Author Topic: Should I sell the home I just bought in July? New Mustachian Reader Case Study.  (Read 5849 times)

JPinkerton524

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Thanks in advance for the help!! Here is my Case Study Format.

Specific Question(s):

The Dilemma!
My wife is pregnant and is due April 26th of 2017. She would be able to take our child with her to work as a nanny, and continue working for a few more years if she wanted to.

However, we have an insane commute. It is soul sucking. It is about 30 minutes to where she works, and 45 minutes back. Also, I hop off where she works and ride my bike another 35 minutes. 20 miles each way. There is also waiting time included in it. It’s extremely inconvenient.

Proposal: Sell the house. Rent close to her work, so she can walk. It would be the most convenient for her and our child. I would be able to bike to work. It is a little bit higher cost area so a rental would conservatively be about 1400 per month.

We feel so dumb for buying way out in the suburbs, we just had the itch to buy a home. We had been saving 2.5 years, since we were 19. Both of us are pretty over home ownership. We bought a “turn-key” property, and it still has just been countless hours of maintenance and work. We miss the lock and leave aspect of renting.

Why not buy in the new area? We just don’t know how long we want to be there. It’s 20 minutes from my parents, but we just don’t know how long we want to stay.

Another option would be to rent out our place, but market rent is only 1300-1350 at MOST.
Need some advice. Thanks!



Life Situation: Married Filing Jointly. I am 22 years old, and my wife is 21. We have been married for 2.5 years and pregnant with our first child! We live in an east suburb of Phoenix, Arizona. 

Gross Salary/Wages: I make 65K (Including Bonuses), My wife makes 20k as a nanny.(Just started in July) I just got a raise from 48k in July!

Pre-tax deductions: I only have 5% taken out for 401k (5% match) but putting 100% of bonuses into 401k / HSA (8500). HSA will be maxed. Insurance is taken out, too. Net- about 1800 or so 2x a month, wife makes 1600 / month cash.

Taxes: 85k of (Taxable) income is in the 25% bracket, our pretax contributions will keep us in the 15%. State taxes are 3.36%, lovely FICA is 7.5% 

Current expenses: (Monthly)
PITI + HOA : $1200
(Principal $335, Interest $580, Taxes 88, Insurance 35.67, PMI 86.25, HOA 62 )
Gas : $70 (Carpool to work in a Prius)
Car Insurance : 95 (Liability + Comprehensive for $0 deductible glass coverage. In AZ I get a new one every two years, and get paid $100 cash to have it replaced.)
Food: 220
Dates: 80 (20 a week to do whatever we want together)
Household items: 40
Electric: 50-70 November – April. 70-100 May – October
Water + Trash: 55 (52 dollars regardless of usage. Insane.)
Phone: Free until 05/2017 (65 / mo thereafter)
Internet: 40
Health Insurance: 222.64
Vision and dental: 13 (only do this b/c we get a $150 “credit” each year towards glasses / contacts. My wife wears them)
Charitable Giving: 10% of our income. (This is not changing. Please do not comment, unless you are encouraging us to give more! ) Let’s assume $600.
Total Expenses: 2705
Less Mortgage Principal: 2355
Savings Rate : 58%

Assets: 20K in Cash, bank accounts. 15K in my 401k. HSA has $3k but will be spent on Bicep Surgery tomorrow.

Liabilities: No debt besides the casual 206k liability I live in.
206K on the loan. 3.375% interest rate. Market value is about $235k - $240k. 
Time remaining: 29.5 years, lol.


JPinkerton524

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Oh! Also,

If we don't move & my wife no longer works, we would have to acquire a second car. It would also increase my commute to 55 miles round trip. So increase in car insurance, commute time, and commute distance.

Thanks in advance,

KelStache

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Congrats on the pregnancy!

Personally I would sell the house- that commute is insane! And I can't imagine you will enjoy it any more once you have a baby. Yes, buying in the suburbs was a mistake, but at least you realized it early and aren't underwater on the house! I would cut my losses now.

Just to throw out a third option- does your wife want to continue being a nanny with a new baby? I might be wrong but that sounds tough. If she's interested in being a stay at home parent for while you could also look to rent a place closer to your work, and maybe even get rid of the car (how is transit, Uber, and carsharing in that area?) She could optimize expenses at home and make a bit of side income through babysitting occasionally or getting a part-time gig while you're home with the baby (my friend did this; worked at Starbucks 5-9pm Monday to Friday). Just something to think about, good luck!
« Last Edit: November 07, 2016, 02:37:27 PM by KelStache »

ZiziPB

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Quote
We feel so dumb for buying way out in the suburbs, we just had the itch to buy a home. We had been saving 2.5 years, since we were 19. Both of us are pretty over home ownership. We bought a “turn-key” property, and it still has just been countless hours of maintenance and work. We miss the lock and leave aspect of renting.

