Income: Starting Next Week, Gross will be $152,000 for the family; take home after taxes and retirement savings will be: $4750/month
Current expenses:
Water, Sewer, Trash, Electricity, Gas, Internet (I have not had television since 1999). Internet access is necessary for my job (or I would spend less time with my wife and more at the office). $350.00
Gas for the long commute (for both my wife and myself): $550/month
Food and toiletries: $200/month for two (lots of healthy foods- fresh veggies, Ezekiel bread, stuff like that)
Lunches with other professionals (about 2/week for myself and for wife at around $10 a meal): $160/month
Eating Out and Entertainment (Dates): $200/month
Mortgage: $1220/month (includes PMI and insurance)
Insurnaces (life, auto, umbrella, etc): $160/month
Total Monthly Expenses: $2840
Assets:
$70,000 in his 401k (ineligible for loan)
$12,000 in her 401k (ineligible for loan)
$11,000 in his backdoor ROTH
$11,000 in her backdoor ROTH (cannot be withdrawn because of conditions of a gift for this purpose)
TOTAL retirement assets: Approx $104,000
Home (Zillow value) $138,000
Liquid Savings: $10,000
TOTAL assets: $252,000
Liabilities:
Mortgage: $156,000 (20 year mortgage)
Car: $0
Car2: $0
Student Loans: $0
Credit Card/Other: $0
TOTAL liabilities: $156,000
Specific Question(s):
I have been reading MMM for a while, but I have been intimidated about posting in the forums because I felt like I would need a facemask for all the punches. I have been turning things around over the past two years, but I have a glaring problem that has set my hair ablaze. I live an hour and a half from my work (it was not always this way, but the housing crash
excuse, excuse). Fact is, I am in a house that is upside down, and I do not have enough money to get out of it. However, my wifes work is about 1 hour away (in the same direction as my work), and we are spending about $550 a month in fuel. (Enough to take credit for half a degree in global warming).
My question is this: With the current situation, I cannot get out of my upside-down house to move. However, a situation has come up that may allow me to move out of it to another house. With my wifes new job, we have increased income and she is a first-time home buyer (not on the house I owned when we met). We were looking at purchasing a new house closer to our jobs, while renting out the current house.
With her new income, we can afford to pay for both houses, although it would be a tight squeeze if we did not find a renter. However, a movie studio is being built near our home that is bringing in a lot of people to the small area where we live. I know a guy who owns a property management business. Since he is my client, I can see the inner workings of his outfit, and I know they do a great job and are honest. Rent in the area should be going up, and he is desperately looking for new houses because he has so many renters lined up right now. He estimates that our home would rent for $1300-1500, with $1350 being a good rent-it-tomorrow price.
The house has been well maintained, but it would need new flooring. I am an attorney, so if I did not go through a company, the legal work would be easy. Unfortunately, other than some basic woodworking, my home repair skills are non-existent. For that reason, I think a management company would be a better bet for my situation.
An obvious downside would be PMI on a second house, along with having two mortgages and being 97% financed. Once the first home was rented, we would pay down the second mortgage like crazy, but as the area in which we are looking has decent houses 15 minutes from our workplaces, I would imagine a significant part of the $550 fuel bill would disappear, offsetting some of this loss.
After paying off all other debt, I do not like the idea of such a huge loan, but the numbers seem to indicate that this would put us in a much better financial situation and allow us to have our first rental home. Assuming we only free up $300 in fuel to put on this second mortgage a month, we would also have money freed up from having a renter to throw into that debt as well.
I am hoping for insight and ideas as to how to put my family into a better situation than what we have here. If this escape route seems too dangerous, I want to know. If anyone can think of better ways to get there, my ears are open.
Some important notes:
I cannot do anything that would destroy my credit like giving the house back to the bank because of work. It could cause problems with my job.
My wife is told that she gets a bonus with the new position as well, but they were not very clear as to how much. Obviously, we could drop that on any debt, but since it is a new job, we do not know if her bonus will be $500 or $5,000. (They hinted that it would likely be around 5% of her salary if goals were met ($2,500), but we do not want to count on this. Her last company suspended all bonuses right after she was hired. If it comes: great. If not, we do not want to count on it.