Author Topic: Home Ownership Struggle  (Read 5262 times)

Rebecca Stapler

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Home Ownership Struggle
« on: August 09, 2014, 12:43:47 PM »
ETA: I didn't realize that this post was so long until after it posted. Here is the executive summery: How can I resolve my Mustacian interest in paying off our SLs with my emotional desire to own a home in my expensive hometown or other towns with great school districts?

My non-mustacian emotions are taking over a big financial decisions and I want to figure out the right path. They're at odds with logic. I'm not one to covet stuff, but there's one thing I'm envious of, and that's home ownership.

Although most of our rentals have worked out just fine, I want to buy a home because I feel like it will help me feel more permanently rooted, and I can invest time and energy into making a house our home -- I want to paint walls and hang artwork and have furniture that "works" for us in the long run, not just something that works for us for now.

Another important factor is that our son will be going to kindergarten next year and would like to start him in the same school district that he'll live in until he moves out. We know that circumstances may change at some point, but the ideal is to have 1 school district for him -- with the possibility that we may move once or twice for some reason. But my husband moved around a lot growing up and doesn't want that for our kids.

I also want to move back to my hometown, where my parents currently live. I have lived in many places over the last 20 years, and consistently have never felt better about where I live than in my hometown. It's an expensive area, however, and not the most convenient location to commute into the major city nearby. But I want to hang a shingle and practice estate planning law there. It doesn't have more than 2 law offices, and because the residents are fairly wealthy I think it could sustain another. The other benefits are that my parents live there and they are more than happy to help with after-school care for our sons; I am still involved with the church there and have never found a church more suited to me than this one; and it has top-notch public schools for my sons without the super-competitive atmosphere found at nearby schools.

These are all non-financial reasons, because it seems like the financial logic weighs in favor of either renting or buying in a lower-priced town.

We currently pay $1825 for our apartment, which suits our needs but we aren't thrilled about sending our son to kindergarten in this town and we will likely outgrow the apartment quickly after our second son arrives. As much as we're trying to accommodate the 4 of us in this space, I don't think we can make it work long-term. My husband recently got a better-paying job, so we could afford the increased out of pocket expenses of either a rental or mortgage in a town with better schools.

Single family homes in my hometown rent for $2500-$3500, whereas buying a house would cost us about $2600 PITI. But to put down a down payment, we would need to withdraw from our Roth IRAs. My family is willing to pitch in some of the DP because they know we can't afford it otherwise. (The houses we're considering are entry-level homes in good neighborhoods with possibilities for additions in the future -- which we would pay for with cash)

Otherwise, there is a town that has a great public school system, an easier commute into the city, and a church of the same religion as mine (although I've never visited so I don't know if it would still be such an awesome fit) -- and we could buy the same house, on less land, for $50k - $100k less. The downside is that it's still 20 minutes away from my parents. So, no after-school care help. But I'm confident that we would see my parents often because we see them weekly now and we live 20 minutes away now. My parents would be a LOT less willing to help with a DP in this town, obviously, because they really want us to live in their town.

Single Family rentals in the other town are also less expensive than my hometown's rentals (the max I saw was $2800), although right now I didn't find anything that we would want to rent for the long term.

My parents are in their 70's and in completely denial that they will ever move out of their current home, but I'm sure it will happen in the next 10 years. They don't have a plan for where they'll go, but they want to be close to their friends -- who all live in their town.

Oh, and we have $185k in SL debt. Did I mention that? We really have no business buying a house. But when the rentals in the towns with great school districts go for as much as we would pay for a mortgage, and I have such a strong emotional interest in putting down roots, I think home ownership is the better option. I just want to do it in a somewhat financially responsible way.

Is a face punch in order? Or can we do this (set down roots in a great school district in a great community) in a financially responsible way?
« Last Edit: August 09, 2014, 03:45:59 PM by Rebecca Stapler »

Nords

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Re: Home Ownership Struggle
« Reply #1 on: August 09, 2014, 01:47:44 PM »
This is one of those situations where you have to be willing to work for the things that bring value to your life. 

It will certainly delay getting out of your student loan debt for a few years, let alone delay your financial independence, but you seem to be able to expect a huge improvement in quality of life.

You'll have to allow room in your home-care budget for more than just PITI, and you're contemplating becoming the poster child for "house poor".

It sounds like you gain nothing by staying where you are for another year or two.  Do you already know the real estate market in your hometown, or would it be better to rent for a while there and wait for a bargain to pop up?

Rebecca Stapler

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Re: Home Ownership Struggle
« Reply #2 on: August 09, 2014, 03:44:23 PM »
This is one of those situations where you have to be willing to work for the things that bring value to your life. 