No matter what the numbers, this seems like the most important factor in the decision making.  Sounds to me like you are just not ready for home ownership.  But there are additional things to consider.

What can you sell the house for?  What would be the sale costs (broker's commission, taxes, etc.)?  Would your wife be able to walk to work and would you be able to bike to work when it's really hot in the summer?  Once the baby is born, will you be just as happy in a rented apartment or will you need more space?

JPinkerton524

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Congrats on the pregnancy!

Just to throw out a third option- does your wife want to continue being a nanny with a new baby? I might be wrong but that sounds tough. maybe even get rid of the car (how is transit, Uber, and carsharing in that area?)

She is still deciding, but the other child she watches is 9 months old. So it would be our 3 month old (summer off after having the baby) then an 18 month old.

Also Car sharing / transit is pretty much non-existent in Phoenix. Hopefully in the future less residents want to drive 45 minutes from the burbs to work!

Thanks for the input, I'm leaning towards selling just because of the time suck. I will hate the commute even more when I'm rushing home to see my wife and kid.

JPinkerton524

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What can you sell the house for?  What would be the sale costs (broker's commission, taxes, etc.)?  Would your wife be able to walk to work and would you be able to bike to work when it's really hot in the summer?  Once the baby is born, will you be just as happy in a rented apartment or will you need more space?

Market Value would be 235-240K. I'm assuming 8% for closing costs / commissions. So we'd get about 14k out, when we put 25-30k in.

I work at 6:30 AM and would be able to bike to work when It's hot, and we are looking at renting in the same neighborhood that my wife is a nanny in, so it wouldn't be a problem.

We are fine with 2 beds

Cassie

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I would stay awhile. You are losing $ and also you will want a yard for your children to play in. If neighbors are noisy they will wake the baby, etc.   

KelStache

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I would stay awhile. You are losing $ and also you will want a yard for your children to play in. If neighbors are noisy they will wake the baby, etc.

Aren't they losing money on the commute, home repairs/maintenance, etc. anyways?

OP you should look up a Rent vs. Buy calculator and see what the results are for you particular situation. In my opinion paying closing costs now is no worse than paying them in 2 years after suffering a long commute and disliking home ownership.

I disagree on needing a yard for your kid- there are plenty of public spaces that are just as nice (or nicer) and you can socialize there, plus you don't need to own a lawnmower and waste time and money maintaining it. My last apartment even had a private yard / bbq area for shared use by the residents.

I know tons of couples thriving in small spaces with kids/babies, but if you're concerned about loud noise just make sure you ask a few residents, and listen for it when checking out new places. Our apartment is perfectly sound proof.

Here's an awesome blog written by a father with 5 kids living in a 3 bedroom condo and absolutely thriving :) 5kids1condo.com

icemodeled

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There is no way I or my husband would consider doing that commute everyday so.. For me it's a easy decision to sell. If it wasn't for that, I would say stay put. Both our homes we have owned has been very low maintenance which we are fortunate for. To bad yours is causing issues.. Especially considering it was "turn key". In your situation I would definitely look into selling though and living closer to work, even more so since your not attached to your current home or owning a home any more. Good luck!

bestname

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If you can get out of your house only losing 10-15K, you should totally do it.
See MMM on the true cost of commuting:
http://www.mrmoneymustache.com/2011/10/06/the-true-cost-of-commuting/
Nothing is more valuable than your time, especially when you have very small children.

MayDay

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Sell and move.

Hands down.

soccerluvof4

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If you can get out of your house only losing 10-15K, you should totally do it.
See MMM on the true cost of commuting:
http://www.mrmoneymustache.com/2011/10/06/the-true-cost-of-commuting/
Nothing is more valuable than your time, especially when you have very small children.




I agree with ^


I have 4 kids and a yard I dont think they know exists..lol.  My kids run all over and would make no dif if I lived in an apartment. Home ownership isnt for everyone and if I wasnt fire'd I would probably for the first time rent because I wouldnt want to be spending time taking care of a home. Giving up 15k to spend time with your kids is well worth it. You will NEVER get that time back.  Family before all else I say!

