Hi there
I realize that the housing cost is a huge cash drain (2nd only after my taxes)... and while Jacob's advice about minimizing housing cost is great, too bad I didn't read it when I first purchased the property (I read the millionaire next door and kept it twice my annual income, and I considered it an achievement then, until now...)
So, it's relatively easy to move to a cheaper location while renting, how about all of your home owners? Anyone actually sold and rented a room (while staying at the same city and NOT relocating? and oh, if I pick a central location I can also get rid of my car!)
I realized that the next stage of my expense minimizing will be very drastic, and I wanted to know if people have actually done it and what their thoughts are (very happy due to lightened load? regrets for loss of personal space?)
thanks for the tips in advance.
anyone actually chose to sell their house while living in the same city?
I moved from a 1500 ft2 house into a mobile home to reduce living expenses. I didn't sell the house though, I'm renting it out. My mobile home is paid for and I like it. Now my total living expenses are about that same as just the mortgage payment on my house ($1170/mo).
My daily commute went from 35 minutes each way to 9 minutes. I thought about renting a room but I like to tinker in the garage a lot so that's hard to do in a rented room.
My daily commute went from 35 minutes each way to 9 minutes. I thought about renting a room but I like to tinker in the garage a lot so that's hard to do in a rented room.
I haven't actually done it as my primary reason for selling. I did, however, relocate in 4 years ago to an identically priced region. At that point, I sold my house (of 6 years) and decided that it made more sense to just rent. It's fun to watch the real estate market watching for buys too... you really stay in tune with what the market will bear, and you really recognize the bargains, knowing what will sell quick, etc. I made only 1 offer in 4 years, and I got crushed... but it would have been a great deal at the asking price 
What do I miss? Only being able to 'invest' the effort into
'long term growth' of a yard/garden. That's it actually. Everything else is easier and cheaper. I'd love to take the time to improve soil, plant perennials, etc., with the knowledge that I'll be there 15 year later. That is the only thing I miss.
I don't have kids either... so imho, that could change the equation. I'd probably want my kids to grow up with a yard if I could manage.
What do I miss? Only being able to 'invest' the effort into
'long term growth' of a yard/garden. That's it actually. Everything else is easier and cheaper. I'd love to take the time to improve soil, plant perennials, etc., with the knowledge that I'll be there 15 year later. That is the only thing I miss.
I don't have kids either... so imho, that could change the equation. I'd probably want my kids to grow up with a yard if I could manage.
We haven't, but we're considering it. The trouble is that the transaction costs involved are pretty nasty. You can negotiate with your realtor to take less than a 3% commission, but you still have to pay the other realtor 3% and pay taxes. I have a friend who just sold two houses and she said that in this market people also want you to pay the closing costs. Her estimate was that the transaction costs ate up close to 10% of the selling price of the house which is an awful lot.
Since it is costly to change houses we're taking it slowly and figuring out where we want to live and how we want to do things. The house is paid for so the main concerns are that (1) taxes are high and (2) it's tying up a lot of money so that we can't invest it and live off the income. We have kids and I think we will want a house with a yard... but we could get a smaller house. Here is what we are considering:
1) Renting from my parents whose house is kind of two units (2 kitchens etc. but no separate entrance). The rental income would help them retire, it would save us money, and it would be nice to see more of them. It's also in a more central location so that buses etc. would be easier.
2) Buying a smaller house
3) Moving to a small house in an entirely different area. (very low probability)
4) Staying where we are for a few years and hoping our local real estate market will perk up a bit. The nearby city is doing well, but it's still pretty bad out in the country and there are too many houses on the market in our neighborhood.
5) Staying where we are permanently and just saving up more to keep up with the property taxes.
That doesn't really answer your question, but we've been thinking about the same thing and that's what we have been considering.
I think you did well to keep the house down to twice your income, honestly, as most people spend about 40% of their income on housing. Maybe you get some roommates to reduce your housing costs? Or rent it out entirely and live in an apartment?
Since it is costly to change houses we're taking it slowly and figuring out where we want to live and how we want to do things. The house is paid for so the main concerns are that (1) taxes are high and (2) it's tying up a lot of money so that we can't invest it and live off the income. We have kids and I think we will want a house with a yard... but we could get a smaller house. Here is what we are considering:
1) Renting from my parents whose house is kind of two units (2 kitchens etc. but no separate entrance). The rental income would help them retire, it would save us money, and it would be nice to see more of them. It's also in a more central location so that buses etc. would be easier.
