Author Topic: More expensive house in a perfect hood or less expensive in an imperfect one?  (Read 4754 times)

scantee

  • Bristles
  • ***
  • Posts: 410
    • Do Anything
Hello fellow Mustachians. I'm hoping you can provide me with some advice about a conundrum my family is facing.

First, a little background. I am a married woman, with two small children living in a northern midwestern city. My husband works full-time at the local university and I work part-time at a non-profit. We have a combined income of $130k. I'm very mustachian by nature and while my husband is less so he is willing to humor me in my personal finance pursuits. We have a pretty simple lifestyle: small house in the city, husband rides bike to work, we try to keep our consumption to a minimum.

There has been an increase in crime in our neighborhood the past few years and we want to sell our house and buy a new one somewhere safer with better school options. The issue we're facing is that we can't decide between two areas.  The two areas we've narrowed it down to are:

1)A different neighborhood but still in the same city. This is a fantastic neighborhood with access to a lot of the things we enjoy doing, like proximity to bike trails and lakes, with great schools, good access to public transportation, and close enough to my husband's work that he can still bike. A decent home in this neighborhood will cost us from $250-300k.

2)A very small, very inner-ring suburb. This is a nice little suburb that for some historical reason was never integrated into city lines. The schools are great, it has decent public transportation options, and it's close to my husband's work so he can ride his bike. A nice home in this neighborhood will cost us from $200-250k.

While the second option is nice it is also a suburb: there are no sidewalks and there is really nothing in walking distance that we like to do, although we do have friends that live there which is a plus. So the question, is it better to pay more, about $50k, for a house in the perfect neighborhood or to pay less for the area that we still like but that will require more driving?

Thanks for you help.

shedinator

  • Bristles
  • ***
  • Posts: 300
  • Location: Eudora, KS
Do the math :).
How many miles is your husband currently driving to work? How many days/year would he be likely to bike in each neighborhood? Would your commute to your job increase or decrease? Add up all the miles that you wouldn't be driving because of work (A), then try to calculate the number of miles you would now be driving to do other things(B) for each neighborhood. Subtract A from B for each neighborhood.
Then do an honest comparison of what you'd end up spending on a house in each neighborhood. You said that 250-300 buys a "decent" house in the first neighborhood, while 200-250 buys a "nice" house in the second. I don't want to read too much into that, but it sounds like the 2nd scenario offers a better home in the price range given, which leads me to believe you'd spend closer to the upper limit of the 250-300 range, but around the midpoint for the 200-250. This nets a hypothetical difference of around 75k. Get more concrete prices for  both neighborhoods, rather than 50k ballparks.

For every $1,000 difference in price, you can drive an additional 1800 miles in the cheaper home for the net cost to be the same. If it really is a $50k difference between houses, you're looking at an added budget of 90k miles, and there's really not enough time in a year for a dual-income family to drive that many miles (it amounts to about 94 DAYS of driving at ~40mph average). If the difference is closer to $10k, you've still got 18,000 miles to work with.

scantee

  • Bristles
  • ***
  • Posts: 410
    • Do Anything
Thank you for your input.

You're right about the distinctions between "decent" and "good": both areas have houses in good condition but the houses in area #2 are larger on average. We're not looking for a big house, we have a 1300 s.f. one now and we'd like a 1600-1700 s.f., so I'm not sure how important the added size is to us.

You're also right that in purely economic terms area #2 is the better choice. We don't drive all that much and while we would drive more in the suburban area it probably wouldn't add up to more than the extra housing costs of living in the first area. The challenge for us is to asses the value of things that are not easily quantifiable. We would enjoy living in the first area more. We've had discussions where we agreed that we couldn't picture living in area #2 once are kids are grown. And maybe it still makes sense to live there now. We can always sell that place once the kids are gone and move to an area we like more. That said, I do think our current enjoyment of our living situation is important too which is what makes this a hard decision.

