, not caring about fast. We get a (3) every damn Saturday evening during the warm months (June-September) but it's live music that always sounds like this so I tolerate it even if I'm an old fogey who goes to bed at 1030p on a Saturday.

We're on first name basis with all of our neighbors; look out for each other; and bring each other produce and cookies. I absolutely love this neighborhood for the welcoming community. I've lived in more expensive places where people basically just ignored each other completely. This seems to be inversely proportional to housing prices. When we lived in the RV park we almost got too much attention, but this place is just right for us.

When we lived closer to the city, we picked "fast, cheap". That sucked mainly for the squeaky old building we lived in but it was nice to not think of the commute as a "trip".

Some of my more prodigal and relatively "normal" consumer friends live in "fast, good". That ain't cheap though! It's great to be just 10 minutes walk from work though! It sums to many hours worth of life.

About a mile away, there's a city that's basically just "good" or rather "very good". It's further away from the city than us and is mainly filled with McMansions and populated by vicepresidents (a euphemism for someone who works in sales with suits mandatory) with more money than sense. I hear they have excellent school ratings over there. Ours suck (2 out of 10), but what do I care. I'm not overly convinced that they would care to mow your front lawn for you just to be nice/build some social capital. Where I live, people take turns shoveling each others walkways. Just because.

[SimpleLife]

I think Jacob makes a good point. Since the residence I'm considering is a retirement or "forever" residence, it makes sense to pick one that may be farther away from work but in a good area for a good price. Yes, I won't have the proximity to jobs that I have now maybe, but have and would rather deal with a commute than live in a crappy area when I'm supposed to be retired but still working for the heck of it.

Luckily with my job I can work from pretty much any internet connection in the world but those jobs are harder to come by than "report to the office daily" jobs. Still, a reasonable compromise. Also, I'm actually considering relocating to IN or FL as housing is really cheap there and I love the FL weather. There is nothing really tying me to WA than a lot of real estate but I would sell what's worth selling and reinvest, while leaving some properties here to be managed by a PM.

There is no real reason for me to have to live in HCL WA (though I could relocate to small towns for about the price of FL). Although FL is not really considered a tech hub, my specialty pays 24% more there than other states.

[SimpleLife]

First of all, don' t be a bottom feeder. Find the best neighborhoods and best locations and find the best value. Buy a house you can retire in. When you look at an area, think five or ten years ahead.

Actually the area has many new developments all around, as in two houses down to a couple blocks away. Someone is investing money in the area, and older houses are being torn down and the large lots subdivided to put 10 or more houses at a time in. It seems to be gentrifying.

My only real issue with the place was the street noise from the busier than I'd like street. Other than that I didn't mind it really, it was convenient for everything, including fishing, going to free entertainment, hiking, etc.

[llorona]

@Edith: That's why I said "Depending on your targeted geographic area..."

[dot_com_vet]

I lived in an apartment complex next door to McMansions for years. It was a pretty good deal. The rent premium was $200/month over an average apartment in non-ideal location.

I was able to live/walk/bike in the McMansion neighborhood at a fraction of the cost.

[SimpleLife]

... and now in a McMansion in a ritzy neighborhood where the new houses they are building two houses down are selling for 600K+. No issues in this neighborhood.

Doesn't that make you the ghetto neighbor?


Is it worth renting somewhere first to make sure you'd like neighborhood?

Hold on, I have some roadkill on the stove...

OK, I'm back. No, I'm not the ghetto neighbor at all

Kidding aside, not really. Not the smallest house, and the above price is for brand new construction. The houses existing in the development are 10 years old. Not bad, but I will say, most neighborhoods decline as the houses age. It seems to be the rule rather than the exception. I'm in a desirable area due to the school district and proximity to amenities including the schools. Walking distance to everything.

Perhaps I should just buy a place that's remote. No neighbor issues, just have to drive to amenities and the city. Oddly enough I miss my old apartment that I lived in for 10 years. It was quiet (except summers, my unit was by the pool), only one tenant I ever had an issue with and they got evicted pretty quickly after mass complaints.

[Peanut]

The houses existing in the development are 10 years old. Not bad, but I will say, most neighborhoods decline as the houses age. It seems to be the rule rather than the exception. I'm in a desirable area due to the school district and proximity to amenities including the schools.

Except for the very best neighborhoods, I'd say? See: Mid-century moderns in Los Angeles; Victorians in NYC, Atlanta, Chicago; 17th-18th c homes in London, Paris, Vienna...

Agree schools are probably the #1 factor driving divergent prices of comparable homes in the same city in the U.S.

[SimpleLife]

The houses existing in the development are 10 years old. Not bad, but I will say, most neighborhoods decline as the houses age. It seems to be the rule rather than the exception. I'm in a desirable area due to the school district and proximity to amenities including the schools.

Except for the very best neighborhoods, I'd say? See: Mid-century moderns in Los Angeles; Victorians in NYC, Atlanta, Chicago; 17th-18th c homes in London, Paris, Vienna...

Agree schools are probably the #1 factor driving divergent prices of comparable homes in the same city in the U.S.

Those are the exact kind of places that I was thinking of as the exception when I wrote that. There are some areas where the values just keep going up due to the location and this drives the poor people out. Look at California, they just had an article in the news about this. The poor are leaving in droves. When they arrive here, I send them to live with Jacob in Chicago on his dime.