Help - Need to Make a Decision about a House

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JamesR
Posts: 947
Joined: Sun Apr 21, 2013 9:08 pm

Re: Help - Need to Make a Decision about a House

Post by JamesR »

Don't forget about the 1% rule.

If the rent is less than 1% of the purchase price, it's cheaper to be a renter and invest the difference into index funds. If the rent is higher than 1%, then it's a good deal to buy.

So that means the $650k house should rent for $6.5k/mo.

But it sounds like you can rent a $650k house for $3k/mo, it's vastly cheaper to just be a renter, and invest the difference (the downpayment etc) in index funds

tylerrr
Posts: 679
Joined: Tue Dec 13, 2011 3:32 am
Location: Boston

Re: Help - Need to Make a Decision about a House

Post by tylerrr »

JamesR wrote:Don't forget about the 1% rule.

If the rent is less than 1% of the purchase price, it's cheaper to be a renter and invest the difference into index funds. If the rent is higher than 1%, then it's a good deal to buy.

So that means the $650k house should rent for $6.5k/mo.

But it sounds like you can rent a $650k house for $3k/mo, it's vastly cheaper to just be a renter, and invest the difference (the downpayment etc) in index funds
thanks for the 1% rule.

SimpleLife
Posts: 771
Joined: Wed Aug 21, 2013 8:23 pm

Re: Help - Need to Make a Decision about a House

Post by SimpleLife »

tylerrr wrote:
SimpleLife wrote:I'm sure this isn't the answer you are not looking for, but you're asking us for input into something very vague, that you say is designed to satisfy an emotional need for a dog and having people over more often. I don't see the correlation between how often you can have people over in a house you own vs. an apartment or house you rent.

You also don't specify where this 5K in guaranteed income is coming from and whether it is or is not tied to the house, though you mentioned AirBNB earlier. I think you want to buy a house and are looking for people to lean in that direction, as you are clearly rationalizing the decision to buy this house. It serves no purpose other than to allow you to have a dog and a yard. You can get that renting, but what is the benefit to cost ratio? No rational person buys a 650K house to satisfy a subjective emotional need to have a dog or so they can have people over more often....You can do both in an apartment or a rented house as well, and neither provide strategic benefit.

At the end of the day, 5K "guaranteed" income (nothing is guaranteed other than our deaths) and 3.5K just for a mortgage rounded up to 4K when you factor in maintenance, leaves you spending 80% of your so called guaranteed income on having a dog and having "people" over more...Does that sound like something YOU would tell someone to do?
I'm sorry you felt moved to use a nasty tone towards someone simply soliciting for helpful advice and thoughts.

I'm not looking for justification, I was looking for non-hostile opinions. I have 5k guaranteed income and it's not from property. You can choose to believe that or not. If the home goes up in value and I have additional income from doing work that I love, it very well may make sense in my situation.

I haven't made a decision yet.
I posted objective facts and a logical numbers based argument, founded on what he said his reasons were for spending this money, the cost of the house payment, and the income he is guaranteed. Telling him that no reasonable person would spend 80% of their income to satisfy an emotional want of having a dog and people over more often, when you can do the same renting an apartment is good advice in the context of a FIRE board, not an insult. You may do what you like with your money, but this is a FIRE board after all, and spending 80% of your income on a dog and having guests over more often is not congruent with FIRE, especially when you can rent and achieve the same. My advice stands, and you seem to like my advice since you have repeatedly emailed me with questions about real estate and whether I think you should buy a house or not.

tylerrr
Posts: 679
Joined: Tue Dec 13, 2011 3:32 am
Location: Boston

Re: Help - Need to Make a Decision about a House

Post by tylerrr »

SimpleLife wrote:
tylerrr wrote:
SimpleLife wrote:I'm sure this isn't the answer you are not looking for, but you're asking us for input into something very vague, that you say is designed to satisfy an emotional need for a dog and having people over more often. I don't see the correlation between how often you can have people over in a house you own vs. an apartment or house you rent.

You also don't specify where this 5K in guaranteed income is coming from and whether it is or is not tied to the house, though you mentioned AirBNB earlier. I think you want to buy a house and are looking for people to lean in that direction, as you are clearly rationalizing the decision to buy this house. It serves no purpose other than to allow you to have a dog and a yard. You can get that renting, but what is the benefit to cost ratio? No rational person buys a 650K house to satisfy a subjective emotional need to have a dog or so they can have people over more often....You can do both in an apartment or a rented house as well, and neither provide strategic benefit.

At the end of the day, 5K "guaranteed" income (nothing is guaranteed other than our deaths) and 3.5K just for a mortgage rounded up to 4K when you factor in maintenance, leaves you spending 80% of your so called guaranteed income on having a dog and having "people" over more...Does that sound like something YOU would tell someone to do?
I'm sorry you felt moved to use a nasty tone towards someone simply soliciting for helpful advice and thoughts.

