Buying new house.... how to handle financial situation? (payments, mortgage, savings)
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I'd sell it unless its a very high appreciation area, $1050~ is not good rental income if the property is worth 225k. After capex, general maintenance, vacancies, insurance and property taxes that $1050 will be cut in half. On the rent you're looking at a 3% net yield, so the appreciation would have to be really good to make it worth your time.
I'd sell it unless its a very high appreciation area, $1050~ is not good rental income if the property is worth 225k. After capex, general maintenance, vacancies, insurance and property taxes that $1050 will be cut in half. On the rent you're looking at a 3% net yield, so the appreciation would have to be really good to make it worth your time.
Maybe up to 1250. Given the square footage (1000) and only a 2/1, I just don't think it will rent for much more. People can get more space for that. When I bought it it was renting for $725. Of course it was before the recent run-up, in terrible shape and the neighborhood was worse then.
Based on my calculations you're about right...3-4% net ROI could probably be made.
The general advice is your house price be no more than 2.5 to 3 times your gross income. Your going 4 here. Is it possible to sell your house and then rent for some time waiting for a correction and/or an increase in income?
The general advice is your house price be no more than 2.5 to 3 times your gross income. Your going 4 here. Is it possible to sell your house and then rent for some time waiting for a correction and/or an increase in income?
We'll probably be waiting a long time. Years. Talking to friends in the real estate business, they tell me it won't crash much anytime soon... there are no subprime loans being thrown around. It's good old fashioned supply and demand. There are no homes in the area except mobiles and manufactured ones for less than about 290.
Our current house is not suitable for a family. I bought it for me alone before I got married. Renting another house wouldn't save anything; rental rates in a 3/2 are about 16-1800. That's what buying this house will cost. Plus if the market corrects, my house's value will correct more steeply percentage-wise. We'll be worse off.
We're ready to move now, and all the home buying advice I get is buy when you're ready and let the market sort itself out. When our house sells we can refinance it down as if it was a 200k house.
$250,000 is a good amount of money saved for your age, but the majority came from the inheritances, so it may not be indicative of your savings rate. Where you see your income going in the coming years should factor in here as well. Good luck
$250,000 is a good amount of money saved for your age, but the majority came from the inheritances, so it may not be indicative of your savings rate. Where you see your income going in the coming years should factor in here as well. Good luck
Savings rate is about 30% in the current house. Net income 5000 - bills come out to around 1400 total, we spend about another 1500 on life more or less. We save anywhere from 800 to 2100 a month, depending on what's going on.
This is what I foresee with the new house:
Housing payment - ~1625 including PITA [350k, 70k down, payments 1300/mo +325 tax and insurance)
Various Bills - utility, electric, internet, etc... 950-1050 this is a liberal estimate
Living - food, gas, travel, whatever, 1500-1800 this is a liberal estimate
That leaves us 500-1000 left over, about 50% less than our current *net* savings rate. (I am not counting contributions to retirement plans or HSA as net).
However, we will make anywhere from 80-115k from the sale of the current house, and we expect it to sell very quickly at its price point, we are already preparing it. That will reduce the housing payment down to around 1150-1200. At that point we will paying about what it would cost to *rent* a lower-end 2br apartment in the area
Income will go up predictably 3-4% per year assuming I don't lose my job, which does not seem likely.
I swear, some of you guys would have people living in shacks if only to save millions for retirement. For reference regarding retirement, I will get a pension.
Last edited by redguard57; 07-27-2017 at 04:31 PM..
Savings rate is about 30% in the current house. Net income 5000 - bills come out to around 1400 total, we spend about another 1500 on life more or less. We save anywhere from 800 to 2100 a month, depending on what's going on.
This is what I foresee with the new house:
Housing payment - ~1625 including PITA [350k, 70k down, payments 1300/mo +325 tax and insurance)
Various Bills - utility, electric, internet, etc... 950-1050 this is a liberal estimate
Living - food, gas, travel, whatever, 1500-1800 this is a liberal estimate
That leaves us 500-1000 left over, about 50% less than our current *net* savings rate. (I am not counting contributions to retirement plans or HSA as net).
