Author Topic: Should frugalnacho buy a new house and move?  (Read 12643 times)

frugalnacho

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Should frugalnacho buy a new house and move?
« on: September 23, 2020, 07:59:36 AM »
Mrs. frugalnacho keeps looking at new houses and keeps expressing an interest in moving.  She is looking at the price of our house and comparing it to the cost of a new house and concluding it won't be that expensive.  I am looking at it and I think it's extremely cost prohibitive.

The current home is a 3/2, ~1,200 sq ft, basement, no garage, ~5,000 sq ft lot.  Standard suburbia.  Approximate value $200k.

We are in a bit of a unique situation, as my wife participated in a new home owner incentivization program during the great recession.  The stipulations are that the county will loan you 1/2 the purchase price of the home at 0% interest indefinitely as long as you continue to live in as your primary residence.  If we sell the house, or rent it out, or change our primary residence then the loan is immediately due in full.  The entire point of this program was to allow low income people to purchase a house, and stay in it, and IMO it's working.  She purchased the home for ~$93k.  She got ~$46k in the 0% never-a-payment-due loan, and also ~$47k in a traditional mortgage (which has since been paid off).

The main driving points for wanting a new house:
     We have no garage.  A house with a garage would be extremely nice.
     I would like a much bigger yard.  The standard size suburban lots suck.  I don't need a farm, but enough space to have a big garden, swing set for kid, patio, etc, and just some free yard would be nice.
     More space in the house.  We can't really host a large gathering with our current house without being cramped. 



She is looking at larger houses within our same area that are priced around $240k, which doesn't seem like that much of an upgrade, and sounds entirely reasonable on the surface.  She isn't as concerned with having a larger yard, so is mostly looking at houses that have the same standard size lot we already have (which is inadequate IMO).

My counterpoint is that moving in general is extremely expensive.  We are going to lose 6% of the value of the house in realtor fees, and the same is true for the house we are buying.  Everyone I talk to points out that technically the seller is losing 6%, but that's a distinction I don't really understand.  You can write it down on paper however you want, but the fact is 6% of the cost of both houses will be eaten up by parasitic realtor fees, and everyone involved is ultimately sharing that cost.  The very act of buying/selling houses is extremely expensive for this reason.  We are also going to lose the $46k 0% loan we currently have.

So around $26k will be eaten up by realtors during both transactions, and we will have to pay off a $46k 0% loan immediately.  Our current taxes are based on the original $93k purchase price of our home, and is capped at a 4% increase each year, so purchasing a new home at $240k will likely increase our property tax burden as well.  I am also assuming insurance will be more expensive for a more expensive home.

Some quick calculations:
$200k sell price
-$12k realtor fees
-$46k 0% mortgage payback

= $142k net

Apply that $142k to a $240k house and get a new $98k mortgage at current rates.

Am I crazy or is this a terrible, terrible deal financially?  I understand she wants to move, but it just seems so expensive. 


 

Jack0Life

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Re: Should frugalnacho buy a new house and move?
« Reply #1 on: September 23, 2020, 08:15:21 AM »
YOLO.
If you find a "forever" home, this shouldn't deter you from moving.
One thing I do hate is the hike in Property tax.

former player

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Re: Should frugalnacho buy a new house and move?
« Reply #2 on: September 23, 2020, 08:23:43 AM »
Realtor fees are 6% are "paid" half by the buyer and half by the seller: you are losing 6% overall (and only paying out of pocket on the cheaper house you are selling).

But apart from that it seems that both you and Mrs FN could benefit from an upgrade if you can find a house that she likes better on a lot that you like better.  If you find that unicorn you can then work out whether the finances work.

dcheesi

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Re: Should frugalnacho buy a new house and move?
« Reply #3 on: September 23, 2020, 08:24:21 AM »
On the 6% question, one way to look at it is that if you were to sell your house and buy another one of equal value/price, then your costs are 6% + seller's closing costs, plus buyer's closing costs. While you're technically covering the seller's 6% on the new house, the same is true of the buyer of your old house; either way you slice it, you're only on the hook for one 6% cost.

Now of course things get more complicated when the values of the houses differ (as they usually do). But that's the gist of the argument.

FWIW, I think that the seller-pays scenario is philosophically more valid, in the sense that "value" == what people are willing to pay for something. If the price is $240k, does the question of whether you're willing pay that price actually hinge on your knowledge that 6% of it going to someone else? I would argue that for most people, it does not. It's a simple question of how much you can afford and how much you want that particular house at the time.

Likewise, whether this is a good deal or not is really up to you. The special loan does complicate things a bit in theory, but in practice working the numbers, as you have, still gives you the appropriate value proposition: is a bigger house (and maybe a bigger yard) worth a $98 mortgage to you?

couponvan

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Re: Should frugalnacho buy a new house and move?
« Reply #4 on: September 23, 2020, 08:42:54 AM »
At 2.5% interest rates for purchase loans of 30 years, you have plenty of equity to payoff the $45K 0%. Is it going to be more expensive? Yes. How much more expensive? Let’s annualize the expenses into the new loan

$12K realtor fees - $300 annual interest
$45K loan payout- $1,125
$40 increased home value purchased  -$1,000

Total annual cost $2,425.

NOW.... if you invest the money you take out of the house instead of putting it all in the mortgage....

$240 house. $48K down payment for 20%

Take the $142K you net and subtract your $48K down payment. That leaves $94K to invest-investing in stocks over the last 10 years returns 7% on average. So the invested $94K can provide you 4.5% returns on average.
$94K invested annual difference in returns vs cost of mortgage interest- $4,230.

You’d be saving $1,805 per year taking the cash out and buying a bigger house while investing the equity.

Increased taxes, insurance, and utilities will eat up some of the savings, but it’s likely a wash. 

Fixed interest rates are so low right now it seems crazy not to borrow to the 80%.


slappy

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Re: Should frugalnacho buy a new house and move?
« Reply #5 on: September 23, 2020, 08:46:52 AM »
I am struggling with a similar situation. I love our house, but there are some things I really dislike. However, we have an amazing yard. I've been looking at other houses, and I am put off by the cost. Especially in our area, where prices have appreciated so much. I think we have decided on just renovating our current place, although that may end up being just as expensive, depending on what we do. Property taxes are also a concern, as they would likely increase a couple hundred per month. I really struggle with the decision for a few reasons. 1) I'm one year into a new role that increased my salary to the point that I can actually afford a nicer place. I feel uncomfortable increasing our lifestyle so soon by such a permanent change. 2) I want my kids to experience a modest home. A lot of the places up for sale now are beautiful homes, lots of new construction. I'm just not sure that's the experience I want them to grow up. Yet I also don't want them to feel deprived if we can afford something bigger. (Three kids might hate living in our house when they are teenagers.)  3)A bigger house would be more of a burden as we age. We don't want to buy and then have to downsize later.

Are you able to build a garage? We built a garage last year and it was a life changer! It was really worth the cost. The large gatherings that are tough to host indoors can usually be hosted in the garage, weather dependent of course. We don't generally do large gatherings, but all three kids have summer birthdays and people always congregate in the garage for the parties. Plus it's just awesome to have a garage. Of course, a garage doesn't fix your issue with your yard, and might actually make it worse if you have to use a portion of the yard for the garage.

