Author Topic: Short commute/Expensive house vs. Long commute/Cheap house?  (Read 29587 times)

RLVB

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Short commute/Expensive house vs. Long commute/Cheap house?
« on: October 15, 2012, 08:52:47 PM »
As new Mustachians my husband and I have made some significant financial changes, but there's still one we can't agree on, so maybe some of you seasoned folks can weigh in.

Do we live 8 minutes from his work and spend $400-500K on a decent house in Chicago (older, needing work/updates, smaller-1500 sq ft)? Or does he commute 45 minutes each way and spend $200 on a nicer house in the 'burbs (newer, move-in ready, larger-2000 sq ft)? The disparity between city and 'burbs housing costs is really that big.

We have one child and decent schools are important.

Thanks!!
« Last Edit: October 15, 2012, 09:02:41 PM by RLVB »

sol

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #1 on: October 15, 2012, 09:11:22 PM »
I opted for a more expensive smaller house and a shorter commute.

I figured I can always work longer to pay it off, as long as I like the lifestyle I've built, but there isn't anything you can do to fix a soul-crushing commute.  Those years are just wasted.

jawisco

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #2 on: October 15, 2012, 09:20:01 PM »
If the house price and the commute time were the same, where would you prefer to live?  How much is your family income and do you have any plans to reach FI?

okits

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #3 on: October 15, 2012, 09:27:22 PM »
If you're going to stay in this house (and your husband will keep working this job) for at least a decade, get the expensive house in town. MMM has a post coming about how your time is worth at least $50/hr, so some quick back-of-envelope scribbling:

37 mins. saved x 2 way commute x 260 working days a year divided by 60 mins. per hour x $50 = $16,033 per year

The scales start to tip in favor of the expensive house past the 10-year mark. And that's just accounting fo your husband's time. If you can save on car costs and he can bike or walk to work, add in those savings and that health benefit.  If commuting stresses your husband or pisses him off, you're also saving him that unhealthy aggravation.

This does assume you can do a fair bit of the home reno yourself, and intend to stay in the city long-term. If you aren't going to stay, do a comparison of the benefits of renting. Sure, owning feels nice, but if FI is in six years and you're getting the hell out of the big, expensive city as soon as your husband can quit his job, buying the house means you're counting on it being a good time to sell that half-million dollar asset at that particular time.  It might not be.  If your timeframe is shorter, renting gives you the flexibility to move on without a big (positive or negative) impact on your net worth.

kit

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #4 on: October 15, 2012, 09:30:00 PM »
I'd definitely (and I do) choose the more expensive dwelling and shorter commute. I agree with sol- you never get that time back. Also more expensive neighborhoods (because of location) often are because the location gives you access to all sorts of lovely things to do, whereas living further out you'll have to commute to activities as well or just not do them due to the inconvenience.

I will say that I think you can live closer in without spending so very much. Maybe expand your search to include more neighborhoods and smaller places? 1500 ft^2 is double the average size of a house in 1950.

inthebiz

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #5 on: October 15, 2012, 09:37:08 PM »
Not that this is an option for you, but my family just moved out of the South Loop and out of the state. I took a job in a smaller city. We have a place twice the size as what we had in Chicago and for the same price, and I'm a half mile from my office. I loved being a walk to work and be downtown, but with the second child we knew we could stay in the city and accept the costs and benefits or deal with a commute. We didn't feel the trade off was any better by commuting 45+ from the suburbs, both financially and quality of time spent away from family, so we found a solution that fit our criteria. However it did mean I had to find a new job in a new city.
« Last Edit: October 15, 2012, 09:39:29 PM by inthebiz »

Jimbo

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #6 on: October 15, 2012, 10:48:35 PM »
8 minute commute?

You do mean 15-20 minute bike ride, right?

offroad

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #7 on: October 16, 2012, 01:44:10 AM »
Shorter commute is so much better on your soul. But there is a way to make longer commutes worth it, via books on cd-tape-iPod.   Just listen to books during your long commute.

