I want to buy too much house. Talk me into it/out of it?

How to avoid signing your life over to a mortgage
ertyu
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I want to buy too much house. Talk me into it/out of it?

Post by ertyu »

Location: beautiful. Walkable to largest city park, city square, cafes, grocery, pretty much anything you might want. Also to the local university (though it's not a thing to rent out rooms to students, most seem to live in dorms). It is very hard to come up with a better location in the city in my opinion. Location + quality of building construction probably means it will keep its value well.

Size: 107 sq. m, 3bdrm, living room, kitchen. 11th floor, balconies with beautiful view. One fairly large, little coffee table + chairs possible. Central heating from the local coal power plant (pricey - up to 250 euro/month in peak winter months but does excellent work), south/west facing.

Cost: Approx. 9.75 JAFI, possibly up to 12 JAFI with full repairs (insulate the walls, bathroom/WC is in terrible state and needs complete reno, ditto kitchen, etc.). Net worth: 25JAFI. So cost is 50% NW.

Steady income: ?? - corona: job prospects unknown. Also, the fact that I have worked abroad might mean I don't have the exact paperwork required for a mortgage and/or might mean a higher interest rate. Mortgages here are variable. I would rather make a cash offer.

Do I like this property? Yes, I do. Do I need this much house? As a single male who is likely to remain so, highly unlikely (town is not a major tourist spot so any, say, AirBnb income from renting a spare bedroom might be fairly occasional). Can I afford this much house? Eeeeeeh, very much debatable, especially by ERE standards.

tl;dr: I want it, but it's too much house. Pricey, but good property - but too much house. But I want it :lol:

Edit: another option I am considering is a studio in a good, but way less ideal location, which costs 15% of NW + probably 10-15% additional needed in repairs (tiny, so space-saving furniture will need to be designed, full bathroom/kitchen redo, possibly with walls moved, windows replaced, etc.) I estimate 25-30% of NW in total.
Last edited by ertyu on Sun Apr 12, 2020 9:38 am, edited 2 times in total.

Alphaville
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Re: I want to buy too much house. Talk me into it/out of it?

Post by Alphaville »

Counterpoint: buy it, get paying roommates (if you can live with them).

ertyu
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Re: I want to buy too much house. Talk me into it/out of it?

Post by ertyu »

Renting out rooms isn't really a thing here. The city is large-ish but not a major one, most jobs are elsewhere. Population has been decreasing and most people live either on their own or with family of origin (if still living in current city). I might be able to find roommates - even though people would likely see it as extremely weird, particularly for an adult - but I wouldn't rely on any income in projections.

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Re: I want to buy too much house. Talk me into it/out of it?

Post by jacob »

NAV > price?

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Re: I want to buy too much house. Talk me into it/out of it?

Post by Alphaville »

ertyu wrote:
Thu Apr 09, 2020 2:18 pm
Renting out rooms isn't really a thing here. The city is large-ish but not a major one, most jobs are elsewhere. Population has been decreasing and most people live either on their own or with family of origin (if still living in current city). I might be able to find roommates - even though people would likely see it as extremely weird, particularly for an adult - but I wouldn't rely on any income in projections.
Ah! Then unless you can turn the space into a moneymaking enterprise it’s too much space for one person. The cost of heating alone a killer.

Stick to the neighborhood and keep looking?

ertyu
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Re: I want to buy too much house. Talk me into it/out of it?

Post by ertyu »

tried to calculate, did it wrong. lol

If I were renting, I would probably rent a 1bdrm and live in a less perfect location. According to one present value calculator, the present value of expected 225 euro per month rent over 20 years at 3% real discount rate would come to 40k (I got 3% from here https://financial-charts.effingapp.com/)

As for heating/utiities: you don't have to turn on the heating in all rooms, electrical heating isn't cheap either (what I would likely be doing if renting), the 250 euro per month estimate is without trying to be frugal with heating and only dec-feb). But yes, heating and electricity are expensive here.
Last edited by ertyu on Thu Apr 09, 2020 2:38 pm, edited 2 times in total.

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Re: I want to buy too much house. Talk me into it/out of it?

Post by Alphaville »

you gotta add the non-insignificant utilities though

ertyu
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Re: I want to buy too much house. Talk me into it/out of it?

Post by ertyu »

If I were to estimate, the asking price is probably fair compared to other properties in town and given the size and location of the apartment. It's not "cheap" but it's not overpriced any more than the market as a whole may be overpriced.

