27 yr. old making $31K purchases house with $7,760 down

[kfire20]

http://www.theglobeandmail.com/report-on-business/video/how-this-millennial-managed-to-afford-a-home-with-a-31000-net-income/article33292014/#videouuid_9b1bb613-0e01-4539-9910-47334050f2c1

Alyssa: 27 years old
Work: Drives 54km to and from work each day in an older model car with high mileage
Take Home Pay: $2600.00 net/month
Monthly Expenses: $2300.00
Home Purchase: 2016
Mortgage: $148,154 - Payment $950.00/month
Down payment: $7,760
Cellphone: $115.00
Student Loan: $100.00
Groceries: $400.00 (rural premium)
Distance from Toronto: 2.5 hrs.
Gas: $250.00 per month
Internet and Cable: None
Side gig: rents out space in her garage
Car Payment: $0
Car Insurance: $53.00 /month

[CoreyTheMan]

So, I don't think she makes 31K per year because if her net monthly income is 2600 then (2600 * 12) = 31,200.......so unless she pays no taxes, then I'm assuming she makes around 50K. Also not sure if buying a house on such a tight budget is wise. If anything happens with the house it could totally wipe her out. Also her down payment comes out to be just 5% of the value of the house. I am not certain this was a mustachian move. I could be wrong in my analysis, I have been told I can be an a$$ sometimes. ( I noticed in her monthly budget, nothing is going to investments so this house is her only investment which makes this even more dangerous)

[Prairie Stash]

Its funny when a standard event becomes a news story. A young person with good career prospects (fresh in her career) buys a house because its cheaper than renting. At 27 it can be assumed she'll be getting raises that beat inflation as she gains experience. Its sometimes hard to get a picture of a person from the breakdown; for example how large were her wage increases over the past 3 years?

So, I don't think she makes 31K per year because if her net monthly income is 2600 then (2600 * 12) = 31,200.......so unless she pays no taxes, then I'm assuming she makes around 50K. Also not sure if buying a house on such a tight budget is wise. If anything happens with the house it could totally wipe her out. Also her down payment comes out to be just 5% of the value of the house. I am not certain this was a mustachian move. I could be wrong in my analysis, I have been told I can be an a$$ sometimes. ( I noticed in her monthly budget, nothing is going to investments so this house is her only investment which makes this even more dangerous)

What would her expenses looked like with rent instead of mortgage? I suspect the differential between rent and own is going towards principle repayment which means that she's not out anything on a monthly cash flow basis (principle payments counts towards increasing NW).

I was told the same stuff when I purchased. I was also told my house was going to devalue, burn down, etc. What people didn't do was draw a projection of where I would be if I continued to rent for 20 years. We can only extrapolate but I suspect she'll be better of with the purchase; considering its roughly 3 times her current income which is historically a good price to income ratio.

[fattest_foot]

The difference in this case being that she has no extra savings. As a renter, the landlord is responsible for major repairs.

If her furnace breaks, she's in a heap of trouble.

[CoreyTheMan]

Its funny when a standard event becomes a news story. A young person with good career prospects (fresh in her career) buys a house because its cheaper than renting. At 27 it can be assumed she'll be getting raises that beat inflation as she gains experience. Its sometimes hard to get a picture of a person from the breakdown; for example how large were her wage increases over the past 3 years?

So, I don't think she makes 31K per year because if her net monthly income is 2600 then (2600 * 12) = 31,200.......so unless she pays no taxes, then I'm assuming she makes around 50K. Also not sure if buying a house on such a tight budget is wise. If anything happens with the house it could totally wipe her out. Also her down payment comes out to be just 5% of the value of the house. I am not certain this was a mustachian move. I could be wrong in my analysis, I have been told I can be an a$$ sometimes. ( I noticed in her monthly budget, nothing is going to investments so this house is her only investment which makes this even more dangerous)

What would her expenses looked like with rent instead of mortgage? I suspect the differential between rent and own is going towards principle repayment which means that she's not out anything on a monthly cash flow basis (principle payments counts towards increasing NW).

I was told the same stuff when I purchased. I was also told my house was going to devalue, burn down, etc. What people didn't do was draw a projection of where I would be if I continued to rent for 20 years. We can only extrapolate but I suspect she'll be better of with the purchase; considering its roughly 3 times her current income which is historically a good price to income ratio.

The rent vs buy extrapolation you just did is a terrible over-simplification and I won't even comment on that because that would take much greater analysis to give any response even remotely correct. I was just saying that buying a house when your disposable income is $3600 per year is a risky move. From that video all I saw was "HOUSE POOR". We all have different risk tolerances, I think you have a higher tolerance than I do.

[trashmanz]

I think you posted in the wrong forum, this isn't the wall of shame

[kfire20]

Re: "wall of shame" - You're likely correct but......parts of Alyssa's story has her exhibiting some emerging mustachian qualities:

- no cable
- no TV
- owns an older car
- makes her groceries stretch by preparing her own dishes and freezing them

A new furnace or a costly roof repair could put her behind as her yearly disposable is only $3,600. She'd likely do better renting closer to work, ditching the car and riding a bike  to save gas costs and insurance.

Question: I wonder who gave her the advice to purchase a home at this stage in her life when there are so many blogs and books out right now about renting as the way to go: i.e., Alex Avery's book, Go Curry Cracker to name a couple.

[bacchi]

She's definitely house poor. Her car has 350,000 km on it and (apparently) sometimes doesn't start. It'll need repairs or replacing sooner rather than later.

It's a 3 bedroom. She needs a roommate.