It will certainly delay getting out of your student loan debt for a few years, let alone delay your financial independence, but you seem to be able to expect a huge improvement in quality of life.

You'll have to allow room in your home-care budget for more than just PITI, and you're contemplating becoming the poster child for "house poor".

I hear ya. I'm so nervous about taking on more than is wise. I know our finances will loosen up once our littlest is out of daycare, but I hope I'll be earning more before that point.

It sounds like you gain nothing by staying where you are for another year or two.  Do you already know the real estate market in your hometown, or would it be better to rent for a while there and wait for a bargain to pop up?

I  have been watching the listings and toured some of the more affordable options, so I have a good idea of what our price range will get us. We won't buy unless it's a bargain, and if we don't find something by July 2015, we'll rent so we can get into the school system and keep our eyes peeled for the right property.

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Re: Home Ownership Struggle
« Reply #3 on: August 09, 2014, 04:41:20 PM »
You're parents would be less willing to give you money for a DP if it was not to their liking? That seems a bit, controlling. But i guess if you are going into it fully aware of the give and take, then so be it. If it's a gift that's one thing to decide what you're doing with the gift is another- you guys are adults.

This whole thing is emotional. Wanting roots and a long term home.

You need to make a list with your H of all the things you want and the costs. Then weed out needs vs wants.

Personally I would not factor in the parents as babysitters and plan on putting in expenses for a sitter.

there are too many unknowns in these scenarios.


Rebecca Stapler

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Re: Home Ownership Struggle
« Reply #4 on: August 09, 2014, 05:13:57 PM »
You're parents would be less willing to give you money for a DP if it was not to their liking? That seems a bit, controlling. But i guess if you are going into it fully aware of the give and take, then so be it. If it's a gift that's one thing to decide what you're doing with the gift is another- you guys are adults.

This whole thing is emotional. Wanting roots and a long term home.

You need to make a list with your H of all the things you want and the costs. Then weed out needs vs wants.

Personally I would not factor in the parents as babysitters and plan on putting in expenses for a sitter.

there are too many unknowns in these scenarios.

That's how my husband feels -- he doesn't place as much stock on having our kids get off the bus at grandma's house. And I see the point of that. At some point, it will be too much for them to have the kids come over on their own.

It's dealing with the unknowns of future jobs that makes my husband the most wary of buying a house -- anywhere that's not in the city. But that's at war with my want to put down roots somewhere, and both of us don't want to live in the city.

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Re: Home Ownership Struggle
« Reply #5 on: August 09, 2014, 06:22:02 PM »
You're parents would be less willing to give you money for a DP if it was not to their liking? That seems a bit, controlling. But i guess if you are going into it fully aware of the give and take, then so be it. If it's a gift that's one thing to decide what you're doing with the gift is another- you guys are adults.

This whole thing is emotional. Wanting roots and a long term home.

You need to make a list with your H of all the things you want and the costs. Then weed out needs vs wants.

Personally I would not factor in the parents as babysitters and plan on putting in expenses for a sitter.

there are too many unknowns in these scenarios.

That's how my husband feels -- he doesn't place as much stock on having our kids get off the bus at grandma's house. And I see the point of that. At some point, it will be too much for them to have the kids come over on their own.

It's dealing with the unknowns of future jobs that makes my husband the most wary of buying a house -- anywhere that's not in the city. But that's at war with my want to put down roots somewhere, and both of us don't want to live in the city.
I have a friend with a wife and 3 kids.  They live with his mom.  Before that, when his dad was alive, his kids would get off the bus and spend the afternoon  with the grandparents, sometimes having dinner, until the grandparents couldn't handle it anymore.

They wouldn't change that for the world.  The opportunity to spend that much time with the grandparents - nobody I know, who has had that chance, regrets it one bit (including my brother's and sister's kids, my SIL's kids).

theonethatgotaway

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Re: Home Ownership Struggle
« Reply #6 on: August 09, 2014, 09:02:51 PM »
Can you not afford to buy in the city?

You both don't want to live in the city, but your jobs are in the city and jobs outside this city are questionable. Is that based on income? Would your income potentially drop and your expenses go up? 1800 rent then 2800 mortgage (not including expenses of a house) is a pretty large jump.

What is your income/ expenses/savings?

So you're torn because you want to leave and settle but can't afford it, right? So you are thinking it will pay off in the long run hopefully.

Seems like a pretty big gamble UNLESS you have significant savings. I would wait to double down on SL repayments until you know where you are living.