RLVB

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #8 on: October 16, 2012, 07:13:46 AM »
Wow! Thanks, guys!

This was the first time I've posted so it's nice to get responses. Your answers gave us some much needed perspective and some things to think about.

ashem

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #9 on: October 16, 2012, 07:36:15 AM »
I've tried both, and I prefer in-town living. We are now 5 miles from downtown Atlanta, can walk to the train station, and have an expensive, 1300 square foot, 90-year-old bungalow. Our taxes are enormous, but our schools are great and our commute is short. You don't need a big house if there's a lot to do right outside it.

If living in-town really isn't an option, try to find a home right by the Metra.




Lady Mustache

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #10 on: October 16, 2012, 08:00:04 AM »
I'm trying to figure this out for myself. We are also in Chicago. I want to buy a multi-unit building, but buying in my neighborhood is not an option. At the moment, my plan is to continue renting in my lovely, walkable neighborhood and look for an income property a few neighborhoods away. This will create a bit of a commute (to the rental property), but not every day.

twinge

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #11 on: October 16, 2012, 08:15:21 AM »
Quote
Do we live 8 minutes from his work and spend $400-500K on a decent house in Chicago (older, needing work/updates, smaller-1500 sq ft)? Or does he commute 45 minutes each way and spend $200 on a nicer house in the 'burbs (newer, move-in ready, larger-2000 sq ft)?

I think 1500 is more than enough for a 3 person family--we find 1300 too large for our 4 person family and would love to go smaller. So there's no way a 2000 sq ft home would tempt me.

Also, you don't mention your commute so if you're not working outside the home I feel like this situation can create a lack of balance where one person gets to be in the larger, newer home at the expense of the other person spending 1.5 hours in the car each day.    I also think a long commute plus full work day can sometimes create a sense that where the commuter doesn't have as many domestic responsibilities and sense of daily connection to the family.  IMO there's no house that is worth that dynamic, but you know your own family, the likely dynamics and what you value.

RadicalPersonalFinance

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #12 on: October 16, 2012, 08:22:26 AM »
In your analysis, consider the nature of the commute in from the suburbs. For example, could you choose a suburb with immediate access to a direct train into the city which has a stop near his office?  45 minutes of train time spent working/studying/learning is not equivalent to 45 minutes in a car.

Also, you didn't say what your goals are. Start with your goals. For example, is your goal to be financially independent in less than 10 years so that you can retire and move to Tahiti?  If so, consider option C, which is renting a small place in the expensive neighborhood close to his office.

Or, is your goal to have a fancy house and live in Chicago for the rest of your life so that your husband can continue working at a job which he loves forever.  In that case, consider buying the fancy house you'll want to stay in forever.

My point is that you should start with your lifestyle goals and long-term plan.  Think outside the box.  Decide what you want from your lifestyle and then back in to the financial analysis.  There are so many people living so many interesting lifestyles that are useful to open up your mind.

A choice between two options is rarely a real choice.  Try to come up with half a dozen (or more) different options and then spreadsheet out the advantages and disadvantages.  Here are some that come to mind for me:
1. Buy the nice house in the city.
2. Buy the cheap house in the suburbs and commute 45 minutes by car.
3. Buy a cheap house in a nice suburb with train/bus access.
4. Rent a nice apartment in the city and sell one car.
5. Buy an RV and live on the streets.
6. Buy a tiny house and put it in the back yard of someone's house.
7. Change jobs and move from Chicago to Kansas and buy a really nice house for $150k cash.
8. Etc., etc.

Again, my point is to think about what you want your perfect day to look like and then design financially to achieve it.

Use it up, wear it out...

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #13 on: October 16, 2012, 08:32:14 AM »
To run some VERY LOOSE numbers:

Let's assume that we value your husband's time at $25 / hr. The cost of the additional commute will be about $7400 / year

Assuming that the longer commute is 36 miles round trip per day, at $0.51 / mile, that's another $4,406 /year.