It is an excellent property given lifestyle considerations - how do you value being 10 min walk away from jogging by the river and a large balcony with sunset view over the park and said river? + walking distance from all shopping and recreation? Emotionally, I am a very strong yes while I realize that the value of the property is very large compared to my NW.

ertyu
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Re: I want to buy too much house. Talk me into it/out of it?

Post by ertyu »

Sigh dang it, I can't afford it. The fantasy was very good while it lasted, though.

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Re: I want to buy too much house. Talk me into it/out of it?

Post by Alphaville »

ertyu wrote:
Thu Apr 09, 2020 2:47 pm
Sigh dang it, I can't afford it. The fantasy was very good while it lasted, though.
unless you can convince your society that having roommates is not weird :mrgreen:

are you working with a real estate agent? there’s gotta be something smaller in the same area... a one bedroom— a studio! would be much less.

also, trust me on this, a balcony that looks the other direction is much better for your sleep schedule.

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Bankai
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Re: I want to buy too much house. Talk me into it/out of it?

Post by Bankai »

Do you have a system for making important life decisions? One consideration would be to take your time with making the decision to avoid the emotional trap - there's no rush and no, this is not once in a lifetime opportunity, there'll be other flats/houses you'll fall in love with.

As for financials, if you're FI on paper, would you still be after the purchase? If not, are you prepared to go back to work in your country for a much lower salary? If you'd decide to go abroad to make up the difference, why buy now if you can't live in it anyway?

What about buying a 1-bed with half the size? This would likely cost half the price and have much lower ongoing costs. And then 'upgrade' once the need arises, be it family or something else.

ertyu
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Re: I want to buy too much house. Talk me into it/out of it?

Post by ertyu »

I do mostly look for studios or 1-beds, it's just that int his particular neighborhood there aren't really any. I mean that literally - it's an older part of town so it's mostly larger family-size units. As for whether it's once in a lifetime, i think it kind of really is - the particular building, the high floor, the large south-facing balcony. The only way this property is sub-optimal is financially - it's too large and thus too expensive for a single guy.

As for avoiding the emotional trap - I kind of don't want to, in the case of looking for an apartment. I want to be into the place emotionally and aesthetically, in fact those are more important to me than the precise price and whether the deal is exactly optimal when it comes to the numbers (INFP, but don't kick me off the forum yet) - which is why I was even considering it in the first place.

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Re: I want to buy too much house. Talk me into it/out of it?

Post by Frita »

Are you considering a purchase to avoid something (i.e., not living with your parents, not having to work abroad, etc.)? If so, is there a different question to ask and answer?

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Re: I want to buy too much house. Talk me into it/out of it?

Post by Alphaville »

ertyu wrote:
Thu Apr 09, 2020 3:23 pm
(INFP, but don't kick me off the forum yet)
infp here too, well more of an f/t blend, but aesthetics are important, and if someone tells you that aesthetics are silly you respond that they’re important for morale, and morale is essential to victory.

if you’re infp you’re creative—are you sure there is no way to make money off the extra space? 3 rooms is a lot of real estate.

eta: university: visiting professors?

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Bankai
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Re: I want to buy too much house. Talk me into it/out of it?

Post by Bankai »

You want to 'feel' that the place is right for you, but you also want to be sure the decision is correct from an intellectual/financial angle. I'd not buy a place which on paper ticks all the boxes but feels soulless and bad to be in. But buying emotionally, especially something that costs half of your NW, is an even greater danger. So yeah, as with most things, you want a balance between both.

Re: once in a lifetime: consider we're entering the worst recession in at least 90 years. People will lose their jobs, then houses, and there'll be plenty of opportunities to buy below (current) market prices. You as a cash buyer will be first in line.

ertyu
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Re: I want to buy too much house. Talk me into it/out of it?

Post by ertyu »

Frita wrote:
Thu Apr 09, 2020 3:45 pm
Are you considering a purchase to avoid something (i.e., not living with your parents, not having to work abroad, etc.)? If so, is there a different question to ask and answer?
You are right, it's not a coincidence that I'm looking precisely now. Being alone in a property of my own, drinking coffee on a balcony with a beautiful view, is very much something I'm in need of right now. Nailed it, to look for the deeper motivation behind, why this and why now. Working abroad, idk. Realistically, I will probably go back if/when feasible. I simply cannot earn like that here. But even so, I still want the apartment :lol:
Alphaville wrote:
Thu Apr 09, 2020 3:50 pm
aesthetics are important, and if someone tells you that aesthetics are silly you respond that they’re important for morale, and morale is essential to victory.
BAhahaHa - thank you, good advice, I'll keep the quote ;). The part where aesthetics are important but ERE requires mismatched furniture / ERE requires a tool and materials stash but aesthetics requires (at least for me) lack of clutter and minimalism are things I'm still chomping on internally. One of all the authors quoted in one of all the required posts wrote something about the dignity of a dwelling - I think that's the phrase that nails it for me, but my thoughts here are still very much in progress.

