Author Topic: Housing Dilemma/Decision  (Read 6911 times)

ohio4life

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Housing Dilemma/Decision
« on: July 15, 2014, 11:10:09 AM »
I currently own a home with another individual, but they want out and off the mortgage. So it goes. They are willing to sell the house to me or place the home on the market. They just want this done yesterday.

I live in a great neighborhood and am close to work, friends, and fun. My job is stable, but I may consider another job in the next few years. I'd likely have to refinance to keep the house as I don't believe my mortgage can be assumed by one individual. It's in no way luxurious, but is worth approximately 3 times my annual salary of ~$80k. I'm not likely to see an increase in salary anytime soon. I'm open to renting out the spare room, but it's not necessarily an ideal home to share with a non-partner. It's an 1100 square foot home with 2 full baths. The house has a new kitchen, laundry room, roof, and windows. It likely needs a new furnace/AC in the next 5 years. The other major maintenance issue to tackle is a wet basement with some insufficient floor support. These are expensive problems that do scare me.

I'm currently maxing my 401K (457 actually) and Roth IRA and have a savings rate close to 60%. I'm 34. I have no debt and my investments are worth ~$200,000 (35,000 in taxable brokerage). I have roughly ~$10,000 in cash. My goal is to be FIRE at 46, but I'm not worried about working a bit longer for an improved lifestyle now. Travel and nights out with friends are my biggest expenses after housing.

Home Details
Value ~$225,000
Loan Amount ~$157,000 (13 years remaining on 15 year 3.125%)
Monthly Taxes and Insurance $400
Current Monthly Principal and Interest Payment $1250 ($~820 to principal)
Monthly Utilities ~$125 to $150
Money to buy out partner $10k to $15k
Associated Costs to buyout partner (wild guess) $2000
Monthly Minimal Maintenance $200
Approximate Rent Value of 2nd Room $500 to $700

If I sell the house now then I'm likely to have 30K and change in cash (after costs). I'd likely send all of the money to my Vanguard brokerage. I have a friend who will rent me a room in his very nice home for about $700 a month, but this would not be permanent (maybe 6 months to a year) and some stuff would have to go. He does not live in my neighborhood, but it is almost equally close to my work (~1 mile). If I were to rent in my neighborhood or similar walkable/bikeable neighborhood I'm guessing my rent will be close to $1000 a month for a pretty nice place. I could go cheaper and or live in a worse neighborhood and I'm somewhat open to that, but as a newly single person I don't want to be far from friends and entertainment options.

Keeping the house costs me at least 10 grand, but probably 17 or so, up front. I don't even have that much cash, but can come up with it. I have a few things to sell and can part with some of my brokerage account. I'm not comfortable adding any of this onto the loan. I could get a 30 year loan and drop my payment a few hundred bucks, but that wouldn't really change my savings rate. I guess my biggest problem with selling is that I'm not going to get this type of "deal" again. There's no way I cut bait on this house and end up in something comparable in the next several years. Renting will save me $800 (increased cost of mortgage and minimum maintenance) in cash flow, but $800 is going to the principal if I have a similar loan to what I have now. I know 800 added to investments a month is going to do a lot more than in a home, but some might consider it a hedge. It's also required savings and I'd be less likely to spend it. If I could find a good renter then I may even make the home a financial advantage. This is all under the assumption that maintenance costs stay relatively low. This could even become a complete rental at some point, but not any time soon as it wouldn't fetch more than 1300 a month or so.

Thoughts? What am I not thinking about? Should I keep the house? I need to figure this out by the end of the week. Thanks for reading.


frugaliknowit

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Re: Housing Dilemma/Decision
« Reply #1 on: July 15, 2014, 11:31:48 AM »
The first thing to consider is that if this was more than a roommate partner, psychologically, it would be better to move.  The home might remind you of him/her which could be a detriment to your well being.

Secondly, for you to keep the house, you have a very low cash position.  You need to divert more money to emergency savings so that if you encounter unexpected repairs, you can take care of them without going into debt or raiding retirement accounts.
If you keep the house, reduce your 401k contributions to beef up your emergency cash.  At 3X income and a roommate it is doable; without a roommate it is not very mustacian in that it does not leave much money to cover the unexpected and invest.

ohio4life

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Re: Housing Dilemma/Decision
« Reply #2 on: July 15, 2014, 12:35:21 PM »
The first thing to consider is that if this was more than a roommate partner, psychologically, it would be better to move.  The home might remind you of him/her which could be a detriment to your well being.

