Author Topic: Sell our home and rent an apartment - Need advice!  (Read 3721 times)

bkworm82

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Sell our home and rent an apartment - Need advice!
« on: March 09, 2014, 01:19:06 PM »
I recently posted on here with a Reader Case Study and the comments got us (husband and I) thinking about selling our home and renting an apartment closer to our jobs in order to reach FI faster. I had written that we 'knew we did not want to retire in Florida' and we got some comments saying people didn't understand why we hadn't sold the home yet. Here are some facts:

Home: 3/2.5 bath townhouse, 1598 square feet. 30 year fixed rate mortgage at 4.25%, 28 years left. Bought at 123.5 and now have a balance of 112k. HOA: 1994/yr. Taxes (we claim homestead): 1700/yr. PMI: 1300/yr. Insurance: 1492/year.  Value of the home has gone up to about 150k.

We had not discovered minimalism or MMM when we bought the home and were blindly following the American Dream of owning our own home. We planned to start a family as well, which for now has been placed on the back burner as we want to achieve FI first or be almost there some time after having our first (and only) child.

Now we are so excited about early retirement and would like to do so in 8-10 years. I am 31 and my husband is 28. We did some math and some preliminary research on Craigslist for apartments and know we would most likely to be able to rent a small apartment very close to our jobs (we work in the same vicinity) for 600-800 a month. If we did that, we would get rid of my husband's Jeep Cherokee and possibly my Honda Civic and buy one small vehicle, but bike or walk to work. This would reduce our spending several hundred dollars a month.

We realize that owning vs. renting is also an emotional decision, but we are willing to put that aside if the numbers were skewed towards renting for these next 8-10 years and maximizing our retirement accounts as well as investing 50k a year. We put an excel sheet together and we believe selling now and renting would maximize our savings and further minimize our spending so we can reach our goal faster.

Any thoughts?

Another Reader

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Re: Sell our home and rent an apartment - Need advice!
« Reply #1 on: March 09, 2014, 01:40:46 PM »
You should be able to get rid of the PMI.  If your figures are correct, you have around 25 percent equity now.  Have you looked into this?

Prairie Stash

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Re: Sell our home and rent an apartment - Need advice!
« Reply #2 on: March 09, 2014, 02:10:30 PM »
FI in 8-10 is awesome. Waiting till 39-41 for your first child is a bit of riskier strategy. Logically most people won't have a problem waiting. For that small percentage of people it doesn't work for, it's an irreversible choice. Sometimes quality of life needs to be factored in ahead of FI.

Back to the house, remove PMI from the equation. You still have $400/month in housing costs before utilities, maintenance etc. Renting sounds much better, even before factoring on proximity to work. If you actually save the cash you an always buy another house whenever you want.

nereo

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Re: Sell our home and rent an apartment - Need advice!
« Reply #3 on: March 09, 2014, 02:14:30 PM »
Sounds like you two are willing to do what's necessary to reach RI.  From what I can tell from your numbers, your monthly expenses for shelter will go from ~$1150/month to $600-800. My math may be off somewhat... Your real savings though will come from driving less, selling off a car and having a lot more time.  Plus if you're right about closing costs you might net $30k+ from selling right now which will juice your savings.

good luck with the search for a great place to rent!


spoonman

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Re: Sell our home and rent an apartment - Need advice!
« Reply #4 on: March 09, 2014, 04:05:55 PM »
We had not discovered minimalism or MMM when we bought the home and were blindly following the American Dream of owning our own home.

That's the same thing that happened to us.  I was also after a tax deduction.  What we should have done was just max out our retirement accounts.

After owning for 4 years we ended up selling the condo because it granted us the flexibility to live wherever we want.  By removing that liability we automatically put or FI horizon closer by two years and have the freedom to travel.  Our tax liability is a bit higher now, but that's a small price to pay for flexibility.




oldtoyota

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Re: Sell our home and rent an apartment - Need advice!
« Reply #5 on: March 09, 2014, 05:02:05 PM »
I am glad you asked this. We're considering selling our home and buying a condo (more money for around the same square footage) in an area with better schools. However, I'm also open to renting.

It sounds like you guys have this thought out. So, renting and living closer to work would let you save more? If you have the answer as to whether gaining equity versus not helps you reach that goal, then it would seem like you are set.

I agree with a pp who said waiting to have kids could backfire due to age and health reasons.

RetiredAt63

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Re: Sell our home and rent an apartment - Need advice!
« Reply #6 on: March 09, 2014, 06:06:41 PM »
Waiting till 39-41 for your first child is a bit of riskier strategy. Logically most people won't have a problem waiting. For that small percentage of people it doesn't work for, it's an irreversible choice. Sometimes quality of life needs to be factored in ahead of FI.
Been there, did that - you are older, less energy, but smarter, so it balances.  Be prepared to be 5-10 years older than the parents of your kid's friends. Biologically, aim for before 35.

Workinghard

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Re: Sell our home and rent an apartment - Need advice!
« Reply #7 on: March 09, 2014, 06:17:52 PM »
We're also looking at selling our home when my husband retires in three years (no early retirement here). The money from the sale of our house will pay rent for 25-30 years based on my brother's spreadsheet with return on our investment and rentals going up.

Like spoonman, we want flexibility and freedom.