Author Topic: Would you do this?  (Read 2921 times)

lavagirl

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Would you do this?
« on: November 10, 2015, 09:27:25 AM »
Would you sell your house with mortgage and hoa @ $2200 to move a lot closer to work and rent for $2260 (HCOL area)? We really can't afford to buy anything close to work.  Also, profit from our house sale should be about 30k which we would use to pay off debt. 

Cheddar Stacker

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Re: Would you do this?
« Reply #1 on: November 10, 2015, 10:08:57 AM »
Yep. Your commute savings should exceed that $60/month, plus time, plus using that $30K for debt reduction/investing should prove profitable.

The only questions I have are how much of that $2,200 is principal reduction, because that's not really a cost/expense. And are there any other expenses that might change (i.e.-insurance, rent HOA/overhead)?

Kaplin261

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Re: Would you do this?
« Reply #2 on: November 10, 2015, 10:16:30 AM »
Would you sell your house with mortgage and hoa @ $2200 to move a lot closer to work and rent for $2260 (HCOL area)? We really can't afford to buy anything close to work.  Also, profit from our house sale should be about 30k which we would use to pay off debt.

That $2200 is actually probably closer to $2600 if you figure in maintenance and repairs for the home.. On average every 15 years you will need a new HVAC,Roof, carpet,paint,kitchen appliances and all those other little things that happen with home ownership.

catccc

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Re: Would you do this?
« Reply #3 on: November 10, 2015, 10:47:37 AM »
I would.  I had to think of it the other way around to come to my decision.  If I was renting for $2,260 close to work, would I spend $2,200 a month to own and be a lot further away from work?  No, I wouldn't buy.  So I guess that means if I were you I would sell and rent. 

Plan on staying in that area long, or long after FIRE?  That might factor in.

soupcxan

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Re: Would you do this?
« Reply #4 on: November 10, 2015, 10:56:30 AM »
No I would not.

Your rent is going to go up every year while your mortgage is mostly fixed. If your rent increases 5%/year for 5 years, your $2260 rent is now $2880. Your mortgage payment may increase a little if property tax or insurance goes up, but not nearly that much.

Your rent check is 100% an expense, while some portion of your mortgage payment is going to principal which you get back when you sell (most of the time).

You may get some tax benefits on your mortgage interest and property tax that you won't get if you rent. This could further reduce the total cost of owning.

Kaplin261

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Re: Would you do this?
« Reply #5 on: November 10, 2015, 11:11:01 AM »
No I would not.

Your rent is going to go up every year while your mortgage is mostly fixed. If your rent increases 5%/year for 5 years, your $2260 rent is now $2880. Your mortgage payment may increase a little if property tax or insurance goes up, but not nearly that much.

Your rent check is 100% an expense, while some portion of your mortgage payment is going to principal which you get back when you sell (most of the time).

You may get some tax benefits on your mortgage interest and property tax that you won't get if you rent. This could further reduce the total cost of owning.
Quote from The true cost of commuting
http://www.mrmoneymustache.com/2011/10/06/the-true-cost-of-commuting/
Each mile you live from work steals $795 per year from you in commuting costs.

catccc

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Re: Would you do this?
« Reply #6 on: November 10, 2015, 09:10:36 PM »
Your rent is going to go up every year while your mortgage is mostly fixed. If your rent increases 5%/year for 5 years, your $2260 rent is now $2880. Your mortgage payment may increase a little if property tax or insurance goes up, but not nearly that much.


Can you check with the lessor on the history of rent increases?  I've been renting the same place for about 5 years now and our rent hasn't gone up a cent.  And our landlord has spent $$$ making improvements to the place that have decreased our utility costs since we moved in.  And we bargained to do some exterior maintenance on our own to bring the rent down when we signed the lease, but we are no longer required to do it.  I suspect we may be in the minority with our "luck" as renters, but it's worth asking "What kind of annual increases in rent have you historically used?"

It's hard to put a value on being able to call up your landlord with a property problem and not have to worry about it.  Like "the fridge died" or "a kid across the street sent a bb through the porch sliding glass door" or "the toilet had a containment issue while we were on vacation!"  All those things cost us zero dollars to deal with because we are renters.  If we owned the place, we probably would not have put out $10K for the heating system conversion from oil to gas, because the payback period is quite a while.  As renters, the payback was immediate.  And we would have had to spend hundreds on each of those issues I mentioned, but as renters, our cost was zero.  This is definitely a big factor for me in deciding to continue renting.  Less about the $$ and more about the weight off my shoulders in maintaining a home.

Sorry, I'm trying not to make this into another general buy v. rent debate.  But like others have mentioned, it depends on a lot of factors.