Why We Went Down the House Route
June 5, 2009, 10:07 pm
Filed under: Uncategorized

Excuse me while I ignore my emo self for a little while. I’m not ready to let the cat out of the bag, but things are perking up around here.

So, I’m going to discuss some finances.

Specifically, the house!

Yes, a house was purchased. This house, to be exact.

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It is a nice little house. I don’t want to say that ‘we’ bought, because ‘we’ did no such thing. As unmarried folk sharing living quarters, Bear and I are unwilling to mingle finances extensively, particularly debt. He has his debt, I have my debt. We split living costs, and we vaguely split groceries. When we finally get hitched, we’ll have a common fund. So, yes. BEAR bought a house, but WE made the decision.

Why did we make this decision? I recently read a post over at Sense to Save that came to the opposite conclusion. However, in the grand scheme of things, we’re in a very different situation than Kacie and her husband, so I don’t think that this purchase was the same level of risky.

1. Buy Low, Sell High. The time was right, in terms of interest rates and the market. While Pittsburgh has not seen the level of depreciation that other communities have, it is a fairly flat market to begin with. The cost of living here is exceptionally low. You can only drop so far when you’re low and slow-growing. And yet, Pittsburgh is just as eligible for the $8000 tax credit, and low interest rates that everyone else in the country gets. These are historic lows, and as Rahm Emmanuel says, you should never waste a good crisis! If we waited another year or 2, interest rates might very well skyrocket. And frankly, considering the behavior of the Fed, and the amount of money our government is printing and the unlikelihood that they will raise taxes to lower the deficit, high interest rates and heavy inflation are in our future. It’s better to lock in the low rates in today’s dollars than try to get the same product in 2 years for more dollars that are worth less on the same income.

2. We view rent as throwing money down the drain. Every time I wrote a rent check out to the landlord, I felt like I might as well go stand in the shower and rip up 20 dollar bills. We were never going to see that money ever again, but whoever was the anonymous “Owner” behind the management company was making some serious dough, considering how little they were paying on a mortgage. (I knew how much they paid for the building. The internet exists for these sorts of inquiries and nothing else.) By taking out a mortgage, every time we write out that check, that money is going into equity. When we sell, in theory, we will get that money back again. If we keep this place nice, improve it in appreciable ways, and wait out the recovery, this is an investment. Maybe when we move elsewhere, instead of selling, we can rent this place out. Buy low, sell high. Now was the time.

3. No change in monthly cost. In terms of monthly living expenses, this house costs the same as our apartment, including the taxes, which are escrowed with the mortgage. It’s a fixed rate mortgage, so that won’t change, either. Our incomes will only go up (we hope), but not our housing cost. If we have x dollars to spend on housing, I would rather put that into equity. $300 a piece, per person, times 12 = $7200. That money will go into equity now, which is almost as good as going into our pockets. That’s a lot of money in the long run. The house was recently completely remodeled, and almost everything is only a few years old. We don’t have to fear needing to replace a furnace or a dishwasher or windows, because with good care, they will last for a long time. We didn’t need to buy any appliances, either. Bear built a fence for the dog, but that was relatively low in cost, he and his dad did it themselves, and it wasn’t vital for our ability to live in the house immediately. If we hadn’t found this house with that list of non-expenses at this price, we might have seriously considered finding another apartment. But we found it, and we couldn’t pass it up.

4. We live really cheap, and as a result, had the money to pay for the down payment (closing costs were covered by the seller, as part of the deal), and will be able to continue to keep our expenses low even though we own a house. We accomplish this in a number of ways:

      a. Roommates. Sharing living quarters is an incredibly easy way to slash the cost of living. We bought a three bedroom house. Bear and I have one room (with Ozzie and Harriet twin beds of course. And straight jackets), and Roommate! has another. The third bedroom is currently housing a lot of my drying laundry, but by the end of the month, a nice Polish expat will be residing in there. He got a job at Bear’s workplace, but has no car or license, and needed to live some place with transportation to work. Not only is he cutting down on our living expense, but he’s also sharing gas money. Also, 4 people living in one place means we split the cost of water, electricity, gas, cable, internet, etc. 

      b. We live significantlly inside our means. We are inexpensive to entertain, we rarely eat out, we don’t drink significantly. A favorite form of recreation is to find a new park in the area and take the dog for an extended walk, giving her as many opportunities as possible to roll in dead animals. We shop at thrift stores only if we need something. We make Saturday morning visits to estate sales in search of yard equipment and tools so we don’t have to buy them new. That’s how we got the lawn mower, for instance. Various friends and neighbors have given us free vegetable plants. As of now, we have 2 tomato plants, 2 pepper plants, and 1 zucchini plant, none of which cost us a dime. That’s a lot of free produce in exchange for some basic tending. We’ve been eating a lot of pork products since Swine Flu decimated the price of pork. Heck yea, $1/lb country style pork ribs!