I am struggling so much with this decision, so I know how you feel! I keep thinking that maybe prices will go down in a year or two and it will make the decision easier.

frugalnacho

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Re: Should frugalnacho buy a new house and move?
« Reply #6 on: September 23, 2020, 08:49:44 AM »
Like I said I understand how the math works out regarding 6% realtor fees, and the cost is a burden to all parties involved.  I'm not under the impression I am solely paying 6% for both houses (the fees I listed are only the 6% for selling my house).  The whole system just seems excessive that every transaction is getting a 6% haircut, and that cost is being built right into the price of all homes.  The seller may be paying the 6% fees on his end, but that means on the purchase of a $240k house, if I wanted to resell it for the same price I would only get $225.6k.  My whole point is that buying/selling houses has an unreasonably high transaction cost IMO, and no matter how you slice it that price is ultimately paid by everyone buying/selling houses.   

I don't think she is looking at a "forever" home or finding a special unicorn.  My plan this entire time has been to ride out my career for another 5-7 years until FIRE, at which point we can actually choose a forever home anywhere we want without being restricted to staying within commuting distance of my job.  I really hate the winters in michigan, but have always loved the hot summers, so was always planning to move someplace with a much warmer climate, but now that I'm getting fatter and older I am much less tolerant of the sweltering heat and someplace like florida is sounding less inviting to me.  But I still hate the winters here. 

It's also not like the $46k 0% mortgage is just free money either.  Well, the 0% interest part of it is, and the fact that we don't have to make payments and can instead build our stach has already helped us immensely.  We will essentially be trading the 0% interest for whatever the current rate is (~3%?) for that $46k worth. 

frugalnacho

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Re: Should frugalnacho buy a new house and move?
« Reply #7 on: September 23, 2020, 08:51:57 AM »
At 2.5% interest rates for purchase loans of 30 years, you have plenty of equity to payoff the $45K 0%. Is it going to be more expensive? Yes. How much more expensive? Let’s annualize the expenses into the new loan

$12K realtor fees - $300 annual interest
$45K loan payout- $1,125
$40 increased home value purchased  -$1,000

Total annual cost $2,425.

NOW.... if you invest the money you take out of the house instead of putting it all in the mortgage....

$240 house. $48K down payment for 20%

Take the $142K you net and subtract your $48K down payment. That leaves $94K to invest-investing in stocks over the last 10 years returns 7% on average. So the invested $94K can provide you 4.5% returns on average.
$94K invested annual difference in returns vs cost of mortgage interest- $4,230.

You’d be saving $1,805 per year taking the cash out and buying a bigger house while investing the equity.

Increased taxes, insurance, and utilities will eat up some of the savings, but it’s likely a wash. 

Fixed interest rates are so low right now it seems crazy not to borrow to the 80%.

Yes I would likely get as large a mortgage as possible without incurring PMI and invest the difference.  My numbers were just for illustrative purposes, because it seems way less complicated to boil it down to a single number. 

ericrugiero

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Re: Should frugalnacho buy a new house and move?
« Reply #8 on: September 23, 2020, 08:53:35 AM »
Yes, it's expensive to move.  It will cost you ~$100K which you can get a low interest loan for.  But, the $46K is already owed and will be re-payed whenever you (or your heirs) sell the house.  Really, it would cost you ~$55K + the opportunity cost of that $46K you aren't needing to pay back right now. 

Only you and your wife can decide if that cost is worth it in your quality of life.  Could your current home be improved for less than the cost of moving?  Finish the basement and build a garage? 

frugalnacho

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Re: Should frugalnacho buy a new house and move?
« Reply #9 on: September 23, 2020, 09:01:03 AM »
Yes, it's expensive to move.  It will cost you ~$100K which you can get a low interest loan for.  But, the $46K is already owed and will be re-payed whenever you (or your heirs) sell the house.  Really, it would cost you ~$55K + the opportunity cost of that $46K you aren't needing to pay back right now. 

Only you and your wife can decide if that cost is worth it in your quality of life.  Could your current home be improved for less than the cost of moving?  Finish the basement and build a garage?

I forgot to mention, but part of the stipulation on that $46k 0% mortgage is that we are never allowed to refinance or take out a home equity loan.  The original mortgage was locked in at 5.5%, and when interest rates dropped we were unable to refi to a lower rate for this reason, which is why we decided to pay it off.  Any home improvements would need to be completely funded without a loan.  We have the money in our brokerage account, but would have to liquidate a large portion of it to afford that.

We looked into building a garage and we would have to pour a large amount of concrete, relocate all the wires to the house, and build the garage, and do it all without a loan.  It would also significantly cut down on the amount of space we have in the backyard, which I think is already small.  After evaluating it we decided that even though we really wanted a garage it just wasn't worth it (financially and space wise) and we'd likely not recoup enough when we resold. 

slappy

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Re: Should frugalnacho buy a new house and move?
« Reply #10 on: September 23, 2020, 09:13:53 AM »
Yes, it's expensive to move.  It will cost you ~$100K which you can get a low interest loan for.  But, the $46K is already owed and will be re-payed whenever you (or your heirs) sell the house.  Really, it would cost you ~$55K + the opportunity cost of that $46K you aren't needing to pay back right now. 

Only you and your wife can decide if that cost is worth it in your quality of life.  Could your current home be improved for less than the cost of moving?  Finish the basement and build a garage?

I forgot to mention, but part of the stipulation on that $46k 0% mortgage is that we are never allowed to refinance or take out a home equity loan.  The original mortgage was locked in at 5.5%, and when interest rates dropped we were unable to refi to a lower rate for this reason, which is why we decided to pay it off.  Any home improvements would need to be completely funded without a loan.  We have the money in our brokerage account, but would have to liquidate a large portion of it to afford that.

We looked into building a garage and we would have to pour a large amount of concrete, relocate all the wires to the house, and build the garage, and do it all without a loan.  It would also significantly cut down on the amount of space we have in the backyard, which I think is already small.  After evaluating it we decided that even though we really wanted a garage it just wasn't worth it (financially and space wise) and we'd likely not recoup enough when we resold.

I'd move just for the garage! haha

Especially when you live somewhere with cold winters. (We are in NH.)

elaine amj

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Re: Should frugalnacho buy a new house and move?
« Reply #11 on: September 23, 2020, 09:14:34 AM »
I'm having some of the same issues. Our current house is fine. But several things I don't like that will cost too much to change (like a garage!). I just can't stomach dropping $50k into an extensive renovation. The one thing I am being obstinate about is I refuse to let our housing costs go up. So having a hard time finding the unicorn that has all the stuff I want at a breakeven point with this house. So for now, we stay. And are spending a few hundred bucks on minor redecorating with used furniture.

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partgypsy

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Re: Should frugalnacho buy a new house and move?
« Reply #12 on: September 23, 2020, 09:24:42 AM »
I don't care about not having a garage since I'm not a car person, and don't live somewhere where it's cold. I was going to say go for it, but if it's only for 5-7 years, I don't know? Honestly due to climate change michigan will get warmer, as well as other locations. Im originally from the Midwest, live in NC and for me this is the most south I'll go given I hate the combination of heat + humidity in the summer (and when I'm saying hot, 90+ degree weather for weeks, heat index in the 100's). What I would do is simply find a place to stay at in the winters because otherwise michigan has a very nice climate, has seasons, lots of places for recreation etc. If u do decide to move if you are anything like me florida will be too much of a change.
« Last Edit: September 23, 2020, 09:26:51 AM by partgypsy »

Paper Chaser

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Re: Should frugalnacho buy a new house and move?
« Reply #13 on: September 23, 2020, 09:31:39 AM »
Can the house be sold without a realtor to reduce some of the commission? Seems like the internet is making that easier all the time.