Total costs are therefore $11,806 / year.

The additional interest on a $400K loan vs a $200K loan at 3.5% fixed 30-year is $898 / month, or $10,776 / year.

Seems to me that, if you can find a neighborhood close to work in the price range you mention with a good school - it's a wash or a win, and your family gets more time with husband/father.

If you sell your car because you now live in urban Chicago, you save even more, tipping the scale further.

BTW, all above were estimated using a 240-workday year. Insert your own numbers and let us know how it looks! - as always, YMMV.

« Last Edit: October 16, 2012, 08:36:14 AM by Use it up, wear it out... »

Soccermom2b

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #14 on: October 16, 2012, 08:45:19 AM »

We have one child and decent schools are important.

Thanks!!

Not sure how old your kids are, but there are some impressive language immersion schools in Chicago.  We are looking at a promotion (which would require a move) to Chicago specifically because of those schools.

Done by Forty

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #15 on: October 16, 2012, 09:16:04 AM »
In your analysis, consider the nature of the commute in from the suburbs. For example, could you choose a suburb with immediate access to a direct train into the city which has a stop near his office?  45 minutes of train time spent working/studying/learning is not equivalent to 45 minutes in a car.

This is an excellent point.  Public transportation is downright delightful with a book in hand.

RLVB

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #16 on: October 16, 2012, 03:54:33 PM »
You guys are awesome!

I'm realizing that part of our problem is that we are still unsure of what we want exactly, in terms of becoming FI and retirement, and where/how long we actually want to live somewhere.

To provide a few more details: husband owns a business that he enjoys watching grow. He built it from scratch and has expanded to three stores. I'm pretty sure it offers him challenge and stimulation, so retirement in the traditional sense is not what he wants just yet (he's 35). If he sold the business he'd likely want to just start up another one, regardless of whether or not we needed the income. I do actually work outside the house, but I'm a flight attendant so I only make the trek to the airport and back once a week (and it's an hour drive from the "far" location, half hour from the "closer" location). In addition to the income, my job provides our family health insurance and free flight bennies, so regardless of income I'll probably never retire but just cut back on what I fly. These are the reasons why we're a bit uncertain of retirement goals.

What we are sure of though, is that we would like to live so far below our means that we pay off everything (credit cards, student loans, future mortgage - we're currently renting) and don't NEED to work, but rather choose to.

Which is why we were questioning cheaper house/far commute vs. expensive house/short commute. We tend to not be people who have 10 year plans or know where we want to live "forever" (that's a hell of a long time). If we get the cheaper house/far commute, we could pay it off asap, and if we want to move, we could rent it out for pure profit in the future. But if we get the expensive house/short commute we gain profit immediately in less gas, car expense, time, etc, but twice as long to pay off.

Our daughter is 3, so where we decide to set roots is likely where she'll spend at least her elementary school years. And as far as "good schools" in Chicago Proper, yes, they exist, but they're often magnet or charter schools that require testing that puts college admissions tests to shame. 5 years old is a bit young to have the stress of "getting into a good school."

We definitely have some calculations to do to determine the true cost of each location, over the length of at least our daughter elementary years. Thank you for each of your bits of information! It's been incredibly helpful!

(I hope I addressed all those questions)

RLVB

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #17 on: October 16, 2012, 04:05:52 PM »
Point 6 made me laugh!

Ultimately, we need to figure out what our "perfect day" looks like.



Sparky

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #18 on: October 16, 2012, 04:21:57 PM »
Expensive house, short commute. Enjoy your extra hour of free time everyday.

TomTX

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #19 on: October 16, 2012, 07:46:13 PM »
Rent, short commute.