Another Reader

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If you are in the far East Valley or Maricopa, in your shoes, I would sell and move.  Transportation infrastructure will not improve in the next 10 years for those locations. If the market goes into a downturn, the outer suburbs will drop in value more and faster.

You also bought too early (young).  I would rent for awhile and see what happens.

Malum Prohibitum

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How do you bike to work in Phoenix without being drenched in sweat and stinky when you get to work?

Mel70

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If you can get out of your house only losing 10-15K, you should totally do it.
See MMM on the true cost of commuting:
http://www.mrmoneymustache.com/2011/10/06/the-true-cost-of-commuting/
Nothing is more valuable than your time, especially when you have very small children.

Agree with the above. Child care will also be a challenge. One of you needs to be close to the childcare facility in case baby needs to be picked up in an emergency situation.



I agree with ^


I have 4 kids and a yard I dont think they know exists..lol.  My kids run all over and would make no dif if I lived in an apartment. Home ownership isnt for everyone and if I wasnt fire'd I would probably for the first time rent because I wouldnt want to be spending time taking care of a home. Giving up 15k to spend time with your kids is well worth it. You will NEVER get that time back.  Family before all else I say!

JPinkerton524

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If you can get out of your house only losing 10-15K, you should totally do it.

Nothing is more valuable than your time, especially when you have very small children.

I agree, thanks for the input.

How do you bike to work in Phoenix without being drenched in sweat and stinky when you get to work?

Wind + Deo

If you are in the far East Valley or Maricopa, in your shoes, I would sell and move.  Transportation infrastructure will not improve in the next 10 years for those locations. If the market goes into a downturn, the outer suburbs will drop in value more and faster.

You also bought too early (young).  I would rent for awhile and see what happens.

I'm in Gilbert, so yeah no public Transit. Looking to move to S. Scottsdale.


I could rent a comparable house for 1400, not a condo / apartment.

Thanks everyone, going to look  into selling.

Another Reader

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Gilbert is a good area with well-regarded schools.  Commuting to Scottsdale is not fun, however.  What you can rent for $1,400 on South Scottsdale will likely be older and in a marginal school district.  With a baby, that will not be important, but in a few years, it will be a major consideration.  In your shoes, I would spend some time in South Scottsdale looking around and then make your decision. 

JPinkerton524

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Gilbert is a good area with well-regarded schools.  Commuting to Scottsdale is not fun, however.

Yeah it will be a commute to Phoenix in May, too. I like S. Scottsdale for the balance of family, close to 101 for visits to family / church.

I'm currently thinking of selling early in 2016 depending on market conditions. Hard to predict what the housing market will look like in a few months. What does everyone think?

Also trying to find a condo (wife wants a garage) for 1k-1200 per month.



boarder42

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on the home selling front.  shop your area for a realtor who uses a low fixed cost for the seller side.  These are starting to become more and more common across the US.  so instead of paying 3.5% to the seller agent and 3.5% to the buyers agent you pay 3-3.5% to the buyers agent plus a fixed cost to your agent based on the price of your home listing. 

http://yourfutureaddress.com/

this is an example of one in KC.  its full service fixed rate. 

Another Reader

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I don't have an opinion on house prices in the spring.  A lot depends on interest rates, which seem to be going up, and employment.

I looked at 85257 and 85251, which are South Scottsdale.  Only 3 MLS listings at $1,200 or under with a garage.  One has an open garage under the building.  One has a garage that doesn't have direct access to the unit. The third might meet your criteria.  It's in the complex at 525 N. Miller. 

I suggest you start on-line condo rental shopping.  Show your wife the pictures.  Drive around and see how she likes the area.  If you agree this is what you both want, then move forward.

JPinkerton524

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I looked at 85257 and 85251, which are South Scottsdale.  Only 3 MLS listings at $1,200 or under with a garage.

What source / search engine did you use?

This is something we are both wanting, more time and less commuting. We are fine with a house, but would hopefully find something 1300 or under. We pay like $60 a month in water no matter how much we use, so right now WITHOUT Maintenance we are paying 1260+

Another Reader

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I looked at the MLS listings.  Zillow usually has more.  Craigslist is too sketchy.

I own single family rentals in Tempe.  Not your area of interest, south of Baseline. Market rent for my properties runs around $1,175 for a 1,000 sf 2 bedroom 1.75 bath to $1,500 for a partially remodeled 1,900 sf 4 bedroom.  All have 2 car garages.  North of the freeway in 85282, rents are similar to a little higher as you get closer to the University.

Wherever you are in the east valley, getting past the 10/202/51 merge is the killer for the commute into Phoenix.