Sibley

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Re: Should frugalnacho buy a new house and move?
« Reply #14 on: September 23, 2020, 09:33:06 AM »
Well, first, she's not factoring in your wants for a bigger yard, so you're not really getting anything out of it. You're a couple. You need to sit down and discuss this. It's a money decision yes, but it's also a lifestyle decision. So, your wife wants more house space, you want more yard, and you don't want to spend a ton. You need to look for a house that has a bit more space and more of a yard, in a location that makes sense (commute, schools, friends/family, etc) at a price that you're both comfortable with. So, when she's browsing zillow she's got a list of all the wants.

And yes, buying/selling is expensive, which is why you put the thought into it so you can find one you'll be happy with for a long time. But doing a flat "no" isn't going to work, and it's not respecting your wife's desires.

RetiredAt63

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Re: Should frugalnacho buy a new house and move?
« Reply #15 on: September 23, 2020, 09:57:33 AM »
I understand your desire for a garage, they are wonderful in snow regions.  Are you allowed tempos in your area?  I saw the first sign of fall the other day, a tempo framework up and waiting for the cover.

Cranky

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Re: Should frugalnacho buy a new house and move?
« Reply #16 on: September 23, 2020, 10:32:53 AM »
Hmmm. As someone about to buy a new house and move, I'd say... probably not in your situation. If you are thinking of moving to a different area in 5-7 years, I'd stick it out in the house you've got, since it seems like you are comfortable enough there.

We're moving to a whole different area, as this will be our big retirement move, and frankly, it's kind of a pain to set everything up in the middle of a global pandemic. Plus it's a seller's market...

frugalnacho

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Re: Should frugalnacho buy a new house and move?
« Reply #17 on: September 23, 2020, 10:33:11 AM »
The garage would likely never even store a car, especially if it's in the backyard behind a gate.  It would mostly be used for storage, and tools, and bikes.  I would be far more excited about having a space to do woodwork and mechanical repairs than having a place to park my car.

frugalnacho

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Re: Should frugalnacho buy a new house and move?
« Reply #18 on: September 23, 2020, 10:47:39 AM »
Hmmm. As someone about to buy a new house and move, I'd say... probably not in your situation. If you are thinking of moving to a different area in 5-7 years, I'd stick it out in the house you've got, since it seems like you are comfortable enough there.

We're moving to a whole different area, as this will be our big retirement move, and frankly, it's kind of a pain to set everything up in the middle of a global pandemic. Plus it's a seller's market...

Well that's been my plan.  Wait until achieving FIRE, then we are completely free to move ANYWHERE we want and can get whatever we want without being tethered to some specific location.  The wife is obsessed with horses and would love to have horses, but horses are expensive AF and need a lot of space, and it's simply not practical for us to move to a location to have horses and still work in the city of Detroit.  It would be very cost prohibitive and make my working career much more stressful while also likely extending it a decade.  But if we achieved FIRE then we could easily work another 1-2 years and have a big huge stach ready to buy us some acreage and horses.  As of now large acreage and/or horses are not even in consideration. 

partgypsy

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Re: Should frugalnacho buy a new house and move?
« Reply #19 on: September 23, 2020, 11:14:45 AM »
Sounds like it is better to stick it out. I have heard due to Covid there are many people who want to move to bigger houses because of cabin fever, so her desire for a bigger house, and your desire for a garage/workshop and bigger yard is entirely understandable. I would continue to have conversations with spouse how you envision the next 5-7 years, and the time after that; location interests, etc. If she found a house she liked and worked for you, would she be willing to stay and give up the horses? Things like that.

Everyone is different. My former parents in law, esp my MIL love houses and would sell and buy a new house basically for fun, if they got bored with the house or saw one they liked better. They lived in 3 towns and moved at least 7 times.

Retire-Canada

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Re: Should frugalnacho buy a new house and move?
« Reply #20 on: September 23, 2020, 11:23:39 AM »
Hmmm. As someone about to buy a new house and move, I'd say... probably not in your situation. If you are thinking of moving to a different area in 5-7 years, I'd stick it out in the house you've got, since it seems like you are comfortable enough there.

My GF has expressed an interest in moving, but given I am FIREd and she will retire in ~6 years my stipulation is that this next house is the "Last House". So we either move to our retirement destination now [which is possible] and she'll have to adjust her work situation [which is also possible] or if she wants to move locally where we are now [easiest for her work] than that means we've decided to retire in our current town [not an awful idea, but not ideal].

What I don't want to do is spend a lot of time and $$ to move to a nicer house for 6 years and then move again when she retires.

So I'm with Cranky unless you've decided to stay in the local area after retirement don't move for a few years. If you need some incentive to keep your wife happy quantify the savings and set aside that range of money to make the post-FIRE home more appealing to her than moving twice.

jrhampt

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Re: Should frugalnacho buy a new house and move?
« Reply #21 on: September 23, 2020, 12:27:06 PM »
Moving is such a huge time and money suck that it probably doesn't make sense now unless you find that perfect house that you BOTH love enough that it's worth it.

SunnyDays

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Re: Should frugalnacho buy a new house and move?
« Reply #22 on: September 23, 2020, 12:57:36 PM »
Stay where you are until you retire, put up a “fabric garage,” and wait to see how things play out with Covid.  In the meantime, research where you eventually want to live, visit there once travel is allowed, and find a boarding stable nearby for a horse.  They don’t need to be that expensive if you limit yourself to one horse and a tie stall in a small facility without all the bells and whistles.  You can buy a perfectly adequate riding horse for a couple grand.  Board and vet fees will cost more than the horse in the long term, but your wife can and should learn to do some basic medical care on her own and a stable owner may be willing to reduce fees for some barn labor.  If she’s never had horses before, this will also give her a taste of the work involved before you buy a property suitable to host them.  Horses are beautiful, majestic animals, but a shit ton of work and she might get disillusioned quickly if she doesn’t realize this.

Laura33

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Re: Should frugalnacho buy a new house and move?
« Reply #23 on: September 23, 2020, 01:02:22 PM »
I am rapidly reaching the opinion that no one should make any dramatic life changes until this whole Covid crisis has passed.  People are under a lot of stress in a lot of different ways, and that is coming out in ways you would not expect.

In the past 6 months, I have wanted -- as in, crying-because-I-couldn't-have-it wanted -- both a local mansion that would have cost us as much to renovate as the purchase price, and a house in Maine.  Oh:  and I wanted to rent a place in some vacation wonderland for the next three months while school is online.

That doesn't mean I should buy/do all those things (or any of them!).  It means I'm going fucking stir crazy being stuck in my house in my town and not able to travel freely and spending all day with a 14-yr-old D&D-obsessed teenager who can't seem to understand that I'm trying to get some goddamn work done.  Apparently my dreams of escape all take the form of real estate that I don't need. 

