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Archive for the ‘housing’ Category

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The other day a reader emailed me this:

i would love for you to do a post on what you think about real estate – your blog seems to announce that you do not ever want to be in debt, and i was wondering what your future plans for renting/buying are!

That is an excellent question. Honestly I haven’t put too much thought into it because I probably won’t buy a house for years. My financial priorities go like this:

  1. Save $10,000 in an Emergency Fund (circa Dec 2010)
  2. Max out Retirement Accounts (2011 and on)
  3. Save for a Wedding (2011)
  4. Save for a New car (2011/2012)
  5. Save for a House Deposit (2012-??)

Man! That seems like a loooong time! :( Perhaps I can knock out the first goals faster than expected? Hmm. But back to the question at hand: While I am very much against debt, I do plan to take out a mortgage when I buy a house. I’d love to buy a home with cash only (can you imagine?!) but realistically that probably won’t happen unless I win the lottery or marry rich.

I’ve got a little time before I will be saving for the deposit, but here are my debt-free thoughts on mortgages for when that time comes.

1. Rent Cheap
A lot of people have the mentality that renting is wasting money because you are throwing away cash that could be put towards equity. Well, that is technically true, but it can be a dangerous mentality if it rushes you into buying a house you can’t afford. It is, however, a good motivator to save faster and the easiest way to save faster is to rent cheap. I think that monthly housing costs should be no more than 35% of your paycheck. My rent right now is 26% of my paycheck (33% if you count bills) and I hope to stay around that no matter where I live. You don’t have to live in the ghetto to rent cheap, but some ways to save on rent include splitting rent with a roommate, renting away from city life (make sure to factor transportation costs), and sacrificing amenities like washer/dryer, dishwasher, etc. That topic really could be a whole post in itself.

2. Save 20% Down Payment
Mortgage lenders vary on the amount of cash they require for down payments, but I plan to save for a 20% deposit when I buy.  It is so hard to imagine saving that much money! But like I said in an earlier post, buying a house really intimidates me, so I want to make sure I have enough money up front to cover house expenses as well as a good deposit. This amount depends on the location, but for example, if I buy a house that is $250,000, I plan to save $50,000 to put down. (Yowser!! That’s a ton of money! Hopefully by then I’ll have a husband to help me save.)

3. Buy a house with a 15-year mortgage
I am sure many may disagree with me, but I plan to buy a house with a 15-year mortgage rather than a 30-year. The amount of interest saved between those 15 years is huge! The payments each month may be significantly larger, but if I’m unable to afford them with a 15-year mortgage, then the house is either too expensive or I’m not ready to buy one. If I purchase a home at the age 30 then I could be 100% debt-free by the age of 45 as opposed to 60. Can you imagine not having any housing payments at the age of 45?! That would be AMAZING!


So those are my very high-level thoughts on real estate. Dave Ramsey is my go-to man for most of my real estate questions and advice, so I encourage anyone looking to buy a house to check out his website. I don’t agree 100% with everything he says, but I did follow his example for this one. :)

What about you? What are your thoughts on buying a house?
If any of you are saving for a house, do you have a different strategy? If any of you have bought a house, would you recommend a different approach? Suggestions welcome!

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(Town)Home Ownership?

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J and I agree on all major life issues, but we try not to plan our lives away and simply take each day as it comes (a much easier task for him than me). A few weeks ago, however, we indulged in a little future dreaming. He asked me what my ideal financial time line would look like. We’re pretty open about our finances and discussed emergency funds and saving for retirement and getting his debt paid off and saving for a home and when kids would fit into the picture. (I know—serious talk, right?)

We stayed on the house topic for a while. I confess I’m slightly terrified of buying a house; one because I’m so ignorant of the house-buying process, and two because I’ve heard so many horror stories about young couples who get trapped in a home that they cannot afford. We both agreed that we don’t want to rush into anything and want to be financially prepared for home ownership.