I'm not looking for justification, I was looking for non-hostile opinions. I have 5k guaranteed income and it's not from property. You can choose to believe that or not. If the home goes up in value and I have additional income from doing work that I love, it very well may make sense in my situation.

I haven't made a decision yet.
I posted objective facts and a logical numbers based argument, founded on what he said his reasons were for spending this money, the cost of the house payment, and the income he is guaranteed. Telling him that no reasonable person would spend 80% of their income to satisfy an emotional want of having a dog and people over more often, when you can do the same renting an apartment is good advice in the context of a FIRE board, not an insult. You may do what you like with your money, but this is a FIRE board after all, and spending 80% of your income on a dog and having guests over more often is not congruent with FIRE, especially when you can rent and achieve the same. My advice stands, and you seem to like my advice since you have repeatedly emailed me with questions about real estate and whether I think you should buy a house or not.
I don't remember "repeatedly emailing you" and I just looked in my history and can't find it.

Even if I have emailed you, the fact you would state that publicly on this board shows the size of your ego and crass demeanor.

Don't need your comments anymore. You don't understand my situation completely like others have....

I like the fact I can openly post feelings on this board and get feedback(possibly during a moment of consumer weakness and vulnerability) and not get attacked by another poster, such as yourself.

JamesR
Posts: 947
Joined: Sun Apr 21, 2013 9:08 pm

Re: Help - Need to Make a Decision about a House

Post by JamesR »

BTW, Jacob had some sort of rule for how he decided to buy his house in Chicago, I forget what it was based on. Could be worth looking at his posts about it. (on the forum somewhere)

tylerrr
Posts: 679
Joined: Tue Dec 13, 2011 3:32 am
Location: Boston

Re: Help - Need to Make a Decision about a House

Post by tylerrr »

JamesR wrote:BTW, Jacob had some sort of rule for how he decided to buy his house in Chicago, I forget what it was based on. Could be worth looking at his posts about it. (on the forum somewhere)
yes, and the 1% rule was quoted in this thread too.

Jehdlh
Posts: 16
Joined: Thu Jul 30, 2015 4:05 pm

Re: Help - Need to Make a Decision about a House

Post by Jehdlh »

double post, sorry server error
Last edited by Jehdlh on Sun Mar 12, 2017 12:56 am, edited 1 time in total.

Jehdlh
Posts: 16
Joined: Thu Jul 30, 2015 4:05 pm

Re: Help - Need to Make a Decision about a House

Post by Jehdlh »

i lived in cambridge mass for 10+ years during ugrad, phd and afterwards... go buy a 2-3 family house (traditional duplex or triple decker) in belmont or arlington (you're babyproofing too since the schools are excellent) and rent half of it out and/or do airbnb in your unit as well for some extra income. you won't get anything in cambridge for under $1M and belmont is a 5 min bike ride to harvard sq and buses (71/73) run to/from belmont every 10 mins to harvard sq mbta. you can get a nice triple decker in belmont for close to your $650K mark (and with rental income, you can use that to qualify for the higher loan). the yard won't be *huge* in belmont (arlington will probably be bigger, but arlington is a longer trip and down mass ave which SUCKS) but it was big enough for my full size poodle (we fenced in the yard)...we lived off school street, a five min walk to the huge park/playground/dog park.

in belmont the unit will be an entire floor, what we call in manhattan a "classic six", i.e., 2 bedrooms, 1 office (well, to be specific, the office is only called an office now, before it was the maids room, attached to a small full bath), living room, (separate dining room), full size kitchen and 1.5 baths. plus you'll have a basement and usually those triple deckers have a deck that people have walled off for a 3 season sunroom (i used this as the airbnb room, and bonus, they entered from the rear staircase so they stayed out of my unit except for the kitchen and bath...really cuts down on the foot traffic. if you *REALLY* need more space than that, live on the third floor of your triple decker and renovate the attic...i did this and i'm 6'4 and could stand up without ducking my head in the middle 25% of the attic floor, i installed an extra bathroom and one large "loft" area, behind the bathroom was another "bedroom). if that still isnt' enough space, a triple decker in arlington may be your best bet (as a bonus, you'll get more yard space). i rented out the 3 season sunroom year round (thanks to a space heater) to a postdoc for $700 a month (including utilities) and the third floor attic which was two bedrooms if you pushed it but really people just used that bedroom in the rear of the house as an office, or not at all, for $1000-1300 a month (depending if i rented it on a semester basis or academic year or summer only...shorter stays made more money). the downside of the attic reno was the person had to enter through my unit, but they'd come thru the front door, take an immediate right into my "office" room, and take the door (which they can lock) up to the attic. it was worth it for the rental income.