      c. We’re ok with looking ‘house poor’. Since we’re living in a hippie commune, there’s no sense in putting a lot of money into nicer furniture. Our hodgepodge collection of free or very cheap furniture might not be aesthetically appealing at the moment, but I would rather let a bunch of post-collegiate boys destroy free furniture than nice furniture. We could afford to buy a nicer sofa and some chairs, but right now, we’d rather save that money. By restricting our expenses to things we truly need until we are more comfortable affording things we want, buying a house is very affordable. Also, the boys don’t have to worry about spilling soda on the sofa, so everyone is happier.

      d.  I don’t have a car. I don’t need one to get to work, and my Pitt ID still gets me free bus fare. I could easily drain my account and buy a decent used car. But then my emergency fund would be nonexistant. I might not have monthly payments, but I would still have insurance, gas, and maintenance. That can be very expensive. We specifically chose this location because the easy access to public transportation. 

     e. We chose to move to a less expensive neighborhood. Crafton is a delightful place, don’t get me wrong. It’s very quiet, since no one in their right mind chooses to get lost in Crafton in order to get anywhere else. There are a lot of kids who play safely in the streets. The neighbors are friendly and helpful. There is a 24 hour donut store 3 blocks away. We really like the church. While there are a surprising number of very large, very elaborate, and very well restored Victorian mansions scattered throughout the borough, the vast majority of residences are owned by working class people who are getting by. Nothing is fancy here, and that’s OK with me. But it is significantly less expensive to live here than Dormont, which is one of the many reasons we eventually decided to stop looking at houses in Dormont and start looking in Crafton. 

All of those things add up, pretty quickly, making this leap less dangerous for us to make, financially.

5. We don’t have any real responsibilities other than keeping our own noses clean. Unlike Kacie over at Sense to Save, we don’t have children, and won’t be having them any time soon. We have the pupster, but we don’t have to send her to college. This is good, because I don’t think she’d get in anyway. The stench from the dead raccoons she finds everywhere might turn off admissions officers. We feed, water, and walk her. If there were children involved, we wouldn’t have roommates, we would have much higher monthly expenses, and we would have to save and guarantee his/her security. We might need to pay for daycare. Diapers are expennnnsive. It’s easy to take a risk when you aren’t risking the welfare of wee ones. I can’t blame Kacie for not taking the house leap, since she has the baby to consider and support. If I were her, I would probably come to the same conclusion.

6. The taxes. Did I mention the taxes? The tax credit is a nice perk. We don’t need the money, since we chose to wait till next year for the nonrefundable $8000, instead of applying for the $7500 refundable tax credit that was in place before the stimulus package passed. Being able to write off the mortgage interest and taxes will also make tax refunds nice and fat long after the tax credit is over. If we’re careful about the ways that we invest money into the house, and focus on making it more energy efficient with better windows and that sort of thing, we can recoup a lot of the cost while also increasing the property value. Those are perks you can’t get from renting.

7. There are benefits from owning a house that aren’t financially quantifiable. We now have a large, fenced in yard for the dog. We can open the back door and out she goes. Long gone are the days of walking her down a flight of stairs, out the front door, around the back of the house to the yard, waiting for her to do her business, and reverse. She doesn’t have to be chained up, either. Her happiness, and ours, as a result, is a signficant quality of life improvement. We have more floor space, a dishwasher, washer, dryer and garbage disposal. A bigger kitchen. Another bathroom. A ton of storage space. A real porch! All of this for the same price as the apartment. We got lucky with this house, since it was almost entirely remodeled a few years ago, and all of the important stuff is newer. Bear put in the fence, but other than that, there will be no need for significant investment in the house until we decide we want to do it. There’s something satisfying about being your own landlord: not needing to call someone to ask permission to plant a vegetable garden. Building a fence with your own hands (read: not my hands), enjoying the benefits of it, and knowing you improved your property. Painting (not that we’ve done that yet, but when we finally do, I’m sure I’ll enjoy it). Even cleaning is more satisfying, because you’re cleaning your own place, not someone else’s. Perhaps other people don’t get the same level of personal satisfaction out of homeownership, but Bear and I do. And that’s absolutely worth it. 

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I gardened! Weeded, planted, mulched and edged with bricks (found in the back yard from a now-demolished shed/garage, with my own little paws.

So, that’s why we bought. We had the money, the house was low-priced and comes with minimal expense, and we have very low expenses through cheap living, few responsibilities, and roommates. Not everyone is in that situation, but considering that we would be putting the same amount of money towards rent every month, we might as well get equity out of it.

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