Then he asked me whether I would want to purchase a townhome or a house. Honestly, I had never considered a townhome, but I’ve been thinking more about it. It would be a low-maintenance frugal first home. However, both of us would like to have kids one day and I’m not sure if I’d like to raise kids in a townhouse, so is it wise to buy a place that has an expiration date on it? But then again, perhaps it would be a good transitional home while we save for a real house. Hmm.

Townhome Perks:

  • cheaper
  • low maintenance
  • community amenities
  • could rent it out to others

Townhome Drawbacks:

  • limited space
  • noise/neighbors
  • community fees
  • could be difficult to sell
  • little yard/garden area

What are your thoughts on owning a townhome vs. a single family home? Is owning a townhome a good investment? I’m not seriously considering it, but am interested in hearing others’ opinions on the topic.

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Apartment Updates

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My Current Apartment Timeline:

  • August 1, 2008: Move to current apartment with a one-month lease with Roommate A.
  • April 2008: New Roommate D moves in and we rearrange the place to fit her for two months and an extra $400/month.
  • June 2008: Roommate A moves out and D takes over the lease.
  • July 31, 2009: I negotiate with the landlord and switch to a 6-month lease at the same price.
  • January 31, 2010: My 6-month apartment lease runs out.

Being the responsible adult that I am, I didn’t realize that the end of this month is the end of my lease until about a week ago. Oops! I contacted my landlord and have some exciting news… I can move to a month-to-month lease now!!!

My Future with this Apartment:
Apartment Cons:

  • No dishwasher
  • No washer/dryer (in basement)
  • No garbage disposal
  • One mile from metro=not the most convenient
  • Could be a safer neighborhood
  • There are AC units in the apt, but not my room

Apartment Pros:

  • I pay $660/month + electric = unheard of in this area
  • Takes me 20 minutes to get to work
  • Free parking for me plus any visitors
  • Although we’re not friends, my neighbors are all nice
  • It’s sooo cute!

Right now my plan is to not do anything until J either moves up here or gets a full-time job in the south. His parents told him he has to move out by the summer, so that’s a good deadline to find something.

Aside from J, I have mixed feelings about moving. First, I hate moving: it’s expensive and stressful and messy. I am so comfortable and lazy with where I live now so I’m in no rush. Second, this apartment is sooo cheap for this area, I will have to shop around for a really good deal to justify paying more. But depending on J’s situation (and wanting all of the things this apt can’t offer) I can see myself moving in the next year.

Anyway, this is just me over-planning things… hooray for the flexibility and freedom of month-to-month lease!

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I was on the fence about signing a six or twelve week lease for my apartment. I chose six months. Here’s why:

  • My job is fairly secure, but I have been itching for something new. Plus, it’s not my dream job and I am hopeful that the economy will begin to improve and that I can find something better and more challenging in the next year. I’ll outline my dream job in a future post. ;)
  • My boyfriend graduates from undergrad in December. He’s talked about going to grad school, and I’d like to move closer to him if that’s the case. Or he may move up here. Either way, I don’t really want to go another year without living in the same town. January may not be that date to move, but then again maybe it will be!
  • I found three other apartments in my neighborhood that are $300 less per month. Note to self: Stop thinking of that.
  • It will not affect my budget any since the price is what I’ve been paying this past year.
  • My mom has breast cancer. She’s doing well so far with her treatments, but in case something happened in the next few months I’d like to have the option to move closer.
  • My roommate wanted it also. This apartment is not the most convenient for her to get to work, so she may want to find a closer apartment in six months

So! I will continue to pay my $660 for the next six months, update my resume, and beef up my Emergency Fund in case my life changes and I have to move. Since I like to plan my life years in advance, it’s hard not knowing what will happen. But I think signing for six months gives me flexibility and allows me to make changes if I feel that’s what is best. We shall see!

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A while ago I saw online that my landlord was selling my apartment for $1295 per month instead of the $1350 that I have been paying (split with a roommate). I knew I would negotiate the cost for the next year, but I waited too long. I recently saw the price was raised to $1325. I wrote him an email explaining how I wanted the rate that was offered three months ago and he said the only option would be to get the $25 discounted rate before it goes back to normal again. Whatever. That’s fine. It is pointless to dwell on that right now.