the nice thing about belmont especially is no shortage of wealthy grad students, postdocs, vistiing scholars, vistiing profs, etc wanting to rent in belmont. the trick was to include utilities in the rent and furnish the place in (go on craiglist, people give away everything, even expensive ethan allen etc furnitrue for free, or at most, say $80 for a $8k couch, it's absurd what people will do when they redecorate, agree on everything you want and then on a saturday, rent a uhaul, pay two guy sto help you $15/hr each and spend the day picking all the furniture up and moving it into your new place...for no more than $500-1K, you've furnished the rental areas of your unit and your space too, if you want).

lmk if you want any boston area specific advice. i live in brooklyn ny now but i wish i lived in cambridge again every day.

i hope this helps!

BRUTE
Posts: 3797
Joined: Sat Dec 26, 2015 5:20 pm

Re: Help - Need to Make a Decision about a House

Post by BRUTE »

when the server error occurs, the post still goes through 99% of the time. jacob just isn't willing to pay market rates for an admin to fix the error ;)

tylerrr
Posts: 679
Joined: Tue Dec 13, 2011 3:32 am
Location: Boston

Re: Help - Need to Make a Decision about a House

Post by tylerrr »

@Jehdlh ,

thanks!

Shep
Posts: 9
Joined: Thu Aug 17, 2017 8:32 pm

Re: Help - Need to Make a Decision about a House

Post by Shep »

Late to this thread but we did something similar a few years back in the PNW. We went from Condo in Chicago to then wanting a larger house w/acerage so that we could spread out, have privacy, animals, and allow for family to age in place. We timed it right in that we bought in when prices were low in 2013 where we bought a shortfall. Our house has appreciated quite a bit so that was a good move on our part and I will go through the pros and cos:

First, this is the most quiet we have ever experienced in all of our lives and we love that. I think this is the first place I have ever lived where you can sleep through the night and not hear a single peep until early am when the coyotes descend from the forest howling and doing what they do. We love living in nature all around us. So many trees and bird species, so much beauty. There is no neighbor in site looking in any direction, though we are surrounded by people in a low density area. We are also close to town if we need anything so not so isolated that we can't get to what we need.

The trees here of course are extremely tall as we are surrounded by old growth forest and it will be hard to leave.

Another plus is that when you live out a bit, you do not wake up to the sounds of suburban Lawn every day. It is not a priority out here in the woods. You mow your lawn if you have one very high as its the best for the frogs and the eco system, keeps the weeds at bay with out using chemicals so all of this enhances the quite. The nature around you demands that you learn how to be a good steward of the property you buy.

We could easily rent our the basement as a full time rental that would cover at least 1/3rd of our mortgage or rent out to Air BnB.

The downside, is now that we have all this privacy, we don't want to share. We don't want renters in our space for any reason. It's hard to explain but we have grown to love our surrounding and do not want to disturb any of it.

Property also comes with a lot of maintenance. For us, it's not lawn, but the forest around us will drop a tree or two each winter. This is natural but sometimes the trees will fall too close to the perimeter of our yard and they must be dealt with. This is the first property I ever owned where I had to learn how to use a chainsaw - Greenworks battery operated works just fine - to cut the trees into firewood. This saves a lot of money but it is a lot of work.

Then there is the cost - although I am currently high salaried, I want to ER - too old for ERE in my early 50's - we don't want to carry a mortgage of 3500 (Includes Taxes, Insurance, No PMI). That said, we have learned our lesson and want to recreate this environment with a house either much smaller or in a cheaper location.

I completely understand what you want to do as we have done it and will find a way to do it again, only much cheaper. Having your own domain comes with incredible responsibility - not just the house but the land. You must have an appreciation and respect for the nature that surrounds you. If you do and are willing to put in the time - e.g. dealing w/downed trees, occasional power outages (Yamaha Portable Generator bought on sale is a lifesaver), baby birds found in a nests on the ground happens often in the forest, and many other adventures - it can be shear heaven. I think it can be had, but at a much cheaper cost.

Keep us posted on your journey. I will do the same. We're looking to make move in the next 1-2 years so that we can ER.

Riggerjack
Posts: 3182
Joined: Thu Jul 14, 2011 3:09 am

Re: Help - Need to Make a Decision about a House

Post by Riggerjack »

@Shep,

Where are you, and besides cheap, what else are you looking for in the new place? We have plenty of PNW residents on the board, and we can probably help, though starting a thread for that would probably be most efficient.

@tylerr,

What did you decide, and did you see my thread on recent Fed actions and how that could translate to housing?

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