Same rules apply now as always:  figure out what is really bugging you about the house (vs. just existential stress acting out).  Prioritize those wants from most important to least.  Figure out if there is a way to get 80% of what you want the most for 20% of the cost (e.g., you do not need a whole entire garage for a workshop/bike shed).  If that is still unsatisfying, figure out how long making this upgrade would delay your FIRE date, and decide if it's worth it to you. 


robartsd

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Re: Should frugalnacho buy a new house and move?
« Reply #24 on: September 23, 2020, 01:13:46 PM »
The garage would likely never even store a car, especially if it's in the backyard behind a gate.  It would mostly be used for storage, and tools, and bikes.  I would be far more excited about having a space to do woodwork and mechanical repairs than having a place to park my car.
For me priorities would be 1) tools and bikes stored in the garage are easily accessible without moving the car, 2) any auto maintenance that I DIY can be done in the garage, 3) there is enough space to work on my other ship projects after moving the car out of the garage. If the garage is too small for priority 1 then the car is not stored in the garage. if the garage is large enough for priority 2 then it probably is large enough for priority 1 with the car stored there. Priority 3 might mean having a workbench or two on wheels to easily reconfigure between garage and shop modes.

The availibility of low intrest rates and your current equity position mean it would make sense to take out a loan. If you loved your house and expected to live it it for 5+ more years, I might even encourage you to pay off the 0% loan so that you are free to tap the equity. The 0% loan is no longer saving you money and should not be used as the reason not to move. That said, your priorities for a property to move to should be just as important as your wife's and you should both be confident that the new home will be suitable for the 5-7 years you expect it will take you to reach FIRE, otherwise you should not make the purchase.

Sandi_k

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Re: Should frugalnacho buy a new house and move?
« Reply #25 on: September 23, 2020, 01:42:58 PM »
This is where a concerted "money-only" focus is unhelpful. You have a priority to spend no more money on housing, or at least not to lose $45k of other people's money. Your wife would like a space that is more usable, *especially* with everyone SIP with the pandemic.

We moved 9 years ago, after 19 years in our first house. Yes, we bought a more expensive home. Yes, the property taxes are higher. Yes, our mortgage payment is higher, because I insisted on a shorter-than-30-year-mortgage.

We have still managed to save a big proportion of our income. And we are so, so grateful that we've been in this home during COVID.

I would absolutely move if I had a yard too small for my kids, no garage, and had to dig out cars from a snowbank in the winter.

You cannot optimize every dollar without sacrificing some happiness. I prefer a balance of thoughtful frugality, instead of focusing only on the cost of something that adds enormously to my quality of life.

norajean

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Re: Should frugalnacho buy a new house and move?
« Reply #26 on: September 23, 2020, 01:51:32 PM »
Once you are on the hedonist treadmill, it is hard to get off.   A year or two after moving, your wife will starting look at real estate again and find a house with a better kitchen, larger garage, better yard, nicer location, etc. It is endless.

Don't give in!  Stay put!

Villanelle

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Re: Should frugalnacho buy a new house and move?
« Reply #27 on: September 23, 2020, 02:14:31 PM »
In addition to the costs you listed, a bigger house likely means more expenses. Higher utility bills, for starters.  Then, you mention that you can't entertain in your current space.  So does that mean a larger dining table and additional seating will be purchased to fill the additional space?  A desk for the home office?  A bed for the new guest bedroom (or guest/home office combo)?  Also I find there are a ton of small expenses when you move (granted, our moves have always been international).  You don't throw the old toilet brush in the box with your things.  You buy a new one.  The kitchen trash can no longer fits in a cabinet so you need a new one.  The new room you didn't have before also needs a trash can and another extension cord.  Old place had a built in paper towel holder; new one needs one on the countertop.  You don't have enough curtains for all the windows, and two of your sets are too short for the new higher ceilings.  Shelves for that garage in which you want to store things.   (Yes, I know many of these things are option and or can be done cheaply, but my sense is she wants a "nice" place, which usually translates to "one where the paper towels aren't just sitting on the counter.)  Then there are boxes which are expensive if you can't track down enough free ones, packing paper, a truck rental, the pizza and beer you buy for the friends not lucky enough to be legitimately busy that weekend, etc.     So add all that to your expense spreadsheet.

To me, it wouldn't be worth it if you are almost certainly moving in half a dozen years. 


frugalnacho

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Re: Should frugalnacho buy a new house and move?
« Reply #28 on: September 23, 2020, 02:27:12 PM »
We currently have 2 small sheds.  One for lawn equipment, corn hole boards, gardening stuff, etc, and one just for bikes.  It's a major pain in the ass for bikes though because the way they fit they are a hassle to get them out.  By a hassle I mean it's a 5 minute ordeal of pulling bikes and trailers out to get what we want.  Obviously we can make it work and live with it, but it would be so nice to be able to just leave the bike trailer attached to one of our main bikes and just ride it straight out of the garage.  Would also be nice to have a roof over my head to work on a bike, or a car, or anything really.   



Frankies Girl

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Re: Should frugalnacho buy a new house and move?
« Reply #29 on: September 23, 2020, 02:47:08 PM »
We currently have 2 small sheds.  One for lawn equipment, corn hole boards, gardening stuff, etc, and one just for bikes.  It's a major pain in the ass for bikes though because the way they fit they are a hassle to get them out.  By a hassle I mean it's a 5 minute ordeal of pulling bikes and trailers out to get what we want.  Obviously we can make it work and live with it, but it would be so nice to be able to just leave the bike trailer attached to one of our main bikes and just ride it straight out of the garage.  Would also be nice to have a roof over my head to work on a bike, or a car, or anything really.   

Can you remove the 2 small sheds and replace with a large enough shed to hold all the things in the way they can be utilized better? Seems like something to consider anyway.

And to build off that idea (larger multi use storage/work/play structure) as far as the garage thing, that's not a garage you want, it's a workshop. Different animal if not built to hold vehicles. Have you actually considered the value if creating a multi use outdoor/extra area made staying in the current house better, I'd consider the costs involved cheaper than uprooting and moving at this time. I'd also look at improving your outdoor space. I've seen some nice smaller workshops that were also used as extra outdoor entertaining space (tools and workbench along walls/moveable workbenches so space in main area could house table/seating as well, seating is foldable to take up less room overall or allow items to be stored in rafters (exposed) or hung on walls (higher ceilings to really take advantage of the upward space for storage).


K_in_the_kitchen

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Re: Should frugalnacho buy a new house and move?
« Reply #30 on: September 23, 2020, 05:25:10 PM »
I am rapidly reaching the opinion that no one should make any dramatic life changes until this whole Covid crisis has passed.  People are under a lot of stress in a lot of different ways, and that is coming out in ways you would not expect.

In the past 6 months, I have wanted -- as in, crying-because-I-couldn't-have-it wanted -- both a local mansion that would have cost us as much to renovate as the purchase price, and a house in Maine.  Oh:  and I wanted to rent a place in some vacation wonderland for the next three months while school is online.

That doesn't mean I should buy/do all those things (or any of them!).  It means I'm going fucking stir crazy being stuck in my house in my town and not able to travel freely and spending all day with a 14-yr-old D&D-obsessed teenager who can't seem to understand that I'm trying to get some goddamn work done.  Apparently my dreams of escape all take the form of real estate that I don't need. 

Same rules apply now as always:  figure out what is really bugging you about the house (vs. just existential stress acting out).  Prioritize those wants from most important to least.  Figure out if there is a way to get 80% of what you want the most for 20% of the cost (e.g., you do not need a whole entire garage for a workshop/bike shed).  If that is still unsatisfying, figure out how long making this upgrade would delay your FIRE date, and decide if it's worth it to you.