I asked him whether a six month lease was possible. He said yes, at the same $1350 price I’ve been paying. Decision time! This means… a pro and con list! :) Of course my roommate’s thoughts will have to weigh in on this also, but here are the two options I have for housing this next year:

Option #1: Pay $1350 for six months–$660 per month split with my roommate (she has a larger room). This would cost me about $90 and potentially $180 if I resign for another six months. However, after the six months is up I would have the option to switch apartments or resign at the end of January. This could give me some flexibility to find something cheaper, but at the cost of moving–both monetary cost and emotional cost. I have a lot of stuff! This option would also give me the flexibility to change jobs or possibly move out of state, if I wanted to. (Something to think about with a long-distance boyfriend and a mom with breast cancer.) I do have contracts with both cable and internet for the next year and would have to negotiate with the companies if I choose to leave the apartment earlier.

Option #2: Pay $1325 for a 12-month lease–about $645 per month split with my roommate. I would save $180 for a whole year and have the security of knowing that I have a place to live, in an apartment and area that I love. However, if I choose to move I’d have to find a subleaser. This option would allow me to save on moving costs, contract agreements with cable/internet companies, and give me another somewhat guaranteed year at my job (assuming I do not get laid off).

I am leaning towards one of these options, but thought I’d pose the question to my trusty savers out there. If you were in this situation, would you do? Sign a one year or six month lease?

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Apartment Negotiations

AH-HA! I knew it. I knew this apartment was too expensive. I saw online that my two-bedroom $1350/month apartment was going for $1295 online. I don’t think so, Landlord.

I saw that PF pal Saving Cents in the City recently negotiated her monthly rate down and I’m thinking I can do the same. Perhaps I could even get a lower rate than what’s advertised by threatening to leave. Dare I?! He doesn’t want to go through all the mess of having to find a new tenant. Believe me, I have been an angel: Rent paid on time. Minimal utility use. Immaculately clean. Adorable decorations. I even lined the outdoor porch with flowers. (<–See? Angelic.)

There’s no doubt I will contact him about this. The only thing I am curious about is when. And how. My apartment lease runs out at the end of July. Old roommate A will be leaving in June (*tears*) and new roommate D will move out of the former spacious living room and into the big bedroom for the next year. Should I contact him now, three months before I resign? Next month? Wait to hear from him about possibly renewing the lease? Do I contact him by email or by phone? Should I go ahead and grab the apartment across the hall advertised online?!? (Nah, wouldn’t do that).

But seriously–any thoughts would be appreciated!

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The New Roommate

I have mentioned my roommate for quite some time now. I’ll just call her “A.” We’ve been BFF since we were four, lived with each other for three years in college and this past year here in DC. A’s getting married in July and so the past few months I’ve been a little anxious about who will be my next roommate. Big shoes to fill.

Well, it just so happened that my good friend from forever ago just moved to the city for an internship in January. Her internship turned into a full-time job and so I asked if she would be interested in living with me for the next year. She’d love to. Hooray! She won’t be the same as A, but at least the stress it over.

However, her apartment lease ends near the end of April. I talked about it with A and we both agreed to ask her if she wanted to stay with us those few months and live in the living room. She agreed and will be paying us $400 each for letting her live there before she takes over A’s rent in July. It will be crazy sharing our two-bedroom apartment with three girls but I think it will be do-able. It’s just from April 25 to June 20. Plus, the idea of having an extra $400 makes me out right giddy! I’ll probably dump $200 on both debt and savings. Or maybe use a little for something special.

A is out of town on spring break this week (I should have been a teacher!), so my goal is to do a massive clean of the apartment before our new friend moves in. Since she is helping out with rent, the least I can do is give her as much of a room as possible and I want the place to be completely organized and spotless by move-in weekend.

In other news, one of my goals is to try a new recipe per week, and this week I’m going to make this. It looks like a nice little spring dish.

Also, I transfered my savings today: $250 to wedding saving and $30 for Christmas and I’ve adjusted the progress bars accordingly. It’s slowly adding up. Cha-ching!

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