If you still have other debts, you shouldn't be buying a house anyway.

wstetar

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #20 on: October 05, 2013, 01:22:11 PM »
In the Northeast, this is the norm between eastern PA and NNJ; it's not uncommon for someone to commute 140 miles a day from the Lehigh Valley to the NY metro area.

Herr Handlebar

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #21 on: October 05, 2013, 02:53:40 PM »
Frau Handlebar and I came down on the opposite side of conventional mustachian wisdom on this issue but only because of a number of mitigating circumstances.

  • The house we bought in Tacoma was 63% cheaper than the comparable house with short commute in Seattle
  • Tacoma is a city in and of itself, with all the fun stuff we like to do, and not a car-bound suburb
  • I am able to work from home several days a week
  • I am able to commute by combination bicycle/train or bicycle/express-bus
  • Frau Handlebar won't be commuting
  • Frau Handlebar is pregnant with our first child and her family is in Tacoma to support us

That last point really sealed the deal.
« Last Edit: October 05, 2013, 02:56:04 PM by Herr Handlebar »

i_am_the_slime

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #22 on: October 05, 2013, 03:08:35 PM »

Let's assume that we value your husband's time at $25 / hr. The cost of the additional commute will be about $7400 / year


I understand the logic behind this "math" but I'm not sure I agree.  Another way to look at it is how much can you SAVE by "working" as a "commuter" - in other words, if you are WILLING to drive 30 min each way because you will make $25 per hour, that's really $25 in your pocket each day by subjecting yourself to the commute.  Yes, you "work" an extra hour each day, but you are getting paid for it - and it's not like everyone can just work an extra hour at their job every day and get paid for it.

mm1970

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #23 on: October 05, 2013, 03:13:05 PM »
I opted for a more expensive smaller house and a shorter commute.

I figured I can always work longer to pay it off, as long as I like the lifestyle I've built, but there isn't anything you can do to fix a soul-crushing commute.  Those years are just wasted.
Me too.  We live in Coastal Southern California.  The difference between an 1100sf, 2 BR house 10-15 minutes from work and a 2000 sf house 45-60 mins from work was $200,000 to 300,000 when we bought.  We opted for the older, smaller, more expensive house.

And thus, we haven't been spending 20 hours a week driving to and from work.  Each.  Plus gas.

We have two kids and I cannot imagine working a full day and THEN having to drive an hour before picking them up from child care or school.

ender

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #24 on: October 05, 2013, 04:30:48 PM »
My rent/utilities are about $350 a month and I get to live near nearly all my friends. Drawback is a 40 minute door to door commute. But I absolutely have a killer living situation right now which would be impossible to replicate closer to work.

I've been doing this since February and it's alright most of the time, but when I have to work longer than 8 hours it gets annoying fast.

It's definitely a tradeoff. The only reason I'm not moving, though, is because I'm not sure if I will be in this area in about a year - I don't really want to move, start making new friendships/etc, and then move again a short while later.

chasesfish

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #25 on: October 06, 2013, 06:05:34 AM »
I think this is a debate a lot of people are going through, the answer is usually move close, unless you have kids and the public schools near your work are awful (this can happen around Atlanta).

I've been looking for half a year, my issue is most of the nice smaller houses near my office have been torn down and rebuilt into way too many sqft and price.

My commute is also not as bad, it varies between 20-40 minutes and I don't always have to start/end my day taking a direct route to the office with appointments, ect.

oldtoyota

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #26 on: October 06, 2013, 08:18:11 AM »
See if the job will allow telecommuting. My job did and that saves me 4 hours per week. I commute via subway/walking, but it still takes some time.


kaetana

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #27 on: October 26, 2013, 05:43:27 AM »
I think the assumption that a long commute is automatically useless is hasty. My husband and I bought a house that is about 40 minutes away from the city, where we work. We moved here because city life is noisier and wilder and more expensive than we like. We live in the suburbs, in a beautiful home that is quiet, spacious, and much less expensive than we could ever hope to get in the city. We take the train, so we don't pay for petrol or maintenance for the car. The commute isn't "soul crushing"; I study part-time while working full-time, so I usually take my tablet or laptop with me on the train. That hour or so of time is time I would have normally spent sleeping in before work or vegging out after work. Having a commute makes me get up early, and I get an hour of study time every weekday rather than cramming everything in over the weekend. For us, it works. I think it just depends on your priorities.