This!!!

We are 6 months into having everyone home (almost all the time).  We have a smaller, single story house.  3 bedrooms, 2.5 bathrooms (and how I love my little bedroom closet turned half bath!), no separate family room.  DH is working from home FT, sons are attending college online from home.  We turned the largest bedroom into a bedroom for DS#1 / office for DH / media room for all of us.

These past 6 months have been wild.  First I decided that we should move to the northern Washington state (retirement friendly but still in the west) to escape extreme heat but still be near great mountain biking.  Then I thought we should find a duplex or at least a house with an ADU.  Next I looked into converting our garage into an ADU, but we didn't want to give up the garage space and the lot won't accommodate building a separate ADU.  My last rabbit hole was thinking we should buy a large McMansion in a neighboring town with at least 5 bedrooms and a separate family room (shared bedroom with DH, bedroom for each kid, bedroom to use as office, bedroom to use as craft/sewing/art studio), with a large attached garage, large lot, and preferably backing up to the hills.  This last one is particularly interesting considering we've never wanted a McMansion or to live someplace completely car dependent.

We considered renting a mountain house for a month or two, but we live car-lite and our sons wouldn't have been able to get to work.  As much as I want the space, I know Covid is messing with us.

Truth is, we love our house -- we just hate Covid.  Our kids are of the age they should clean up their messes but they don't, and the messes drive us crazy, while at the same time we know at their ages we were on our own and our apartment got very messy!  Different stages of life, as DH put it.  One kid makes vocal noises all the time (beat boxing and other vocal exercises!  With a small house I often shut myself into my bedroom because all three men are in online meetings/classes and need to be in different rooms.  They all want to talk to me whenever they aren't busy with something else.  I went from being the only one home for hours and hours everyday to never being alone at all.


partgypsy

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Re: Should frugalnacho buy a new house and move?
« Reply #31 on: September 23, 2020, 06:02:33 PM »
K in the kitchen, wow. Might need a she shed!

Milizard

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Re: Should frugalnacho buy a new house and move?
« Reply #32 on: September 23, 2020, 06:32:22 PM »
My vote is, yes, if you can find something suitable that provides you with your garage and bigger yard, as well as the things your wife wants.  What you describe with the bikes in the shed sounds like a huge pain in the ass, and I find as you get older, your tolerance for pita diminishes greatly.

I used to never park in a garage, but I did get a carport at my last apartment. That was so nice to have! But still, my first and only house has a double garage. I was a bit nervous about parking in it, but I've totally hedonically adapted to it in the Michigan winter's!  It makes it so much easierto deal with the freaking cold/snow/rain/ice. I can't believe I resisted using it at first.  Yes, I'm spoiled, but s lot of people pick up and move multiple states to the South in order to not deal with it, so I don't think a garage is going too far.

Buffaloski Boris

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Re: Should frugalnacho buy a new house and move?
« Reply #33 on: September 23, 2020, 06:53:11 PM »
I look at this differently. What are the itches that need to be scratched and what is the most effective way to do that?

Things I see are a bigger area to play with projects and toys, more space to garden, place for the kids to play, and a place for gatherings and parties.

I saw the saying somewhere and agree with it: buy utility and rent luxury. The utility house is already owned. A place to sleep, eat, take a shower and do what needs to be done. The rest can be rented a darn lot cheaper and you can see if it’s something you really care about. So how about....

Joining a makerspace or rent a garage in the local area.
Renting a garden plot. Many churches and cities do this.
Going to the park. Free!
Rent a place for the periodic gatherings and parties. Say at a hotel or community center or a shelter at a local park.

You’ll find that some of this stuff, once you have it, doesn’t appeal as much as it did and you really don’t want to own or rent it. Great! You won’t be stuck owning it and can quit renting it. Conversely you might find something you really do spend time with. Better plan on buying that at your eventual permanent home.

frugalnacho

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Re: Should frugalnacho buy a new house and move?
« Reply #34 on: September 23, 2020, 11:15:33 PM »
The availibility of low intrest rates and your current equity position mean it would make sense to take out a loan. If you loved your house and expected to live it it for 5+ more years, I might even encourage you to pay off the 0% loan so that you are free to tap the equity. The 0% loan is no longer saving you money and should not be used as the reason not to move. That said, your priorities for a property to move to should be just as important as your wife's and you should both be confident that the new home will be suitable for the 5-7 years you expect it will take you to reach FIRE, otherwise you should not make the purchase.

Assume I have the $46k 0% mortgage, and also $46k in a brokerage account to balance that.  House is worth $200k, and I can borrow 80% ($160k).  Closing fees would be 3% of the loan amount.  Assume stock market returns are average every month like a savings account. 

Scenario A:
I pay off the $46k mortgage with my $46k brokerage account.   I take $160k cash out refi @3%, and I receive $155.2k cash (cash out less 3% in closing costs).  I make my $640.54 mortgage payment every month and invest nothing in the brokerage.

Scenario B:
I keep the 0% mortgage, and the $46k in the brokerage account.  I add $640.54 to the brokerage account every month. 

By my calculations Scenario A starts me off $4,800 in the hole due to closing costs. The stock market needs to return at least this much to make scenario A break even.  Above this return and scenario A (cash out refinance) wins, below this and scenario B (do nothing) wins.

                           Market Return Needed
5 Year break even   4.87%
10 Year break even   4.51%
15 Year break even   4.50%
20 Year break even   4.61%
25 Year break even   4.78%
30 Year break even   5.00%

Am I thinking about this correctly and calculating it correctly?  It's unlikely I'll stay in this house for 30 years, and I'm not seeing a clear advantage one of way or another.  Maybe I'll come out ahead if I refinance, maybe I'll come out behind, it will be highly dependent on market returns and the sequence of those returns in reality.   

frugalnacho

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Re: Should frugalnacho buy a new house and move?
« Reply #35 on: September 23, 2020, 11:41:45 PM »
Performing a similar analysis on purchasing a new house:

Scenario A (sell house and buy new house):

Current house: $200k
Spend to fix house and moving costs: $10k
Realtor fees: $12k
Mortgage (0%): $46k
Brokerage account $46k

Sell house, subtract $10k, $12k, and $46k leaves me with a $132k check.  Plus the $46k in my brokerage gives me $178k.   

Buy $240k house, put $48k (20%) down, and take mortgage out for $192k.   This gives me mortgage balance of $192k (30 yr @ 3%), and a brokerage account of $130k.  And a mortgage payment of $809.48.

Scenario B (do nothing but invest $809.48 each month):
I keep the 0% mortgage, and the $46k in the brokerage account.  I add $809.48 to the brokerage account every month.

By my calculations Scenario A starts me off $62k in the hole due to realtor fees, fixing house/moving costs, and buying $40k more worth of house. The stock market needs to return at least this much to make scenario A break even.  Above this return and scenario A (new house) wins, below this and scenario B (do nothing) wins.  Keeping in mind I would own a more valuable house with scenario A, but unfortunately I can't use that extra house to pay my expenses.