However, we will make anywhere from 80-115k from the sale of the current house, and we expect it to sell very quickly at its price point, we are already preparing it. That will reduce the housing payment down to around 1150-1200. At that point we will paying about what it would cost to *rent* a lower-end 2br apartment in the area
Income will go up predictably 3-4% per year assuming I don't lose my job, which does not seem likely.
I swear, some of you guys would have people living in shacks if only to save millions for retirement. For reference, I will get a pension.
Once you sell your home, why not take the proceeds, plus your remaining savings and just pay off the house? You could then take the $500+ a month you have earmarked for savings, plus the forecasted house payment of $1600+/month and pile up savings after that. That will give you freedom and optional it's with the monthly cash flow.
You have $250k in cash and another $100k in home equity. You can most definitely afford a $350k home with no problems, go for it. Those 2.5-3.0 formulas are just general advice, it doesn't fit your situation at all.
Once you sell your home, why not take the proceeds, plus your remaining savings and just pay off the house? You could then take the $500+ a month you have earmarked for savings, plus the forecasted house payment of $1600+/month and pile up savings after that. That will give you freedom and optional it's with the monthly cash flow.
I will consider that, thanks
To pay it off though will pretty much clean out the savings, however. Some of the reason for my wanting to hold on to some cash is.... well, personal and maybe a bit paranoid.
Savings rate is about 30% in the current house. Net income 5000 - bills come out to around 1400 total, we spend about another 1500 on life more or less. We save anywhere from 800 to 2100 a month, depending on what's going on.
This is what I foresee with the new house:
Housing payment - ~1625 including PITA [350k, 70k down, payments 1300/mo +325 tax and insurance)
Various Bills - utility, electric, internet, etc... 950-1050 this is a liberal estimate
Living - food, gas, travel, whatever, 1500-1800 this is a liberal estimate
That leaves us 500-1000 left over, about 50% less than our current *net* savings rate. (I am not counting contributions to retirement plans or HSA as net).
However, we will make anywhere from 80-115k from the sale of the current house, and we expect it to sell very quickly at its price point, we are already preparing it. That will reduce the housing payment down to around 1150-1200. At that point we will paying about what it would cost to *rent* a lower-end 2br apartment in the area
Income will go up predictably 3-4% per year assuming I don't lose my job, which does not seem likely.
I swear, some of you guys would have people living in shacks if only to save millions for retirement. For reference, I will get a pension.
The savings rate information (800-2100 a month) is new information. The only thing I saw previously regarding savings was the $200 month going to a Vanguard account. That $10,000-$25,000 annual savings is probably a new "run rate" since you $66K saved (246-200+ 20). Then again, you may have more saved than you have stated. Can only go with the info that you have made known.
You mentioned that your current 2/1 is not suitable for a Family and that right now it's just you and your wife (you said '2'). I'm assuming kids are coming and thus a bigger place is needed. Completely understandable. Have you factored the impact of kids on your budget (food, clothes, toys, term life insurance for you and spouse, day care, college savings, etc.) and what that may do to your savings rate as your income grows 3-4% annually against 1-2% inflation? Does the wife plan on continuing working after having a baby? Day Care itself could kill completely that $800-$2000 a month savings. Perhaps you have Family that will watch them full time.
Full disclosure, I was married at 35, wife 31 at the time and we moved into a townhome (income: $225K). 4 years later moved into a house at 2 times our income and 10 years (and 2 kids) later still in the same house and that original house price is about 1.4 times our current income. I'm sure it's an exciting time as your Family starts to take shape and you are probably visualizing your end goal and its so close you can almost taste it. There's nothing wrong with taking this in steps instead of large leaps. In your shoes I don't buy my "forever" home yet. I may trade up some but just some, have the kids, get a feeling for what my new budget (and potential income is) before I can have a good gauge on what I can afford. As the oldest approaches 4-5 years old, considerations like School Districts start coming into play and your priorities may shift. Not only will you have a better feel of what you want in your forever home, but you'll have better idea of what life has thrown you in regards to this Family. I understand the concept of throwing much of that inheritance at the $350K house so the mortgage feels like one for a $200K or $250K house, but then you lose some of the ability of that inheritance in your current and future daily lives for expected and unexpected events. People can poo-poo the concept of being house poor but there are millions of people that are living this reality.The fact that your working through your options is a great sign. Too many don't give a 2nd thought.
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