I am a relatively new online moustachian follower, but was quite excited to find you all this past year, as I seem to come by these shared financial values naturally, (my family has made fun of my “stinginess” since I was a young child and refused to blow all my birthday money on candy, ha ha)! I thankfully found a wonderful husband who shares my values, and we are at the stage of buying a house. This is where I am looking for a little bit of advice… or maybe just encouragement? I don’t know which yet.
I typed out a query before I found the “case study format”, so I’ve included a breakdown in "case study format" and my original typed out response. I’ve attempted to keep it as succinct as possible.
Life Situation: DINKs, late twenties, living in Northern Canada
Take home pay: $90k between the two of us (this is after taxes. We don’t have dividends, rental income, etc. There isn’t anything to complicate this number, so I've left all that detail out. This is what we get in the bank!)
Current expenses: $30k/year … not entirely relevant to my question, so I won’t bore you with details, unless you need this info, then I will!
Assets: $150k in the bank, no significant material assets
Liabilities: ZERO! (Gosh, I love that!)
Specific Question(s):
Our personal situation:
We have no doubt about being able to afford a house. We are in our late twenties, with no kids, after tax we are taking home around $90k/year between the two of us. We have not previously purchased a house because we were living abroad after university and could not get a mortgage because we were not permanent residents. We have visited the bank here to discuss with them what we could get approved for, and they will approve us for a mortgage much higher than what we’d be willing to spend, so that is not an issue.
Our spending:
We have never been “budget” type of people, we just don’t spend much and diligently keep track of what we do spend. However, we now live in northern Canada, and things are expensive. There isn’t much I can do about many grocery items being double the price of grocery stores in the nearest city (900km away!). (If there IS something I can do, short of moving somewhere else, by all means, share the knowledge!) Utility bills, insurance, etc are pricey, and we do our best to minimize what we can. Still, in 2016 we will probably have spending of around $30k, which is higher than our usual averages. [Side note: I’m not using our historical spending data because I don’t have an accurate depiction to share of our current situation: We lived abroad from 2011-2013, took 2014 off to travel, and completely fell off the bandwagon in 2015 because we were overwhelmed with how EXPENSIVE everything felt back on Canadian soil. I’m a little ashamed that our reaction to this was to basically put the blinders on and just “not notice” how much we were spending on everyday things and for many months stopped tracking our spending. We have stopped this nonsense and gone back to our better habits.]
The housing market:
We live in a small, northern community where house prices are cheap and there aren’t a lot of rental options available (we are currently renting in the worst neighbourhood, in a small townhouse, and pay $1300/month; this is the cheapest rent we could find that was not apartment living). We have contacted the real-estate companies in town and have viewed several houses in varying price brackets. We are looking at around $250k for a moderate-quality 3 bedroom house. Alternately we can get a decent mobile home (trailer park style, but the land is included in the purchase price here, so there is no lot rent) for around $130k, or an older “fixer-upper” house for around $175k (our main problem with this is that material prices are THROUGH THE ROOF here so even though we can do most of the work ourselves, it may still cost more than what we would gain in home value). There are of course houses well above these prices in our town, but they are way more than we need.
The issue:
We don’t want to live here. This house purchase would be purely of the investment nature; we are tired of shelling out $15k a year to rent. We moved back to Canada to be closer to our families, but we are still 1500km from our hometowns! As soon as we can find work closer to home, we will be packing up and moving. Unfortunately, I work in mining, and my husband is a teacher. Due to many factors, there are not jobs available in those fields at the moment. When we were returning to Canada, we wound up in this town because we could both get work, and promised each other it was temporary. So, we picked a cheap rental, and kept all of our moving boxes. A year later, we are still here, still throwing money at rent and there are still no prospects of the job markets improving any time soon. Most of my colleagues who have recently purchased houses are paying similar, or slightly less than us each month in housing expenses including property tax, home insurance, and mortgage (my office mate just purchased a $250,000 house this summer and pays around $1200-$1250 a month, and while I don’t know specific numbers on his down payment, I know he did not have as large of a down payment as we can put down). So we are thinking: buy a house on an open mortgage, and if we wind up moving, we can attempt to sell it, or if we can’t sell it right away, we hire a property manager to rent it out for us. Even if we lose a bit on the house, we would’ve lost money in rent anyways. Worst case scenario, we buy, move right away and can neither rent nor sell the house; then we would need to cover the mortgage of that house, plus living expenses in a new house (either rent or mortgage payments). One of our concerns is that this is a mining town, and the economy here relies almost entirely on the success of the mine: if the mine doesn't do well, our house value will likely drop. Another option we have considered is buying a rental property elsewhere and gaining equity that way while we wait it out here... then it is completely unrelated to my main source of income (the mining industry). Logistically that is more difficult though, because we would have to travel to another town hundreds of km away to look at houses, sign paperwork, etc etc.
Are we crazy? Do you have any sage advice for us? How do we make sure we are making the best investment if we do buy (ie. How do we know which house will have good resale value, or which one will sell fastest if we decide to get out of here)?