The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: ceh on January 21, 2013, 10:22:40 AM
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I'm new to the forums, but I have been reading the MMM website for over a year now. My question relates to property taxes and whether it makes sense to buy a house closer to work with higher property taxes or further away to save money.
A little background: my wife and I are currently living at my parent's house to save up money for our own house. We have no consumer debt, relatively little student loan debt, and a 0% interest car loan with 4 years left (I know, not the best decision to buy a new car, but at least we're not paying interest). My wife works, and I am currently a PhD student. I'm studying engineering, and thankfully all my tuition is covered by the department,so I will not leave school with any additional loans. Additionally, I get a fairly decent stipend for my research work. We're looking to buy a house in the DC Metro area (Prince Georges County), and unfortunately property taxes are ridiculous ($4000-$5000/year) in this area. Specifically, we're looking at small single family homes or townhomes. We figure now is a good time to buy because of interest rates, and the cost of houses being so low, but I just don't know if we should look elsewhere for lower property taxes. We want to be close enough to my school so that I can just ride the bus or bike and my wife can ride the metro, so we're trying to weigh the advantages of different scenarios.
Does anyone have any advice? Am I overthinking the property taxes?
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Living in the DC metro area myself (Fairfax county), let me give you a word of advice: Do not underestimate the value of a short commute.
I personally would like to see the numbers from you (Commute times for both you and wife from both potential locations, difference in commute miles for each location, and difference in property taxes) to get a full determination of cost.
But, I've lived here for 9 years, and nothing shocks me more than hearing people say "I drive 1.5hrs each way, 5x a week, to work just to save money on my house thats 3 counties away!". Quality of life my friend.
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Yeah, we definitely want to improve our quality of life. We've only been making the commute for 6 months now, but we would definitely like to cut it down.
Currently we commute from Baltimore County to College Park together. This typically takes 45 minutes unless there is a backup on 495. From there, my wife takes the metro for another 45 minutes. Roundtrip, I'm commuting at least 1.5 hours a day, and she is commuting almost 3 hours a day. Obviously we need a change, or we're going to go insane.
The places we are looking at right now are about 3 miles away from school, so I could either ride my bike or take the bus. $4000+ in property taxes is a little hard to stomach though, so I wanted to get other people's opinions! Keep in mind, those taxes are on houses in the $150,000-$180,000 range.
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I don't think there's a hard & fast answer. First, you should work out the dollars & cents costs of commuting. Then consider the value of your time (which may not be simple - e.g. if you take a train to commute and can spend your time reading or working, that's much different than if you have to drive). Then finally consider lifestyle differences: are there things that you would do at a more remote house that you couldn't do in town? (E.g. if you want to keep a couple of horses...)
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Have you run a rent vs. buy calculation? In high tax areas, it often does not make sense to buy. Also, what will you do when you finish your PhD? If you are planning on relocating, I would probably consider renting.
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We did an initial rent vs. buy calculation and even looked at apartments when I started this fall, but we would be paying the same or more to rent a tiny studio apartment. To be honest, we may be able to get something cheaper, but we didn't feel like the neighborhoods were that safe. Plus, we have a dog, so that complicates things a little more/comes with additional deposits/costs. I guess my head keeps returning to the idea of this as an investment. We could handle the mortgage and property taxes, but it just felt too anti-mustachian to spend almost $400 a month on property taxes.
As far as work after my PhD, I plan to stay in the area, and there seem to be enough government/private jobs in my field. I understand that this does limit me when I do graduate, but my wife and I have discussed turning it into a rental property if we do need to relocate for some reason.
Ultimately, we're not rushing the decision, because there are a lot of variables that need to be considered. Thanks for the replies!