Author Topic: Considering a big upgrade  (Read 2038 times)

AJDZee

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Considering a big upgrade
« on: January 22, 2015, 02:45:01 PM »
The plan is to move out of my condo in May... I'm sooooooo done with this place, expensive and not appreciating.

I'm considering buying a detached house as long as I can rent the basement out. This obviously comes with increasing my mortgage substantially (going from a condo high-200s, to a house mid-400s), so I have to run through the numbers and be confident I'll be better off to be comfortable with this amount of debt.

Anyone else gone through a similar exercise of looking at an upgrade like this? Any lessons learned if you did or did not go for the plunge?

My inital 'back of the napkin' numbers are as follows...

Current fixed living costs (monthly)
Mortgage + Taxes: $1,278
Condo Fees:              $525
Electricity:                    $50
Insurance:                   $24
TOTAL:                    $1,877

New Fixed Living Costs (monthly)
Mortgage + Taxes:   $1,900
Electricty:                    $120
Heat/Water/etc.:         $250
Insurance:                    $75
Repairs/Maint:             $250
TOTAL:                  $2,595

Rent:                       $700 - 1000

Gone Fishing

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Re: Considering a big upgrade
« Reply #1 on: January 22, 2015, 03:16:25 PM »
Good work so far here are some other considerations assuming leasing is legal:

Are you cut out to be a landlord? Some people are not.
Can you afford some vacancy?
Are you okay with noise/traffic in your house?

As far the house goes, I'd budget some more for repairs, might not use it every year, but when an HVAC or a roof needs to be replaced you are looking at thousands.  Are you okay doing the yardwork?

Might be good to add the square footage and (effective)age of the properties in question.

Did you calculate the payments on the same time frame?  Or are there less years on the condo loan?

An alternative to all this is you renting and investing the difference which looks like it could be quite substantial based on your rental estimate for the basement.   

frugaldrummer

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Re: Considering a big upgrade
« Reply #2 on: January 22, 2015, 03:20:23 PM »
Well...on the surface of it, looks like you could come out even, with a renter in the basement paying for the additional costs.

Some things to consider though:

While your home repair/maintenance estimate seems reasonable if you are buying a home in reasonably good condition, if you are buying a fixer-upper you will need to budget more.

Unexpected house repair bills, when they happen, can be large (always get a really good inspection before you buy a house. )  My mother's house, in the last year she owned it, cost us $25k (started with just converting a bathtub to a shower, found out a pinhole leak in the plumbing had caused a huge mold problem, and the sewer line to the street was shot and needed to be redone).  Will you have the reserves to deal with an emergency?

If you have fixit skills, or are even just good at seeing beyond dirt and poor decor, you can make some real sweat equity by buying a cosmetic fixer (a house that is structurally sound but needs paint/flooring/tile work).  Be honest with yourself though - if you don't have the skills or the vision, don't fool yourself.

AJDZee

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Re: Considering a big upgrade
« Reply #3 on: January 23, 2015, 11:41:39 AM »
Thanks for the feed back - this is just the sort of 'hole poking' this idea needs.

In all honesty my fixit skills are smaller repairs, but I'm lucky that my family is full of tradesmen, including my recently retire (and bored) father who's an electrician and great at most other general contracting things as well. I've lost count how many basements/bathrooms/decks/kitchens/additions my dad and brother have done. I have great resources and mentors.

Although I've never been a land lord before, I feel like it's not an issue. I tend to small issues in my place, help friends when they have small repairs at home, etc.
Great point about vacancy - I'm typically a pretty conservative guy, I wouldn't get myself into a position that I couldn't hold up the costs on my own without renting. When I crunch numbers I'm also thinking 'is it sustainable without a renter'
The places I'm looking at all have a seperate entrance into basement apartment, it's a pretty popular feature in the areas I'm looking at. So no traffic in my living space, and minimal noise coming from below.

Yardwork I have no issue with. In fact, that's another reason I want out of my condo, I miss having a yard. (I'm big into vegetable gardening)

Thanks!