Author Topic: 7 years to FI or buy a house  (Read 3844 times)

MountainTown

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7 years to FI or buy a house
« on: June 02, 2017, 10:24:31 PM »
Ok so I figure in our current situation we could be about 7 years to FI if we didn't buy and just stayed in our cheap rental as long as possible. Emotionally--I gotta be honest, we want to move out, move up, and just get a nicer place. We do love our neighborhood but so does everyone else here and that's why they put up with living in 900 square feet 100 year old houses(or....they are millionaires and it's quite the opposite).

SO we are left with a tough call, do we a.) Stick it out here and save about 60k a year in pre-tax income......
or b.) buy a $250k to $300k house and maybe save more like $18k to $30k in pre tax income(if that)....I know houses can be beasts so who knows how much?

Our current situation is:

MFJ
Age: 30ish married couple(2 years)
Income: $115k
Stable: Both govt. She is stable with a good boss. I am stable, but new micro managing boss so feeling waaay less stable
Current retirement savings: $210k. Mix of TSP, IRA, Roth, Deferred comp, 403b. If I retire out of gov, I have a 1/3 pension(I pay 1%....sweeet)
Cash: Included in that $210k is $83k cash which always we had planned on using for a house

Car: 1 car. Beater but not to bad shape. We are hoping to buy another AWD vehicle before winter as we live in a mountain town and this is actually a legit mountain town(not vail or Big sky).

No other major assets/investments.

Thoughts? I have run the numbers and I figure we could be millionaires by about 7 years. Downside is I am pretty miserable in my job at this point. It's a good job but with the micromanaging it has turned into a nightmare for everyone in my group. This could change quickly or it could stay the same--who knows?

Open to any advice, criticism, cutting jabs, and inspirational ideas. Thanks all.


matchewed

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Re: 7 years to FI or buy a house
« Reply #1 on: June 03, 2017, 06:23:35 AM »
So if you've run the numbers what do they tell you about time to FI with buying a house?

Freedomin5

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Re: 7 years to FI or buy a house
« Reply #2 on: June 03, 2017, 06:58:33 AM »
If you're miserable at your job, when calculating how much mortgage you can safely afford, it's probably best to use only your wife's income. It's one of the worst feelings in the world to feel that you can't leave/lose a job because you need both salaries to make the mortgage payment.

Another option if you're dead set on having the house is to find some way to generate income from it, like buying a duplex and renting out one side, or renting out the basement.

There are several threads on this forum talking about the rent vs. buy debate. Millennial Revolution also has several posts on this topic (though they are mostly anti-buy). They do a nice job running numbers to back up their stance though.

Finally, "we want to move out, move up, and just get a nicer place" sounds suspiciously like lifestyle creep -- I have no context so I can't say for sure. Only you can evaluate that for yourself.

MandalayVA

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Re: 7 years to FI or buy a house
« Reply #3 on: June 03, 2017, 07:19:36 AM »
What's more important to you--freedom or stuff?

MountainTown

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Re: 7 years to FI or buy a house
« Reply #4 on: June 03, 2017, 07:51:12 AM »
Freedom: Context. Lifestyle creep? I dunno...I guess it's all relative. We have lived in the same tiny 900 sq feet rental for years while watching our friends move up in house. I bought a used car in 2006 and am still driving it....

I guess we just feel like we are climbing over each other in this rental and are worried what it would be like if we had a baby

And on the wife's income....yea that's exactly the way I feel. We did find a house this weekend that isn't our favorite neighborhood but it's cute enough. It will need new flooring likely(smells of dog) but the house payment could be kept around $1000 to $1100. My wife makes $40,000 a year so I think as long as I got some kind of minimal work, we could make it on that salary.

Manalay: Definitely freedom. MOst of my life i have delayed gratification over and over again to payoff debt, invest, or save. However lately I have some of those MadFI moments where I wonder if I am restricting myself TOO much and just not enjoying life. Or maybe my attitude is bad? I dunno.


OH and back to Freedom: Yea I have looked at duplexes. Never really found a good one for us. They are pretty expensive here but I like the idea. Another sticky issue is my employer(Fed) Is able to restrict what other forms of income I can take(without their approval). It would not be good to buy and find out they don't approve!

Dee18

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Re: 7 years to FI or buy a house
« Reply #5 on: June 03, 2017, 08:59:23 AM »
If you feel crowded with 2 people in 900 sq feet, take a hard look at your space.  Most of us tend to accumulate over the years, making a space feel smaller.  Perhaps you have refrained from painting or buying a new couch thinking, well, we're going to buy a house soon." Are there smaller steps than moving that would improve your living situation?  I recently staying in a couple of efficiency airbnbs while traveling and they made me decide to downsize.

Another key factor is where do you want to live once you are FI.  If it is the area you are in, you may wish to plan what house you will want in the future and find it now.  Children don't need much space, and they love bunk beds. 

MountainTown

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Re: 7 years to FI or buy a house
« Reply #6 on: June 03, 2017, 12:50:13 PM »
Thanks for the hint Dee. I agree with you...there has been a tendency to say "Wait...let's not buy that....until we get a house." And we aren't quite diggin in here...afraid to do much of a garden, etc. It's bittersweet because we love it here but can't afford to buy in the neighborhood.

I guess my concern is that...right now we are just lucky. Our landlord hasn't risen rent in years so we are totally undermarket. Sure it's good now...but eventually she might or she might sell. Then I am afraid we will be paying rent more like $1400 to $1500 a month. Wouldn't it be better to lock in a house that has a monthly(piti) of $1100 a month? I know there is ultimately more that goes into a house but that's my general thinking.