Secondly, for you to keep the house, you have a very low cash position.  You need to divert more money to emergency savings so that if you encounter unexpected repairs, you can take care of them without going into debt or raiding retirement accounts.
If you keep the house, reduce your 401k contributions to beef up your emergency cash.  At 3X income and a roommate it is doable; without a roommate it is not very mustacian in that it does not leave much money to cover the unexpected and invest.

Thanks for the response, fugaliknowit. Yes, the house was with a significant other and that is a minor concern of mine and others have also warned me about that. I need to keep that in mind. I'm somewhat more worried about my mental state if I do have to move in with a friend or rent a place, but that's not a discussion for this type of forum. I'm leaning the direction of a sale, because relying on other people (renter) isn't exactly interesting to me right now. There I go again! Thanks again!

kyanamerinas

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Re: Housing Dilemma/Decision
« Reply #3 on: July 15, 2014, 12:39:55 PM »
this is not the kind of math i'm good at but i am curious why this is not a good house to share with a renter? two beds, two baths, 1100 sq ft all sounds good to me.

neo von retorch

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Re: Housing Dilemma/Decision
« Reply #4 on: July 15, 2014, 12:43:22 PM »
I own a home which is 1300 sq ft, 3BR/2BA and I've shared it with 2 other renters. (Currently 1 but listed to get a 2nd once more.)

I have found there are a LOT of people looking to rent that often travel for work. My current roommate was gone over 50% of the time last year.

Separate bathrooms will help a lot. Are the bedrooms adjacent or have at least a hall between them?

ohio4life

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Re: Housing Dilemma/Decision
« Reply #5 on: July 15, 2014, 12:52:48 PM »
this is not the kind of math i'm good at but i am curious why this is not a good house to share with a renter? two beds, two baths, 1100 sq ft all sounds good to me.

It's probably one of the weirdest little homes I've ever seen. The master bedroom actually has a skylight in the floor (yes, on the floor) to the living room and a huge circle cutout that opens the room to the stairwell as well. Not so private, but solutions exist.

ohio4life

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Re: Housing Dilemma/Decision
« Reply #6 on: July 15, 2014, 12:59:45 PM »
I own a home which is 1300 sq ft, 3BR/2BA and I've shared it with 2 other renters. (Currently 1 but listed to get a 2nd once more.)

I have found there are a LOT of people looking to rent that often travel for work. My current roommate was gone over 50% of the time last year.

Separate bathrooms will help a lot. Are the bedrooms adjacent or have at least a hall between them?

That would be ideal to have someone there just a few times a week and I think I may find someone like that. The bedrooms share a single wall. The house is so small that the stairwell just terminates at 2 bedroom doors on a triangle like step/landing.

mozar

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Re: Housing Dilemma/Decision
« Reply #7 on: July 15, 2014, 08:10:55 PM »
Do you plan on moving out of the area entirely for a new job in a few years? How many years do you want to stay in the area? If you are staying, I say keep it. I was in a similar situation 6 mths ago where my significant other wanted out and I had just bought a house. My house is 920 sq ft. I got a roommate. She is very considerate of the space we share, and there is only one bathroom!

Do you know how much money your ex put into the house? Can you do a monthly payment plan?
Can you pay for the mortgage on your own? Do you have a low debt ratio? Is the mortgage not more that 30% of your gross income?
Quick google search says you need to refinance and your ex needs to sign a quit claim deed form.

Goldielocks

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Re: Housing Dilemma/Decision
« Reply #8 on: July 15, 2014, 11:46:52 PM »
I would sell rather than be weighted with more house than I could or want to afford.

I did not read that you long term goal is landlording.

Also you should try to have the other owner pay for one of these choices:
  Pay all closing costs or
   Pay you generous moving allowance, plus 2k for youto get points on new MTG on new smaller place...

It is to their advantage to get divided from you financially, and they are asking for no more obligation, so they should pay for any early termination penalties.  That includes closing costs for vaelling three years earlier than intended, or?

Yes, this is an aggressive stance, but give it some thought.   You could split 50% if you want to be fair, if so why are you even asking? Lol.

Why?  You don't want to move and if you stay they can't force you out without something akin to a divorce type decision... So they are on the hook for their portion of the joint payment.  Unless you had a pre_signed agreement?

ohio4life

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Re: Housing Dilemma/Decision
« Reply #9 on: July 16, 2014, 06:08:41 AM »
I would sell rather than be weighted with more house than I could or want to afford.

I did not read that you long term goal is landlording.

Also you should try to have the other owner pay for one of these choices:
  Pay all closing costs or
   Pay you generous moving allowance, plus 2k for youto get points on new MTG on new smaller place...