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Re: Home Ownership Struggle
« Reply #7 on: August 09, 2014, 09:06:29 PM »
Oh wait, you're pregnant???

No wonder you want to settle down! You have the nesting thing going on. You need a long term solution to raise your kids in an area and don't have to worry about moving and job loss.

That's tough.

I would stay put. Wait until after baby then another year to re-asses. I think you need the stability of the jobs situation right now while you have the kids!

Rebecca Stapler

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Re: Home Ownership Struggle
« Reply #8 on: August 10, 2014, 08:40:58 AM »
Oh wait, you're pregnant???

No wonder you want to settle down! You have the nesting thing going on. You need a long term solution to raise your kids in an area and don't have to worry about moving and job loss.

That's tough.

I would stay put. Wait until after baby then another year to re-asses. I think you need the stability of the jobs situation right now while you have the kids!

LOL! There's definitely some nesting anxiety going on here! I agree that it's wise to wait a year and see. For some reason (and I think you've nailed down why!) I got seized with a lot of anxiety about this. There is zero reason for us to move in the next 6 months, and lots of financial reasons to stay put and enjoy the extra $$ (to be put towards SLs) in the meantime.

FWIW, MH doesn't work in the city -- he's starting a job where he works from home most of the time and travels for a week at a time. He's just anxious about his next job, and limiting his possibilities for the next job. I don't think my opportunities are too limited by living in the 'burbs; it's a bustling metropolis out here, with plenty of $$ in the burbs. (I'm an attorney)

And yes, living in the city is cost prohibitive anyway. A friend of mine pays the same amount of rent as we do, but it's a studio loft (at a discount b/c her husband is an artist) and we have 2 BRs, 1.5 BA, washer/dryer in unit, an office, and a yard.

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Re: Home Ownership Struggle
« Reply #9 on: August 10, 2014, 09:03:06 AM »
Does your hometown allow Accessory Dwelling Units (also called Mother In Law Houses, backyard cottages, and laneway homes)? If the zoning code allows it, you can build a beautiful 2 bedroom house in the backyard of your parents house. If your parents are interested, and their back yard is large enough, of course.

It would be an affordable way to live in your hometown, and get access to free childcare from your parents. As your family grows, and your parents age, you could consider switching houses with them, and then you would be able to help them live independently in the Accessory Dwelling Unit. And, the accessory dwelling unit will add to the resale value of the property.

A lot of blogs devoted to this type of housing celebrate having really low square footage, but you can design a two-story house that has 1000 square feet or more. Here is a small two-bedroom, that brings out my nesting instincts: http://smallhousebliss.com/2013/04/27/the-arbutus-laneway-house-by-smallworks/

Rebecca Stapler

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Re: Home Ownership Struggle
« Reply #10 on: August 10, 2014, 09:14:15 AM »
Does your hometown allow Accessory Dwelling Units (also called Mother In Law Houses, backyard cottages, and laneway homes)? If the zoning code allows it, you can build a beautiful 2 bedroom house in the backyard of your parents house. If your parents are interested, and their back yard is large enough, of course.

It would be an affordable way to live in your hometown, and get access to free childcare from your parents. As your family grows, and your parents age, you could consider switching houses with them, and then you would be able to help them live independently in the Accessory Dwelling Unit. And, the accessory dwelling unit will add to the resale value of the property.

A lot of blogs devoted to this type of housing celebrate having really low square footage, but you can design a two-story house that has 1000 square feet or more. Here is a small two-bedroom, that brings out my nesting instincts: http://smallhousebliss.com/2013/04/27/the-arbutus-laneway-house-by-smallworks/

I love this idea! Unfortunately, my parents' backyard is all conservation wetland and no building is allowed. It was a big process just to get approved for expanding their paved driveway :/

If my parents were ready to downscale their home in the next year, we would be happy to buy a duplex with them. We would have the benefit of seeing them often -- which is good for our sons and good for my parents when they need more daily assistance. But they are not interested in downsizing yet, and we couldn't afford a duplex without their help. They aren't interested in buying an investment property for their eventual use, and rent it out in the meantime. 

Another option is for us to buy an investment property in my hometown that's accessible (first floor master bedroom, etc.) and live there until my parents are ready to downsize. When they're ready, then could move in to our place and we'll buy a single family.

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Re: Home Ownership Struggle
« Reply #11 on: August 10, 2014, 09:29:00 AM »
If I were you I would consider:

1)  Ramping up the pace on getting your own practice started in that community.  Is it financially viable for you to start doing so now, or do you need your current income to make ends meet?  From the way you describe it, I would guess that it would not take long to get a solid base of clients.  Your income might increase dramatically, quickly, which would make all this easier.  If that isn't viable at the moment then at least you can do all the prep work you need to be doing so that you can hang your shingle out ASAP.  I know the student loans are a huge burden, but in your case, given your income earning potential (especially in such a comparatively lucrative field of law), I would prioritize starting your own shop first.  Get that going, watch the money roll in, and pay of the student loans as quickly as you can.