To be honest, the town is nice - on a large river, park, the occasional historical building, peaceful - but it's too much of a backwater. Not sure if any visiting professors lol. There could be a way to make an income from the extra space and I would have hoped to occasionally do so, but I don't think that income would be reliable enough to seriously consider in calculations. Something that might be fun: offer a bedroom as a temporary homebase for travelling EREers at 100-ish USD per month (to pay their bills) - but more for the enjoyment of the company than anything else.

@Bankai - good point, neither side should suffer for the other.

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Re: I want to buy too much house. Talk me into it/out of it?

Post by Alphaville »

yeah i think that your enthusiasm for the place could find its way to your sales pitch.

a nice furnished room in a great neighborhood could be a moneymaker if you prove to be a good host. but i don’t think the ERE market is big enough and your price seems... low? i’d rather go after the big spenders.

under that scenario you could think of splitting your cost between housing + moneymaking venture—the second part being an investment with returns rather than an expense. but you would have to analyze the business, and be committed, market your property, and establish a reputation/get a good rating.

also, you said university: what about grad students? quieter and more mature and most of the time smart (lol).

anyway, i am not a “hosting” kind of person, but have friends and acquaintances who are, and one place where i rented a dwelling once kept a fancy place as a tourist destination.

not my line of business though. i’d much rather use a room as a factory hahahahaha. just brainstorming options here: infp, thinking outloud!

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Re: I want to buy too much house. Talk me into it/out of it?

Post by Frita »

Whenever I have desperately wanted to escape something, I have had a tendency to make “Out of the frying pan and into the fire” decisions. It seems like I have been an easy mark, open to BS, on said occasions. Sometimes desperation in others is palpable in others, not ourselves.

Anyway, I can understand both a desire to have your own space and a nice one at that. What is the real estate market like now? How motivated are the sellers (It appears no one is living there, so that is costing them.)? Is an all-cash deal appealing to Bulgarian sellers? If you could pick it up for a bargain and are open to working abroad again, if necessary, perhaps it could be workable.

Just because furniture is not matching does not mean there is not a visual appeal. Beautiful designer rooms often mix pieces but they coordinate. Sometimes buying new and keeping for a long time is the way to go. If you appreciate lack of clutter, beautiful and functional pieces are more important than ever.

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Re: I want to buy too much house. Talk me into it/out of it?

Post by Sclass »

Would you still buy it if you couldn’t tell anyone about it, show it to anyone or invite a guest over?

I like to ask myself this question before I make an over purchase. I gave up on a Rolex watch this way. Keeping it at home or always under my sleeve hidden 100% of the time didn’t make any sense. Always keeps me going back to the Casio.

ertyu
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Re: I want to buy too much house. Talk me into it/out of it?

Post by ertyu »

Sclass wrote:
Thu Apr 09, 2020 6:40 pm
Would you still buy it if you couldn’t tell anyone about it, show it to anyone or invite a guest over?
Hell yes. In fact I would prefer not to invite anyone and keep it to myself. You can't, of course. E.g. I can't live in my hometown where my family also lives and not have them know what building I live in. But I have spent a lot of time wondering about ways I can avoid having them in my house. Not ever. No comments, no telling me how things should be and how i should make it instead, no plans on their behalf about what sibling of mine will stay there rent-free because it's empty anyway and faaaaaamily. I would love to somehow be able to live there and have it be my sanctuary where others aren't invited.

About the fantasy of letting people stay occasionally: yes, it is a fantasy of being around similar-minded people. My main worry there is people taking advantage and overstaying their welcome.
Frita wrote:
Thu Apr 09, 2020 6:14 pm
Whenever I have desperately wanted to escape something, I have had a tendency to make “Out of the frying pan and into the fire” decisions. It seems like I have been an easy mark, open to BS, on said occasions. Sometimes desperation in others is palpable in others, not ourselves.
Wise observation. Thank you for poking under there and helping me avoid a trap.

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