And also to answer your question Dee...yes this is probably the place I would FI. Sometimes i imagine spending some time in my hometown, closer to my parents, which is minnesota. Mainly I think I would just travel more.

Mrs. S

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Re: 7 years to FI or buy a house
« Reply #7 on: June 04, 2017, 10:27:01 PM »
Just weighing in about 900sft house that feels too small for two. We faced the same issues when we moved in our current 500sft rental. We were living in a 1000-1100 sft two bed apartment before that.
(In one year we have come full circle and I honestly believe we can downsize further. We have started selling off huge furniture and are currently contemplating replacing a 3 seater couch and 2 recliners with a single futon. I have thinned my book shelves, closet and even kitchen shelves. When we were talking about whether to up-size in case we have a kid, we decided against it. Chances are we will be here for quite a few years unless we find a better accommodation even closer to work.)

You might want to look into reducing how much stuff you own and it will make living in a relatively smaller house easier.

I would wait till the hike in rent happens even if that is only a few months away and then shift to a house which would cost you less than rent.

How many years will buying a house add to your FI?

boarder42

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Re: 7 years to FI or buy a house
« Reply #8 on: June 05, 2017, 06:18:37 AM »
we added 2 years to FI by upgrading our first house to the house we live in now.  everything is a tradeoff money buys freedom and stuff you can have both eventually but the more things you want the longer it takes to get freedom.  Every individual person/couple has to decide what level of freedom is right for them and when they want it.

MountainTown

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Re: 7 years to FI or buy a house
« Reply #9 on: June 05, 2017, 11:05:27 PM »
Thanks Boarder  and Mrs. S...I guess I am not sure how many years buying a house will add to FI. It seems that this has everything to do with the house right????

Mrs S: Definitely we could reduce. I am by no means a hoarder and/or guy that collects toys(big boy toys like snowmobiles and dirt bikes, etc) but....I think there is always room to improve.

Mrs. S I would love to talk to you sometime because it sounds like a similar situation(it was) but I have to say....how did you you do it?!?!? That seems so difficult and especially with a kid.


ChpBstrd

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Re: 7 years to FI or buy a house
« Reply #10 on: June 06, 2017, 02:59:12 PM »
I'm on the other side of the fence, where you might think the grass is greener.

In 2012 we decided to sell a house we hated, but only owed 80k on, and buy something bigger and more expensive (2700 sf). Now I realize that decision extended my time to FI by about 3 years.

You actually get bitter at the house, as if it was a person and not your own decision, for making you work those years. Every blue-sky day as you walk into the office... "fucking house."

You do the math and realize that if you downsized, transaction costs would eat up years of the savings from doing so. "Fucking house"

You realize the ROI from renting it out would be low-single digits. "Fucking house."

You spend holidays and weekends fixing stuff, painting, and remodeling. You realize what you really want is travel, variety, and feeedom, but you don't get much of those things. "Fucking house."

boarder42

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Re: 7 years to FI or buy a house
« Reply #11 on: June 06, 2017, 03:16:27 PM »
the math can be done here then you know what you're giving up. 

at this point you should know

1. what you spend
2. what you have invested.
3. what the inflation adjusted house costs would likely be - taxes, insurance, maint.
4. what the expected purchase price of the house would be
5. what your current rent is

then you take 1+3-5 to get your new spending multiply that by 25 and add number 4

then you calculate how long it will take you to get to FIRE with your new annual investment compounded at 6% added to your current investment stash and boom done.

AlanStache

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Re: 7 years to FI or buy a house
« Reply #12 on: June 06, 2017, 03:41:09 PM »
There is FI money and there is FU money.  Granted you are in a small town and work in govt but still. 

Your boss will be a dick with or without a house. 

It can be great having your own place where no one can raise the rent etc, but houses can need lots of expensive tlc.


lthenderson

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Re: 7 years to FI or buy a house
« Reply #13 on: June 06, 2017, 05:46:21 PM »
What are your plans after you are FI? Makes a big difference on what I would recommend. If you are planning on roaming around the world exploring new places, I probably wouldn't recommend buying a house. If your plans are to always stay in the area due to family, then a house would probably be justified.

affordablehousing

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Re: 7 years to FI or buy a house
« Reply #14 on: June 06, 2017, 07:02:48 PM »
Consider how much you like owning a house. Some find it fun to build and customize things, other see it as a hassle. As someone who lived in a super cheap and tiny rental, for probably 8 years longer than when I was able to buy a house, I really regret it and wish I'd taken the plunge earlier. Not just market timing regret, more like regret at not letting my life progress by being bound to a cheap apartment. Owning a house, even compared to living in cheap rent control in SF or NYC, can still pay off. I can't imagine the feds would not let you rent part of your house, or a duplex unit, and that way you can grow into the space more gradually.

Don't let an obsession with saving prevent your life from unfolding.

Dicey

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Re: 7 years to FI or buy a house
« Reply #15 on: June 07, 2017, 07:00:33 PM »
I'd be damn surprised if you can't own rental property. Find out ASAP. Then, see if you can buy a house and rent it out for the first few years. Then park youirselves in your cheap-ass, newly de-cluttered rental. Should your LL ever jack up the rent, you'll have an escape route. Make sure the maths work, but I'm guessing from the info provided that they might. Milk that under-market rent for all it's worth.

One more point: There came a time in my life when I wanted my home to look like an adult lived there. I set a budget, got rid of the old mish-mash crap and refurnished with everything to my liking (within reason). I bought on consignment and CL, but I only bought what I liked, not castoffs. To this day, I am damn glad I did. It totally changed my outlook and I was able to stay in my tiny home for a lot longer than I thought I could. When I eventually moved and needed different furniture, I sold a lot of it for at least what I paid for it.