2)  Stay where you are for now and look at all possible ways to economize, bringing your monthly costs down.  That will allow you to save more to put toward your business startup, emergency fund (you will likely want a significant one before you leave your current employment) and house downpayment.

3)  Be sure your DH is more conscious of the financial benefits of living close to your parents and you setting up your own business.  No before/afterschool care to worry about/pay for.  Family meals at home every night.  Lots of other ways you can keep costs low if you control your own work schedule. 

Too bad your parents aren't ready to downsize/move.  Still, it doesn't hurt to keep an eye out for what is available on the duplex market.  Maybe you will find something that they think looks great for the future, and if they can help with the downpayment you can also offset your mortgage in the meantime.

I lived next to my grandparents growing up and it was a fabulous experience.  One of the great sad things in my current life is that we live far from both families. 

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Re: Home Ownership Struggle
« Reply #12 on: August 10, 2014, 11:36:10 AM »
I think you have a great opportunity to get into the town you want to live in with your parents' help with the down payment.  You never know whether that help will be available in the future. 

First off, I think it is a significant advantage to live in the town where you practice law.  A solo practitioner lives off referrals! 

Second, as others have remarked, giving your kids the gift of being physically close to the grandparents should not be underestimated.  I also lived next door to my grandmother as a child - it still is a treasured memory and it was a great help to my mom. 

Third, those law school loans are a nuisance - my sympathies - but you will pay them off.  I imagine that your child care costs will be less for having your parents nearby, and the nature of your practice will be that you will have some big paydays along with some not so large ones.  Pay off chunks when you have the money and they will be gone eventually. 

Fourth, real estate purchases are still all about location, location, location.  As long as you don't insist on living in the grandest house in town, you can build home equity faster in a better location and that should build your net worth. 

Finally, home ownership is, for some of us, a great contributor to the Mustachian lifestyle.  As you say, putting down roots, painting walls, hanging art - it's all part of making a home for your family which fulfills a huge emotional need, in many ways as important, if not more so, than setting an earlier FIRE date. 

As I said to begin, it seems to me you have a great opportunity - I would jump on it, but whatever you decide, I wish you all the best.

Rebecca Stapler

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Re: Home Ownership Struggle
« Reply #13 on: August 10, 2014, 01:28:02 PM »
Thanks for the encouragement as well as the reality checks. I'm glad that I'm not completely out of my gourd with this idea.

I'm going to ramp up my skills in the estate planning area and start taking on simple estate planning matters to develop my skills and start developing more business. I have the romantic notion that going to my children's school activities and going to church -- things I want to do anyway -- are client development.

In addition to looking for single family homes, I'm going to keep my eyes peeled for duplexes and condos that could meet my parents' needs eventually, but we could live there until a SFH is in the financial cards.

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Re: Home Ownership Struggle
« Reply #14 on: August 11, 2014, 09:31:24 AM »
I don't have much to add on the financial side, but I just wanted to say that I completely understand how you connect feeling rooted in a community with owning a home. We didn't start feeling that vested interest until we bought seven years ago. Three kids later (one of whom is an infant), I can truly say that we are committed to this home, this community, and this school district for the long haul. We call our home, which we originally bought with the misplaced notion of it being a "starter home," our "feet first home." This is after we put an addition on the back that increased our bedroom/bathroom count and square footage. It sounds like you have a similar plan, but be sure your lot is deep enough to still have a desirable backyard.

You are ahead of the game, since you already know where you want this future place to be. Being near family is really important. We were simultaneously thrilled and disappointed when my parents moved 500 miles closer to us but then fell prey to overbuying (2,000 sq ft ranch home w/ a huge yard for two people in their 70s???) 25 minutes from us. While we make it work and see them 2-3 times a week, it has made the pop in visits and after school care impossible. We have to be intentional about all the time we spend together. Go with your gut that 20 minutes is too far away. It will impact your kids' relationship with their parents.

Lastly, if this is your long trajectory plan, be patient about it. Moving while pregnant or with an infant sounds like torture to me. Stay put and see how you feel in a year. Then you can also re-access your parents' situation. Also, your eldest can start kindergarten in another district and then move. They are extremely resilient at that age. Set a goal to be settled by the time he or she is in 2nd or 3rd grade.