                              Market Return Needed
5 Year break even   17.77%
10 Year break even   12.57%
15 Year break even   11.19%
20 Year break even   10.79%
25 Year break even   10.77%
30 Year break even   10.89%

It looks likely that purchasing a house will end up costing me a lot over every time frame unless the market gets spectacular returns.  I expected that because I'd be purchasing a lot more house.  The difference in balance between the scenarios is striking though for low market returns.  If the market only gets 5% returns over the next 30 years it will cost me approximately $250k to make that small move up.  Even at 10% returns it will cost me over $100k over the course of the mortgage. 

As for how those will affect my FIRE date...I don't know.  I don't know exactly how much we spend, or exactly how much we plan on spending in the future.  I know I won't reach FIRE in the next 2-3 years, but should reach it before 10 years.   I have always only vaguely planned my FIRE date with the intention of quantifying and refining it as it got nearer.  I know that some large $100k+ swings in my liquid assets is going to delay it though, I just don't know exactly how long.

EDIT: I realized I did not add closing costs to the cost of the mortgage, which would just put me even further in the hole buying a new house. 
« Last Edit: September 23, 2020, 11:44:49 PM by frugalnacho »

RetiredAt63

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Re: Should frugalnacho buy a new house and move?
« Reply #36 on: September 24, 2020, 06:41:08 AM »
Looking back, way back . . .

I've owned 4 houses.  If we had used the money we spent on moving up from house 1 to house 2 we could have done amazing things with house 1.  House 2 was my dream house.  House 3, way more expensive, and way more expensive to run, was Ex's dream house.  House 4 was my affordable, basic, divorce house.  If we had stayed in house 1, or even house 2, we would have been in much better financial shape.  House 3 killed us in a bunch of ways.

You don't  appreciate how much even a basic house has until you go back to renting.  To have what I had in my 4th, basic, house, I rented a luxury apartment (dishwasher, en suite laundry).  Houses have laundry areas and it's easy to install a dishwasher.

My answer to your question is "probably not".  Build your man shed instead.  Put up a tempo for the car.

partgypsy

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Re: Should frugalnacho buy a new house and move?
« Reply #37 on: September 24, 2020, 06:48:01 AM »
You are making it too complicated. All I know is when I was researching mortgages for my sub 100K mortgage it was hard to find a break even, unless I went to a 15 year mortgage with a lower interest rate. I admit I haven't crunched your numbers but saving on 48K mortgage by having to pay refinance fees for lower interest is going to be tough.

If you want more house equity and the interest rate on the remaining, just pay it off faster. I think more, you need to figure out what the next 5-7 years looks like and after that retirement. Keep having conversations with your spouse. I personally don't think it's worth moving for 5-7 years of improved quality of life, but I would if I thought there was a good chance I would stay in that house for longer. But everyone is different.

ericrugiero

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Re: Should frugalnacho buy a new house and move?
« Reply #38 on: September 24, 2020, 07:22:01 AM »
The suggestion of building a bigger shed to store your bikes and tools makes sense.  Tear down one or both of the existing sheds to make room if needed.  It doesn't have to be super expensive to be big enough and nice enough for your needs.  This doesn't allow you an inside area to work on cars but you could do your bikes and all your other projects.  You save enough money by not moving to pay for auto repairs in bad weather. 

It's best to have a concrete pad for the shed to sit on but my FIL built one by pouring concrete for 4x4 uprights to sit in and building off that.  Maybe you could put something like that over the wires you don't want to dig up.  His shed is a little higher so he had to build a ramp for the mower but it's still a very nice shed. 

Doing this might be good enough to get you through till you are ready to FIRE in another location. 

frugalnacho

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Re: Should frugalnacho buy a new house and move?
« Reply #39 on: September 24, 2020, 08:06:51 AM »
partgypsy - I currently have no mortgage other than the $46k one that is at 0% interest, and I don't have to make any payments on (not until I refinance, rent out the house, or sell the house).   So my current mortgage cost is $0/mo, and once I sell the house I will lose $46k in equity by paying off that $46k 0% "mortgage". 

As for the sheds: Neither shed is on a slab.  Code is supposed to require a slab, but we decided fuck that we are putting one up anyway.  Then it got full and we decided we needed another shed just for bikes so we found another used one and put that up as well.  We just laid down some bags of gravel and leveled it and put the sheds up.  The bike shed is about 7X7 and full of bikes.  The other shed is about 8X8 and full of gardening and lawn equipment, and also now is accumulating a lot of toys for my almost 3 year old. 

I have a bike, my wife has a bike, we have a beach cruiser bike, we have another spare bike, my son has a little bike, he also has a pedal-less "balance" bike, we have a pull behind trailer, and we have 2 additional old non-operational bikes we are using for spare parts.  We also have accessories like a bike pump, spare tubes, snap on child seat, and bike tools.  This completely fills the 7x7 shed, and we have to lift the trailer up on store it on top of the bikes since it has such a huge footprint.  The trailer technically folds up for easy storage, but that adds one more step required before you can ride it, so we just leave it together and set on top of the bikes.  This requires my wife to remove my sons 2 bikes, then her bike, then pull the trailer down, and hook the trailer to her bike.  Moderate PITA, but doable. 

In the 8x8 shed we have all of our lawn and garden supplies, some patio furniture, etc.  It's starting to fill up because my son is accumulating some toys.  He's got the cozy coupe, a radio flyer trike, a motorcycle, a sit in and get pushed via handle car, his wheelbarrow, and probably several more I'm not thinking of at the moment.  And he loves them all.   It's cluttered, but manageable, but we can't store anything else outside. 

None of the wires are underground, they are all in the air.  But they go right across the yard where a garage would be, so we will have to have the utilities come out and reposition them to allow a shedgarage. 
« Last Edit: September 24, 2020, 08:43:29 AM by frugalnacho »

frugalnacho

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Re: Should frugalnacho buy a new house and move?
« Reply #40 on: September 24, 2020, 08:41:00 AM »
Once you are on the hedonist treadmill, it is hard to get off.   A year or two after moving, your wife will starting look at real estate again and find a house with a better kitchen, larger garage, better yard, nicer location, etc. It is endless.

Don't give in!  Stay put!

It is endless and I really can't tell when she's being serious.  She regularly looks up houses just for fun and curiosity.  Oftentimes looking up homes of $1M+ in exotic locations like tropical islands. And oftentimes in places we've discussed moving to like florida, or tennessee, or kentucky.   Or up north michigan.  Or in our own city.  She's literally all over the map and seems to just enjoy looking at new houses, even when it's completely out of the question that we are going to move.  Lately in the last few weeks she's expressing a more serious interest in "upgrading" to a bigger house close to our current house.  I don't know if it's cabin fever, or boredom, or just finally getting sick of some of the shortcomings our of our house, like not having a garage. 

I tried calculating out the cost of the different scenarios I posted a few posts up.  We talked about it as I was calculating it and she got snippy and was saying "Well what about our happiness!? Why don't you calculate a number for a that!?" to which I replied "That's literally what I'm doing.  We have to know how much it's going to cost so we can decide if it's worth the financial price we are going to pay". 

It seems like she just wants to make an emotional decision and not fully consider the financial cost.  Maybe because the cost seems unpleasant, or maybe because the cost seems abstract and hard for her to quantify.  I don't like making emotional decisions though, I'd much rather understand how much it's going to actually cost, and how that's going to affect my FIRE date.     