James

  • Handlebar Stache
  • *****
  • Posts: 1680
  • Age: 46
  • Location: Rice Lake, WI
If you have followed MMM for a while, you know he doesn't skimp on his housing in location or quality.  We don't know your specifics of either your finances or your goals, both of what would be necessary to give actual recommendation.  So the advice I would give is to follow up on those two options and actually find good deals on houses in both areas you think you would be willing to buy.  Figure out the actual differences, not the theoretical differences which could vary by up to $100,000.  Then you can actually put a price on what it would cost to live in the preferred area.  One thought to consider is that the place closer to town may actually be better in the long run financially due to faster increase in value over time.  It's just very hard for you to weigh all those issues, so for us it's even more difficult since we have so much less information.

My gut is that you should go to the area you really want to be in, which doesn't sound like the one in the suburb...

Mrs MM

  • Administrator
  • Bristles
  • *****
  • Posts: 367
If you have followed MMM for a while, you know he doesn't skimp on his housing in location or quality.  We don't know your specifics of either your finances or your goals, both of what would be necessary to give actual recommendation.  So the advice I would give is to follow up on those two options and actually find good deals on houses in both areas you think you would be willing to buy.  Figure out the actual differences, not the theoretical differences which could vary by up to $100,000.  Then you can actually put a price on what it would cost to live in the preferred area.  One thought to consider is that the place closer to town may actually be better in the long run financially due to faster increase in value over time.  It's just very hard for you to weigh all those issues, so for us it's even more difficult since we have so much less information.

My gut is that you should go to the area you really want to be in, which doesn't sound like the one in the suburb...

Exactly.  For me, where I live almost becomes part of who I am because we spend so much time here.  I have never been happier and a lot of it has to do with our wonderful little neighborhood.  I would pay more to live in this more walkable neighborhood, but I would look for a house that is a good deal in that neighborhood.  Maybe buy a house that needs some work that others might overlook, if you have it in you to do a bit of work.

Good luck!

wilk916

  • 5 O'Clock Shadow
  • *
  • Posts: 25
  • Age: 38
  • Location: Granite Bay, CA
Here are my two cents:

To me, the whole point of life (and an underlying philosophy of MMM) seems to be a maximization of real, long-term happiness.  In general, temporary happiness is found by buying stuff.  And in general, long-term happiness is found by using your hard-earned money to build a life in which you are not forced to work for someone else, doing something you hate, 40+ hours per week, 50+ weeks per year, 40+ years of your life.  As a result, spending less is a tool for achieving long-term happiness.

That being said, minimizing the amount of money you spend is not always the same thing as maximizing happiness.  There are other factors that play in as well.  One example is living in a location where you feel safe in your home, where you feel comfortable letting your children play outside, and where you enjoy spending your free time.

That's my long winded way of saying, don't let money be the only driving factor in making your big decisions.  Make it be part of the decision.  In general, spending more on a house will reduce your amount of free time (how much should really be calculated), but also may make the quality of your free time more satisfying in the long-run.

Food for thought.  Good luck.

bdub

  • 5 O'Clock Shadow
  • *
  • Posts: 77
  • Location: Minneapolis, MN
Here are my two cents:

To me, the whole point of life (and an underlying philosophy of MMM) seems to be a maximization of real, long-term happiness.  In general, temporary happiness is found by buying stuff.  And in general, long-term happiness is found by using your hard-earned money to build a life in which you are not forced to work for someone else, doing something you hate, 40+ hours per week, 50+ weeks per year, 40+ years of your life.  As a result, spending less is a tool for achieving long-term happiness.

That being said, minimizing the amount of money you spend is not always the same thing as maximizing happiness.  There are other factors that play in as well.  One example is living in a location where you feel safe in your home, where you feel comfortable letting your children play outside, and where you enjoy spending your free time.

That's my long winded way of saying, don't let money be the only driving factor in making your big decisions.  Make it be part of the decision.  In general, spending more on a house will reduce your amount of free time (how much should really be calculated), but also may make the quality of your free time more satisfying in the long-run.

Food for thought.  Good luck.

