Wednesday, August 16, 2017

Housing Expenses – Why I Rent



Rent

The price I pay to live in my home is, by far, my highest monthly expense.  For what I have, a 4 bedroom, 2.5 bath home with a sunroom and 2 car detached garage, in a really nice neighborhood, it is cheap.  In fact, most 2 bedroom – 1 bathroom (run down) apartments in my city, are near the same monthly cost.  I pay $1100 in rent for my home.  It belongs to my friend.  I often have conversations with him about whether he needs to raise the rent or sell the house as he recently bought another house for him and his girlfriend.  I tell him he can rent it out for at least $1450-$1550 per month, and he always counters with:


  • he doesn’t want strangers in his house
  • he doesn’t have time to get the house interior painted for renting (it still has personal paint designs from his ex like one bedroom painted with an underwater theme, sharks and all)
  • he saves money by not having a storage unit to store all his tools – we share use of the garage and storage shed
  • he saves money by not having to store his enclosed trailer that is parked next to the garage
  • he saves money by not having to store his 2 project trucks that are parked in the backyard

My utilities run around $400 per month, so I pay out around $1500 per month for my housing expenses.  This may not seem like much to most people, but it’s a significant portion of my spending.

Home Mortgage

I looked into purchasing a home recently, mostly for an investment, but it doesn’t make much sense financially right now.  I can find a few houses in my neighborhood that need to be renovated with asking prices around 160-175k and having post-renovation values of 200-225k.  My mortgage with taxes and insurance would be around $1050 per month on a 30 year fixed mortgage, and about $1350 per month on a 15 year fixed mortgage.  This would require me to save around 4% down and have closing cost money.  Since I’m still trying to pay off my last debt , I just don’t have any room to save that money right now or have any extra to throw at renovations.  A home, when it’s time, will be a great addition to my net worth, especially if I go for the project home and get moving at fixing it up.

Between the time of writing this and posting, MMM's latest post is an interview with Zeona McIntyre about her experience using airbnb for extra income.  I often wonder if this is a route I could pursue to get some extra income.  It's a great interview and worth the read.  Check it out and let me know your thoughts about renting space in my home.


4 comments:

  1. I think you should definitely not buy a house until you're financially ready to do so. Although, I must admit that my housing numbers are similar to yours, except that I have a mortgage and I don't rent. So, my mortgage balance is around $1100 per month. Right now, I'm not living in the house and so property management will cost me about $150 and I'm hoping to rent the place for $1500, which would leave me about $250 per month to put back in the premises.

    I think buying can be good, if done right, but can be a nightmare if done wrong. So, nothing wrong with renting until you're ready to buy. Just my 2 cents.

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    Replies
    1. DivPort, thanks for the comment. I'm most likely not going to purchase anything where I'm at now. I have been thinking about rentals for cash flow lately though.

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  2. There's certainly a ton of benefits to renting and it often makes sense depending on the housing market in your area. In certain places you can't even make the financials work in favor of housing unless you assume pretty high return rates on your home value. I really like the NYT house/rent calculator in helping make sense of whether a house makes sense financially.

    I'm in the process of looking for a house but couldn't find anything we liked in our price range so we're renting for another year and plan to look again next year.

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  3. Interesting! Thanks for sharing! I personally always prefer to buy, but that's my assessment I suppose. Take care!

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