Author Topic: Mustachian Housing in an Expensive City  (Read 739 times)

kroozin

  • 5 O'Clock Shadow
  • *
  • Posts: 47
Mustachian Housing in an Expensive City
« on: July 29, 2019, 04:27:58 PM »
Hey everyone! I'm having an interesting internal debate about my housing situation and I'd love to get some Mustachian input! I currently live and work in Nashville, TN, which overall isn't a terribly HCOL area (compared to what I'm used to), but it's getting there. I work right downtown, and last year I lived in an apartment within walking distance of my office, which was amazing. Last year I decided I want to purchase a home, but I could only afford areas that were a little further out of town, so now I have a 15-20 minute drive commute into work, depending on traffic.

Upon discovering MMM and the suggestion of living as close as you can to work, combined with missing living in the heart of it all, I've started to think about my options for where I want to live over the next few years. Here are my options as I see them, let me know what you think!

Option 1: Stay at my current house, mortgage is $1370/mo and I have a roommate paying me $700/mo in rent. This would keep my 15-20 minute commute, in addition to the added costs of driving downtown when I go out in the area with friends.

Option 2: Rent out my house (I believe I need to live there for 2 years, per my loan type though), for which I expect I could get somewhere around $1,700 or $1,800 per month. Then rent an apartment downtown, preferably with a roommate and use the rental to offset the higher apartment rent a bit.

1 Bedrooms in the main downtown area range from $1,400 to about $1,600/mo and the 2 bedrooms range from $2,000 all the way up to $2,500 or more. So assuming a 2-bedroom place at $2,000 with $330-430 extra from my house rent and a roommate, my net rent would be $670-770. Without a roommate it wouldn't be as good at about $1,070.

Of course with this option, I have to consider the fact that I'll have to deal with issues that pop up at the home as a landlord, so the $330/mo is kind of misleading.

Any thoughts/suggestions?

cats

  • Handlebar Stache
  • *****
  • Posts: 1166
Re: Mustachian Housing in an Expensive City
« Reply #1 on: July 29, 2019, 05:00:01 PM »
What would the cost be for buying a condo or similar downtown?  Could you get a 2-bedroom condo and a roommate to offset the mortgage?  I know you said that when you were buying you had to go out of town a bit to get something in your price range, any chance your income or savings rate have nudged up enough to make a downtown place more affordable?  If you factor in the savings of not having to drive to work (15-20 minutes means what, a 10-15 mile commute each way? IRS mileage rates are currently around 55 cents/mile so you are racking up at least $100/month in commuting costs) and maybe even getting rid of your car completely, does a more expensive home purchase look a bit less expensive?


historienne

  • Bristles
  • ***
  • Posts: 373
Re: Mustachian Housing in an Expensive City
« Reply #2 on: July 30, 2019, 09:50:09 AM »
Of course with this option, I have to consider the fact that I'll have to deal with issues that pop up at the home as a landlord, so the $330/mo is kind of misleading.

Between vacancies and maintenance, I would not count on having any profit from the rental on a monthly basis (although obviously you're getting equity by paying the mortgage).   And you'd want to have enough liquidity to be able to weather substantial repairs and/or a long term vacancy, if necessary.  It's not likely in a good housing market, but it's a possibility.

terran

  • Magnum Stache
  • ******
  • Posts: 2879
Re: Mustachian Housing in an Expensive City
« Reply #3 on: July 30, 2019, 10:38:28 AM »
These are two different decisions, don't treat them as one. Do you want to move closer to work, and can you afford it? Figure out the best way to do that (buy vs rent). If you decide to move, does your current home make a good rental or should you sell it (as a first pass, multiply what you would net out of a sale by 1% and see if you can rent for at least that much)?

honeybbq

  • Handlebar Stache
  • *****
  • Posts: 1348
  • Location: Seattle
Re: Mustachian Housing in an Expensive City
« Reply #4 on: July 30, 2019, 10:55:12 AM »
Just want to say ... living with someone paying half your mortgage and only a 15 minute commute sounds like ULTRA winning to me.

/Seattlesucks
/1 hr to go 6 miles
/houses are 1 million dollars

kroozin

  • 5 O'Clock Shadow
  • *
  • Posts: 47
Re: Mustachian Housing in an Expensive City
« Reply #5 on: July 30, 2019, 11:44:05 AM »
If you factor in the savings of not having to drive to work (15-20 minutes means what, a 10-15 mile commute each way? IRS mileage rates are currently around 55 cents/mile so you are racking up at least $100/month in commuting costs) and maybe even getting rid of your car completely, does a more expensive home purchase look a bit less expensive?

I wish! Sadly condos in this area START at $400k for ones in pretty bad shape, but in reality are more in the $500-600k range, so unfortunately buying is out of the question if I want to go the living-downtown route.

Between vacancies and maintenance, I would not count on having any profit from the rental on a monthly basis (although obviously you're getting equity by paying the mortgage).   And you'd want to have enough liquidity to be able to weather substantial repairs and/or a long term vacancy, if necessary.

This is a great point. I feel pretty good in general as Nashville is a popular market, but IF I decide to do something like this, I'll want to make sure I have plenty of cushion available in case something goes wrong or I have a vacancy.

Just want to say ... living with someone paying half your mortgage and only a 15 minute commute sounds like ULTRA winning to me.

/Seattlesucks
/1 hr to go 6 miles
/houses are 1 million dollars

haha being formerly from CT and having a very similar commute/cost of living, I totally feel you there. I don't miss it one bit.

These are two different decisions, don't treat them as one. Do you want to move closer to work, and can you afford it? Figure out the best way to do that (buy vs rent). If you decide to move, does your current home make a good rental or should you sell it (as a first pass, multiply what you would net out of a sale by 1% and see if you can rent for at least that much)?

This probably hit home the most, thank you for this. I think when I honestly ask myself, the main reason I was considering this was because I missed the convenience of living downtown and I was trying to "make it work" instead of seeing if it actually made sense. I know for a fact I won't be able to rent the house for 1% of what it's worth, nothing in my area meets that criteria. But I also JUST bought the house last year, so selling doesn't seem like a great idea.

Plus, I have a good thing going with a roommate help paying the mortgage and I probably shouldn't give something like that up. Appreciate all the advice everyone!

frugaliknowit

  • Handlebar Stache
  • *****
  • Posts: 1687
Re: Mustachian Housing in an Expensive City
« Reply #6 on: July 31, 2019, 09:38:11 AM »
You just bought the house a short while ago and have a roommate!  Cool your jets!