Laura33

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Re: Should frugalnacho buy a new house and move?
« Reply #41 on: September 24, 2020, 09:13:32 AM »
Stop driving yourself nuts trying to figure out if there is some scenario in which you will be financially better-off if you upgrade your house.  There's not.  The only way that works is if the stock market crashes and your local real estate market goes through the roof.  That's San Jose 20 years ago, not Detroit.  Almost everywhere else, throughout history, property values rise more slowly than the stock market. 

What you are talking about here is a consumption choice.  You have sufficient housing to meet all your needs and some of your wants, and you are considering whether you want to spend more to fulfill more of your wants.  And the only way to really know whether that is worth it is to run the numbers on a specific house, with specific features and a specific mortgage, and then calculate how much longer those extra costs mean you will need to keep working to pay for it.

Like it or not, it is emotional, because it's about how much monetary value you put on your emotional wants.*  It's not just how much the other house costs -- it's how much you value the extra features it provides, how much of you're life energy you're willing to invest to have those extras.  Right now, your wife seems to be focusing on houses that give her the things she values, so of course the extra cost seems minimal and totally worth it to her.  OTOH, you're not interested in what she values, and she's not looking at places that give you the yard or garage you value, so of course it's not worth the cost in extra work-years to you to have those things.  You need to figure out if there's a house out there that offers enough of the stuff you both value, so that you can figure out how much more of your life energy you'd have to spend to buy it, and then decide whether that's worth it. 

*Recurring frustration with two insufficient sheds is, in fact, an emotion.

frugalnacho

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Re: Should frugalnacho buy a new house and move?
« Reply #42 on: September 24, 2020, 09:44:15 AM »
Stop driving yourself nuts trying to figure out if there is some scenario in which you will be financially better-off if you upgrade your house.  There's not.  The only way that works is if the stock market crashes and your local real estate market goes through the roof.  That's San Jose 20 years ago, not Detroit.  Almost everywhere else, throughout history, property values rise more slowly than the stock market. 

What you are talking about here is a consumption choice.  You have sufficient housing to meet all your needs and some of your wants, and you are considering whether you want to spend more to fulfill more of your wants.  And the only way to really know whether that is worth it is to run the numbers on a specific house, with specific features and a specific mortgage, and then calculate how much longer those extra costs mean you will need to keep working to pay for it.

Like it or not, it is emotional, because it's about how much monetary value you put on your emotional wants.*  It's not just how much the other house costs -- it's how much you value the extra features it provides, how much of you're life energy you're willing to invest to have those extras.  Right now, your wife seems to be focusing on houses that give her the things she values, so of course the extra cost seems minimal and totally worth it to her.  OTOH, you're not interested in what she values, and she's not looking at places that give you the yard or garage you value, so of course it's not worth the cost in extra work-years to you to have those things.  You need to figure out if there's a house out there that offers enough of the stuff you both value, so that you can figure out how much more of your life energy you'd have to spend to buy it, and then decide whether that's worth it. 

*Recurring frustration with two insufficient sheds is, in fact, an emotion.

I don't know that this is entirely accurate.  I know there is no scenario where I am better off financially by buying a new house, it's going to cost more, it's just a matter of how much more it's going to cost, and is that worth it.  My calculation of break even points was just to get a baseline of how the market returns would have to be.  To me they seem completely unrealistic, which is not surprising because of course it's going to cost more money to move, but I don't know exactly what kind of market returns I can realistically expect over 5, 10, etc years.   My main goal was to get it into a spreadsheet, and see if anyone here can point out mathematical mistakes I made, or other considerations I overlooked which will affect the number.  At this point I can plug in different expected returns into my spreadsheet to get an actual number that moving is going to cost over some specific time frame.   Only when I have that number can I possibly make the decision of is it worth it?  As to the bolded part: that's exactly what I'm attempting to do. 

I also don't think we are being dismissive of each other's wants.  She just looks at a lot of houses, and tends to look at what she likes.  I don't look at houses because I feel it's largely a waste of time unless I'm actually considering moving.  I also think she tends to think far more like a typical consumer than a mustachian.  By that I mean she considers whether you can "afford" something by whether you can make the payments, and doesn't consider whether it's actually worth it.

Can I afford to go lease a lexus?  By her definition, and most typical consumer's definition, yes I could afford it, because I could easily make the payments for the entire duration of the lease.  By my definition? Absolutely not.  I could technically "afford" to lease one, but the overall impact to my finances long term is so astronomical it would be insane for me to lease a lexus.
« Last Edit: September 24, 2020, 09:46:25 AM by frugalnacho »

slappy

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Re: Should frugalnacho buy a new house and move?
« Reply #43 on: September 24, 2020, 09:54:11 AM »
Once you are on the hedonist treadmill, it is hard to get off.   A year or two after moving, your wife will starting look at real estate again and find a house with a better kitchen, larger garage, better yard, nicer location, etc. It is endless.

Don't give in!  Stay put!

It is endless and I really can't tell when she's being serious.  She regularly looks up houses just for fun and curiosity.  Oftentimes looking up homes of $1M+ in exotic locations like tropical islands. And oftentimes in places we've discussed moving to like florida, or tennessee, or kentucky.   Or up north michigan.  Or in our own city.  She's literally all over the map and seems to just enjoy looking at new houses, even when it's completely out of the question that we are going to move.  Lately in the last few weeks she's expressing a more serious interest in "upgrading" to a bigger house close to our current house.  I don't know if it's cabin fever, or boredom, or just finally getting sick of some of the shortcomings our of our house, like not having a garage. 

I tried calculating out the cost of the different scenarios I posted a few posts up.  We talked about it as I was calculating it and she got snippy and was saying "Well what about our happiness!? Why don't you calculate a number for a that!?" to which I replied "That's literally what I'm doing.  We have to know how much it's going to cost so we can decide if it's worth the financial price we are going to pay". 

It seems like she just wants to make an emotional decision and not fully consider the financial cost.  Maybe because the cost seems unpleasant, or maybe because the cost seems abstract and hard for her to quantify.  I don't like making emotional decisions though, I'd much rather understand how much it's going to actually cost, and how that's going to affect my FIRE date.     

Sounds like your wife is like me. I look at houses in our area all the time. I always say that if I ever find the perfect house at the perfect price in the perfect location, I will strongly consider it. However, at this time, i'm not willing to put more money toward a home when the one I have is perfectly fine.

Two things:
1)She is right about the happiness, I think. Then the question becomes, will a new house actually make you/her happier? This is a question I struggle with myself. For me, I don't really think I will be any happier, so I just stick to dreaming about a new house. I found almost the perfect house recently, at a decent price, not the perfect location. I was tempted to consider it. Then I looked out my office window and saw the kids playing out back and I couldn't picture them anywhere house. This is our home, and it's not as nice as my SIL's house, but whatever. It's ours and we are all happy. As they say, a small home holds as much love as a bigger one. So then I took the realtor.com app off my phone. :)
2)I think you should let the $46k go. You don't lose that "equity" if you sell. You technically don't have that equity now. You have a lien on the property. You will have to pay it back at some point. I had a similar situation with my first property. There was a grant just like yours. I never considered the money part of my equity. I mean, I get where you are coming from, because if it wasn't for the grant, you would be paying the 46k now compared to when you sell, but I really don't think that money should factor into this decision, other than how much it impacts your housing costs in the new place.

frugalnacho

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Re: Should frugalnacho buy a new house and move?
« Reply #44 on: September 24, 2020, 10:04:46 AM »
I'm not counting the $46k as equity.  I'm treating it as a 0% loan with no payments. 