2) Buying a smaller house
3) Moving to a small house in an entirely different area. (very low probability)
4) Staying where we are for a few years and hoping our local real estate market will perk up a bit. The nearby city is doing well, but it's still pretty bad out in the country and there are too many houses on the market in our neighborhood.
5) Staying where we are permanently and just saving up more to keep up with the property taxes.
That doesn't really answer your question, but we've been thinking about the same thing and that's what we have been considering.
I think you did well to keep the house down to twice your income, honestly, as most people spend about 40% of their income on housing. Maybe you get some roommates to reduce your housing costs? Or rent it out entirely and live in an apartment?
Selling a home you are buying (meaning you and the mortgage company jointly own it, and your paying the mortgage company two times the cost of the home to buy) makes a whole lot of sense. Also, downsizing or just simply getting out of the cost of buying a house in order to achieve ERE makes a lot of sense. So the question is how much of your income can you save by doing so? If you can save significant, it rushes that income towards your ERE goals. Remembering you still need to live somewhere that meets most of your needs is a big factor.
I will put it this way. Were I buying a home, and that was standing in the way of my "most focused goal", I would get out of the home costs. However, if I were buying a home I was going to be happy and content living in the rest of my life, I would struggle though and get it paid off. I would refinance it down to 15 years or whatever greased the skids to eliminate that mortgage payment as promptly as I could. In the end, whether you ERE or not, or some other associated form of goal and retirement achievement, you will have to live somewhere. If family is included, that makes a huge difference. The family must have a qualified voice as well.
I would not do a "grapes of wrath" type scenario on my family just to get debt free next week. Most human's goal is to "provide" for their family, and give them the basics of shelter, food, security, and so forth. This leads to a happy life for all concerned. If your mobile and not rooted with family in a location, then it makes a difference in what you do as well.
I will put it this way. Were I buying a home, and that was standing in the way of my "most focused goal", I would get out of the home costs. However, if I were buying a home I was going to be happy and content living in the rest of my life, I would struggle though and get it paid off. I would refinance it down to 15 years or whatever greased the skids to eliminate that mortgage payment as promptly as I could. In the end, whether you ERE or not, or some other associated form of goal and retirement achievement, you will have to live somewhere. If family is included, that makes a huge difference. The family must have a qualified voice as well.
I would not do a "grapes of wrath" type scenario on my family just to get debt free next week. Most human's goal is to "provide" for their family, and give them the basics of shelter, food, security, and so forth. This leads to a happy life for all concerned. If your mobile and not rooted with family in a location, then it makes a difference in what you do as well.
@Marg: if you're pretty sure the experience of living in the same house as your parents would be a positive one: why not?
You could try to find a renter for your own home, instead of selling it. If the market is that bad, maybe selling is not a good option right now. On the other hand, sometimes you have to cut your losses - if you can sell now and never have to worry about the house anymore again, that is worth something too (versus having to find a renter, having to pay for repairs, things like that). Also, if you bought the house for 100k, paid 130k on it in mortgage by the time you paid it off, if the house was valued at 200k in 2006 but now is valued at 150k, then if you sell it for 150k you still have made a profit. You are only losing "virtual" money - money which you could have cashed in on in 2006, but not anymore and maybe never again.
@Bluepearl: never owned a house, never sold one. But I did downsize from having my own apartment to sharing one when I moved to a more expensive area to get a more interesting job (that paid less, by the way). For me the experience has been positive; the roommates were nice and the shared apartment comfortable enough, and the job made up for the rest.
You could try to find a renter for your own home, instead of selling it. If the market is that bad, maybe selling is not a good option right now. On the other hand, sometimes you have to cut your losses - if you can sell now and never have to worry about the house anymore again, that is worth something too (versus having to find a renter, having to pay for repairs, things like that). Also, if you bought the house for 100k, paid 130k on it in mortgage by the time you paid it off, if the house was valued at 200k in 2006 but now is valued at 150k, then if you sell it for 150k you still have made a profit. You are only losing "virtual" money - money which you could have cashed in on in 2006, but not anymore and maybe never again.
@Bluepearl: never owned a house, never sold one. But I did downsize from having my own apartment to sharing one when I moved to a more expensive area to get a more interesting job (that paid less, by the way). For me the experience has been positive; the roommates were nice and the shared apartment comfortable enough, and the job made up for the rest.