It is to their advantage to get divided from you financially, and they are asking for no more obligation, so they should pay for any early termination penalties.  That includes closing costs for vaelling three years earlier than intended, or?

Yes, this is an aggressive stance, but give it some thought.   You could split 50% if you want to be fair, if so why are you even asking? Lol.

Why?  You don't want to move and if you stay they can't force you out without something akin to a divorce type decision... So they are on the hook for their portion of the joint payment.  Unless you had a pre_signed agreement?

Without getting specific, the other owner is being agreeable to most suggestions, because they feel bad for wanting out and know they put me in a tough spot. Neither of us are interested in making a legal battle out of the whole thing, so it should work out either way. As far as landlording and buying another house, I don't really want either. If I move I will rent for the foreseeable future. There aren't cheaper options in the neighborhoods I want to put down roots. I've rented rooms in a home I owned in the past and it was kind of a headache, but I think it would be easier for me to deal with now.

iwasjustwondering

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Re: Housing Dilemma/Decision
« Reply #10 on: July 16, 2014, 06:20:14 AM »
I would run screaming from "insufficient floor supports."  That sounds very expensive. 

ohio4life

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Re: Housing Dilemma/Decision
« Reply #11 on: July 16, 2014, 06:23:26 AM »
Do you plan on moving out of the area entirely for a new job in a few years? How many years do you want to stay in the area? If you are staying, I say keep it. I was in a similar situation 6 mths ago where my significant other wanted out and I had just bought a house. My house is 920 sq ft. I got a roommate. She is very considerate of the space we share, and there is only one bathroom!

Do you know how much money your ex put into the house? Can you do a monthly payment plan?
Can you pay for the mortgage on your own? Do you have a low debt ratio? Is the mortgage not more that 30% of your gross income?
Quick google search says you need to refinance and your ex needs to sign a quit claim deed form.

I'm not sure about that. Being single again affords me the option to look around more broadly when the job hunt happens. I like this area and what it has to offer, but as recently as a few years ago I really wanted to move out of town. I may have that itch again.

Yes, we have a good idea of how much each of us put into it. She tracked the renovations meticulously (split 50/50) and I tracked the extra money I put towards the principal. We agreed that I would get my principal money back first when it sold. We agree on what the house would likely sell for and considering closing costs and what not we have thrown around a few numbers. I did ask her if I could pay her some now and some later and she seemed OK with that. I'm not sure what terms she would agree to and dragging out our financial intermingling is probably not the greatest idea.

My only debt is on this house. A rough calculation shows that the mortgage is about 26% of my gross monthly income.

ohio4life

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Re: Housing Dilemma/Decision
« Reply #12 on: July 16, 2014, 06:29:00 AM »
I would run screaming from "insufficient floor supports."  That sounds very expensive.

It's not a uncommon problem to have temporary jack posts in basements of older homes. When I bought the home, my goal was to tackle the basement at some point. I just never go around to it. My house was probably built in the late 1800s. Most of the houses in our area have frightening basements and it was a concession we had to make when we were looking for an affordable home 5 years ago.

JCfire

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Re: Housing Dilemma/Decision
« Reply #13 on: July 16, 2014, 06:47:51 AM »
If you've determined that you want to live in a home of comparable quality either way, then I think the buy vs rent decision is economically close enough to a push given current economic conditions.  You should focus on your personal preferences, comfort level, any attachment or aversion you have with regards to your current building compared to places you might move, etc.  Its very unlikely that the economic consequences of one decision over the other, as far as you could accurately predict in advance, would be big enough to trump your personal preference in this situation, in my opinion.

ohio4life

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Re: Housing Dilemma/Decision
« Reply #14 on: July 16, 2014, 07:13:32 AM »
If you've determined that you want to live in a home of comparable quality either way, then I think the buy vs rent decision is economically close enough to a push given current economic conditions.  You should focus on your personal preferences, comfort level, any attachment or aversion you have with regards to your current building compared to places you might move, etc.  Its very unlikely that the economic consequences of one decision over the other, as far as you could accurately predict in advance, would be big enough to trump your personal preference in this situation, in my opinion.

I think I'm willing to downgrade to a smaller place of perceived lesser quality, but it's tough to give up the nice kitchen, yard, space, etc. If a roommate were to happen then I think it is a push on the staying or going. Otherwise, I'm thinking staying is likely hurting my financial goals.