MissPeach

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Re: Should frugalnacho buy a new house and move?
« Reply #45 on: September 24, 2020, 10:11:05 AM »
I'm with the camp of doing some improvements and waiting until right before FIRE if you think you'll want something different.

I'm buying now but am in a different situation - I cashed out right before the market tanked this month locking in a huge gain and using it to bring my monthly costs down $500/month over renting in a market with 5-10% annual rent increases.

Sandi_k

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Re: Should frugalnacho buy a new house and move?
« Reply #46 on: September 24, 2020, 10:25:54 AM »
I'll tell you how we approached getting our first place: I was all-in, after years of renting, and getting tossed out twice due to owner selling...DH was scared, because it was a huge commitment for two people our of college for 2.5 years.

We made a list of MUST HAVE and WANT TO HAVE. And we each got to add to that list.

For example, your MH list would include a garage, and a larger yard. Hers probably includes a larger LRm, extra bathroom.

Your WTH list probably includes things like fireplace, or deck.

Then set your wife loose to find that place, with a figure you agree on. She is your secret weapon in this discussion - as long as you are both clear on the MH list, she will put in the work. The snippiness concerns me - you cannot value cash in the bank over your wife's frustration and unhappiness.

RetiredAt63

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Re: Should frugalnacho buy a new house and move?
« Reply #47 on: September 24, 2020, 10:29:27 AM »
Given your last post, ask her to only look at houses that meet your needs as well.  The only way this would work is if you are both positive about the new house.

Btw, when she was 3 and we lived on 6 acres (5 forest) including a big lawn and gardens and vegetable gardens, my DD (very active, basically a "tomboy" at that point) had none of those toys your son has.  By next summer he should have outgrown most of them, which will free up a lot of space as long as you don't replace them.

It's easy to accumulate stuff when you have a house and think you have space.  But you don't have the space.  Maybe time to go read the Getting rid of stuff thread on Throw down the gauntlet?  I got rid of carloads (literally at least 6, I lost track) of stuff when I moved, and there are only 2 things I regretted and replaced.

undercover

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Re: Should frugalnacho buy a new house and move?
« Reply #48 on: September 24, 2020, 10:41:59 AM »
Realtor fees are 6% are "paid" half by the buyer and half by the seller: you are losing 6% overall (and only paying out of pocket on the cheaper house you are selling).

But apart from that it seems that both you and Mrs FN could benefit from an upgrade if you can find a house that she likes better on a lot that you like better.  If you find that unicorn you can then work out whether the finances work.

Seller loses 6% and half goes to buyer’s agent and half goes to the seller’s agent. The buyer doesn’t actually technically pay the fee even though of course in theory it’s built into the price of the home.

But that said, it’s impossible to really accurately assess what percentage of a home’s advertised price is composed of transaction fees. There’s lots of wiggle room in price obviously and you might sell for an amazing price and then buy for an amazing price thus negating the transaction costs. The truth is though that you will never really know if you bought or sold perfectly, that’s why you shouldn’t worry about the costs in general. You should be thinking whether it’s worth the cost to you or not.

The selling price is only loosely correlated with these fees anyway IMO. When someone bids on an item on eBay, eBay doesn’t care for how much or how little your item ultimately sales, they still get the same 10% fee no matter what. Real estate is similar. The seller sees the cost but isn’t in control of it at all. The market determines price. Of course the fee dictates the market somewhat, but not always.

I am rapidly reaching the opinion that no one should make any dramatic life changes until this whole Covid crisis has passed.  People are under a lot of stress in a lot of different ways, and that is coming out in ways you would not expect.

In the past 6 months, I have wanted -- as in, crying-because-I-couldn't-have-it wanted -- both a local mansion that would have cost us as much to renovate as the purchase price, and a house in Maine.  Oh:  and I wanted to rent a place in some vacation wonderland for the next three months while school is online.

That doesn't mean I should buy/do all those things (or any of them!).  It means I'm going fucking stir crazy being stuck in my house in my town and not able to travel freely and spending all day with a 14-yr-old D&D-obsessed teenager who can't seem to understand that I'm trying to get some goddamn work done.  Apparently my dreams of escape all take the form of real estate that I don't need. 

Same rules apply now as always:  figure out what is really bugging you about the house (vs. just existential stress acting out).  Prioritize those wants from most important to least.  Figure out if there is a way to get 80% of what you want the most for 20% of the cost (e.g., you do not need a whole entire garage for a workshop/bike shed).  If that is still unsatisfying, figure out how long making this upgrade would delay your FIRE date, and decide if it's worth it to you.

Well, to be fair, a couple of months rental is not a life-changing decision and I think most people who are in the position to do so probably should for not only mental relief but just a good change of pace in general. Considering the amount of travel plans that were ruined, it’s completely within reason to expect “slow-travel” to rise. Despite the fact that we will likely return to normal or at least semi-normal, there are definitely things people need to be thinking about right now. If you can already work from home from anywhere, why not move to somewhere better?

Regardless, the pandemic is still a sign of changes to come in the future. Less physical shopping, more work from home, more deliveries, etc. It’s not outrageous to think how we are living now will likely stick in a number of ways for the foreseeable future and then eventually become amplified as AI and technology keeps ramping up.

—————

OP, it’s impossible for us to give you a clear cut answer because you’re focused on arbitrary specifics that really tell us nothing. We don’t know your overall financial picture or if you really will appreciate a bigger house or different area. Even if we knew the former, we can’t know the latter well enough to make an informed decision for you. A house is like any other consumer product at the end of the day unless you’re buying it as an asset to flip/rent.

At the end of the day, we are humans and almost all our decisions are related to our emotional desires. That doesn’t mean we should give into our desires all of the time...it just means that we wouldn’t do the logical things like saving money or living frugally if there wasn’t an emotional reward associated with it.

Maybe you save the money now so that you can afford something better in the future, etc. Maybe waiting is not worth it. Who knows. At the end of the day, there is no logical reason to save money now without any emotional benefit sometime in the future.
« Last Edit: September 24, 2020, 11:11:34 AM by undercover »

frugalnacho

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Re: Should frugalnacho buy a new house and move?
« Reply #49 on: September 24, 2020, 10:42:30 AM »
Given your last post, ask her to only look at houses that meet your needs as well.  The only way this would work is if you are both positive about the new house.

Btw, when she was 3 and we lived on 6 acres (5 forest) including a big lawn and gardens and vegetable gardens, my DD (very active, basically a "tomboy" at that point) had none of those toys your son has.  By next summer he should have outgrown most of them, which will free up a lot of space as long as you don't replace them.

It's easy to accumulate stuff when you have a house and think you have space.  But you don't have the space.  Maybe time to go read the Getting rid of stuff thread on Throw down the gauntlet?  I got rid of carloads (literally at least 6, I lost track) of stuff when I moved, and there are only 2 things I regretted and replaced.

I've mentioned this as an option.  The outside toys accumulate, the bedroom toys accumulate, the living room toys accumulate.  The shit we have accumulates.  More and more stuff keeps coming in, but very little is ever going out.  I said before we consider a drastic change like moving, we should just go through an get rid of everything and really pare it down.  Will definitely make us feel like we have more room.  We would likely purge a ton of stuff during a move anyway, so why don't we just do that now?