Absolutely.  Well said.

The area the original poster talks about sounds very much like where I live (Minneapolis/St. Paul). 

I would just caution you to make sure you put sufficient weight on the day-to-day items that will affect your happiness, not just the "proximity to bike trails and lakes" that you will utilize 15 times a year (if it is more than that, then maybe it should be weighted as a day-to-day activity)

I have numerous friends who bought based on the proximity to lakes and prolific # of restaurants in the city but now are going through the (expensive) hassle of moving out because they choose not to deal with poor performing schools that they take their kids to every day.  This isn't meant to be a discussion about schools; great and smart teachers and kids can thrive in very poor performing schools.  Just make sure you give sufficient thought to the day-to-day activities of the area you choose to buy in because those can weigh on your happiness a lot more than which town has the best art festival (for example).  The same goes for the house you choose.

scantee

  • Bristles
  • ***
  • Posts: 410
    • Do Anything
Thanks you for your additional comments.

Bdub, yep, I'm in Minneapolis. Bike trails are important to us because my husband commutes by bike to work, five days a week, year-round, so having access to trails is a big plus for him. The schools in the area of the city we're looking at are very good, some of the best in the state, which is part of the reason that we like that area.

The other area we're looking at is also nice (St. Anthony Village, if you're familiar) but we would probably end up spending more time at home if we lived there because it isn't close to the things we currently do and most trips would involve driving. There are pluses to living there (we could probably have a nice-sized garden) but the pluses have related drawbacks (we would spend more time on yardwork).

I think we both want to move to the city neighborhood but we also want to get a house for a reasonable price which might involve renting for awhile until we can find a good deal. I was hoping to avoid that since I didn't want to move twice but it might end up being our best option.

bdub

  • 5 O'Clock Shadow
  • *
  • Posts: 77
  • Location: Minneapolis, MN
Yep, I am familiar with the area.  The other area must be Lake Harriet/Calhoun area.  Very beautiful area, can't blame you for loving that area (and definitely more appealing to the eye than St. Anthony IMHO).   I am surprised you can get a nice home there for under $300K, but it sounds like you have scoped it out more than I have.  We are out in the far south suburbs , so a different lifestyle for sure but a mustachian existence is still possible. :)
 
Good luck in whatever you choose!

Parizade

  • Handlebar Stache
  • *****
  • Posts: 1031
  • Location: Variable
  • Happily FIREd
I can understand the tough choice. St. Anthony is a charming neighborhood, close to Como Park and the fairgrounds. Your husband would have plenty of coworkers close by, that neighborhood is popular with profs.

I'm guessing that Linden Hills is your other choice -- also charming. But Richfield is only a few blocks south and I believe houses are less expensive there. I know a number of people whose house is in Richfield but they "live" in Linden Hills.

scantee

  • Bristles
  • ***
  • Posts: 410
    • Do Anything
The St. Anthony we are interested is a suburb of about 8000 next to Northeast Minneapolis. We also like St. Anthony Park next to the St. Paul campus but we'd like a mid-century house and there are very few of them in that neighborhood. We starting looking almost a year ago in anticipation of moving this year and we considered even more neighborhoods: the area of Roseville just north of campus, the eastern part of Golden Valley, Highland Park, and the two we're still considering. Narrowing it down to one has been the hardest part.

Nice to see this many Twin Cities and Minnesota people here!

BenDarDunDat

  • 5 O'Clock Shadow
  • *
  • Posts: 84
  • Age: 49
  • Location: Raleigh NC
I would say that it would be preferable to be in a neighborhood that's on the upswing or stable.  A less expensive house in a declining neighborhood can lose value and be more expensive in the long run.

Sacadoh

  • 5 O'Clock Shadow
  • *
  • Posts: 43
I am with the majority here. Love where you live if you can. You may end up moving twice if you cut your costs here.

"When you pay too much, you lose a little money - that is all. When you pay too little, you sometimes lose everything, because the thing you bought is incapable of doing the thing it was bought to do." - John Ruskin