I'm trying to look a bit on Craigslist, but the apartment listings are clogged with the same complexes (miles away from neighborhood keywords used in my search) over and over again. I don't remember it being this bad last time I looked to rent a place. Any suggestions for online listings? The friend I could live with has a really cool converted old grocery/corner store home and we get a long really well. I just don't know if I want to bounce from there to another place in a few months again. I guess if I get rid of a lot of stuff that won't be so bad. I think he would want me to regardless. I need to talk to him again before I make any decisions.


FrugalZony

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Re: Housing Dilemma/Decision
« Reply #15 on: July 16, 2014, 04:00:00 PM »
Craigslist has a map feature, where you can search the listing on a map, so you can see where they are located
I have given up on keywords, as they are often being abused by posters ;)


I'm trying to look a bit on Craigslist, but the apartment listings are clogged with the same complexes (miles away from neighborhood keywords used in my search) over and over again. I don't remember it being this bad last time I looked to rent a place. Any suggestions for online listings? The friend I could live with has a really cool converted old grocery/corner store home and we get a long really well. I just don't know if I want to bounce from there to another place in a few months again. I guess if I get rid of a lot of stuff that won't be so bad. I think he would want me to regardless. I need to talk to him again before I make any decisions.

I wish you all the best whichever way you go. I am going through a separation too and it has me all over the place as far as my housing situation is concerned
In your particular situation I'd look for the clean cut, as getting out, will also have you share all cost (realtor fees, closing costs etc.), which you would have to bear at a future point, if you stayed, let alone getting rid of the emotional baggage.
But I realize it's not always that simple.

I personally would be glad if I had a friend, I could move in with for a while.

Good luck, whatever you decide!


mozar

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Re: Housing Dilemma/Decision
« Reply #16 on: July 16, 2014, 04:51:57 PM »
First you should talk to the bank. If you can't refinance, you don't have a choice about it. So unless you get a roommate, this house will hurt you financially in the long run?

Sounds like you are not sure about anything. There is a website called Something Pop. You can add priorities and will weigh pros and cons (I think thats what it does). So a pro would be nice kitchen, con would be you don't want to pay for it. Why do you have to decide by the end of the week? This is a big life decision. I think you need more time.

ohio4life

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Re: Housing Dilemma/Decision
« Reply #17 on: July 17, 2014, 06:21:21 AM »
First you should talk to the bank. If you can't refinance, you don't have a choice about it. So unless you get a roommate, this house will hurt you financially in the long run?

Sounds like you are not sure about anything. There is a website called Something Pop. You can add priorities and will weigh pros and cons (I think thats what it does). So a pro would be nice kitchen, con would be you don't want to pay for it. Why do you have to decide by the end of the week? This is a big life decision. I think you need more time.

I do need to see if I can get approved and weigh some real options. I do need more time, but my ex is pushing for some kind of progress on this. I'm going to try out that website. Thanks for the suggestion!

ohio4life

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Re: Housing Dilemma/Decision
« Reply #18 on: July 29, 2014, 07:51:19 AM »
First you should talk to the bank. If you can't refinance, you don't have a choice about it. So unless you get a roommate, this house will hurt you financially in the long run?

Sounds like you are not sure about anything. There is a website called Something Pop. You can add priorities and will weigh pros and cons (I think thats what it does). So a pro would be nice kitchen, con would be you don't want to pay for it. Why do you have to decide by the end of the week? This is a big life decision. I think you need more time.

I do need to see if I can get approved and weigh some real options. I do need more time, but my ex is pushing for some kind of progress on this. I'm going to try out that website. Thanks for the suggestion!

I tried out the website (http://www.somethingpop.com) and I can't recommend it enough. Very cool. That being said, it basically ranks my options equal. Most of my friends and family think I should keep the house, including one friend who is a bit of a mustachian. I've done a lot of number crunching and if it can be had for the right dollar amount I think it is worth keeping for a year or two and then re-evaluate. The wild card with keeping it is the furnace, so I need to save up a bigger emergency fund over the next 6 to 9 months. I'll do that by backing off my 401k contributions for a bit.  I probably will sell my scooter as well. It's not costing me much to keep, but the money will help build my emergency fund faster and I don't ride it much. The other sacrifices I will make if I keep the house is to continue to go car free and limit my travel a bit. I'm not going to like the winter, but I haven't really missed a car much since I got rid of my truck 4 months ago. I just booked a bus ticket to see my family and it was less than 30 bucks. Yes, they have to pick me up and drop me off at the station, but its not that big of a deal to them at this point. I'm going to have to try bus travel to some farther destinations, since I was spending a few hundred bucks a month on flights prior to all this.