Gerard

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #28 on: October 26, 2013, 06:05:43 AM »
I know *I* would go for the short commute... perhaps by renting, rather than buying, and living in a very small space. Whether it works for you, it seems, will come down to the nature of the commute. As others have said, riding a train and reading a book is almost leisure time; driving a car in crappy traffic and weather is probably worse than working. An important question: does one of the choices let you get by with no car, or fewer cars? That's really where the commuting kills your budget.
Even *not* counting the value of your fella's time and soul in traffic, the cost of owning and running a car for his commute is pretty well the same as the extra mortgage interest on the downtown home. And the mortgage will go down over time, while the car costs won't. Plus, the expensive house will appreciate more than the cheap one, maximizing your stash, while the extra car costs are just pissed away.
I assume your fella needs a car at work, if he owns stores? Like, to pick things up and whatever? If so, could he just park that car at work? And if so, would re-imagining that vehicle as "90% for work purposes" lead to choosing a different, more efficient/suitable vehicle?
(Also, if you commute to the airport once a week, that should happen on the subway, so that you're not tying up a car just to park it.)

Rural

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #29 on: October 26, 2013, 07:20:34 AM »
I think the commute is more variable than just the train vs. car consideration, too. I drive 35 miles each way without any real stress on country backroads, but I would never drive even ten miles on a busy freeway. Any "traffic" I encounter is rare (once a month or so) and involves farm machinery, not other drivers. I have books to listen to, but mostly I watch the seasons change in the woods and fields.

Trip

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #30 on: October 28, 2013, 09:34:22 AM »
My situation is slightly different (comparing rents instead of comparing price to buy), however, I subject myself to about 3 hours of commuting into Chicago 5 days/wk.  (~20 minute bikeride to the Metra Station, and ~70 minutes on the train each way)

The reasons I have chosen to do so involve the following.

1.  Almost everything that I've come across is cheaper in the suburbs.
2.  I don't count my time as time lost because I'm exercising on the bike ride, and reading, studying for professional exams, or programming on the train.
3.  I like my open spaces.  On the weekends, I would much rather be in the suburbs than in the city.

Note:  Although the commute is not necessarily lost, it does get to me every once in a while having to travel so far.  Then I remind myself of the 3 points above and I am reassured that it is worth it.

footenote

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #31 on: October 28, 2013, 09:41:36 AM »
Many studies are finding significant damage to health caused by long commutes:
http://well.blogs.nytimes.com/2013/10/28/commutings-hidden-cost/

Wexler

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Re: Short commute/Expensive house vs. Long commute/Cheap house?
« Reply #32 on: October 28, 2013, 10:19:56 AM »
Expensive house/short commute.

Although past performance doesn't guarantee future results, I think the house in the desirable location in a city like Chicago is a safer bet as an investment than the house in the suburbs.  I don't think it's always wise to think of a house as an investment, but I've seen this situation play out with various friends over the years so many times that I think the divergent city/suburb appreciation tracks should be on your radar screen.  Basically, every friend I've had that has ended buying a house in a far-flung suburb has had not only less appreciation in absolute dollar amounts, but also a lower rate of appreciation relative to the houses of friends who stayed in the city.  Also, staying in the city is a hedge against job loss or layoffs, because you are centrally located in case you end up having a commute to the opposite side of town for a new job.  Even in a down market, houses in more desirable city locations tend to hold their value more than houses in the suburbs.  I'm sure that there are exceptions to this rule (desirable inner ring suburb vs. terrible city neighborhood), but I think it's at least worth thinking about.