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A lot of the inventory is not post-1980 in those towns. Once your financials are figured out I think that'll be your biggest obstacle. Why in the past 30 years, if I might ask?
A lot of the inventory is not post-1980 in those towns. Once your financials are figured out I think that'll be your biggest obstacle. Why in the past 30 years, if I might ask?
Well, just my assumption that houses in the last 30 years are fairly new and may not need the level of fixing upping required in older homes. A lot of things like central air-conditioning (not baseboards), tall ceilings (e.g. when you enter the foyer) etc. are things not found in homes older than this.
You partially answered your own question. If the rent in your townhouse is covering everything (mortgage/taxes/upkeep), then you can in fact cut into what you save per month a little (not the 401k) to get the house you desire. The building equity is offsetting the cashflow you are using to buy more house. Your wife is also correct in that as that pays down it becomes a pseudo retirement account. This all assumes you have the stomach to be in the landlord business of course.
The other assumption you have to weigh is that since you make a nice income and clearly your a person who thinks about things correctly, that you will over time be making more and more money. So while you are correctly hedging and planning for worst you also need to weigh that against the place you and your family live, which is very important (schools, peace of mind, etc).
One way to cut thru all this is to adhere to the "Dave Ramsey" formula of keeping your mortgage payment to 25% of your TAKE HOME pay. Not as a strict guideline but a ballpark. No one is more conservative than Ramsey.
Thanks. On your second point on making more and more money, I wish that were true Over the last 3 years my salary has been stagnant. I don't have a lot of optimism given the current nature of the economy that its going to go up and up. Also, if I applied Dave Ramsey formula of 25% of net pay, then the max I can afford would be $1925 assuming a $7700 take home.
In order to pay $3000 a month, my take home would need to be $12000 which in absolute gross annual income translates to $205,714 assuming a 30% tax bracket. That is almost a bump of 35% that I need to get on my current salary which is definitely not going to happen. This makes me question as to if $1925 is the maximum I can afford, that is the same as what I pay today with my townhome. Does it mean I cannot afford something bigger?
Eh, I dunno. We have a house from 1923 that was retrofitted with central air about 20+ years ago. Yes, it wasn't the best reno I've ever seen and if I had been in charge I would have done things differently, but the 9'-10" ceilings throughout and use of good oak for the hardwood floors make up for a lot.
We replaced the single-pane aluminum frame windows when we moved in, but, if you bought a house from 1980 and those windows hadn't been replaced since then you'd have to do the same thing.
I'm not saying that older houses are always better, I'm saying that house building techniques are pretty standard for the past fifty years or so and that you might not want to automatically nix all the older house inventory when that's what the majority of it is in the towns you're looking at. We live in Cranford, which is a great town, but the stock, especially within walking distance to town, is older and the location was more important.
Certainly not a fixer upper and besides the windows, replacement furnace, and dumping in another 12" of insulation in the attic we haven't had to do a lot. All of that money came from a ten-year zero-interest loan from the energy company because we were increasing the efficiency, so it's certainly been affordable to solve the problems, especially since the electrical bill dropped as well. Newer homes in town are rare given the cost of permits and limited lot space and you will pay for it. We bought our single family two years ago for 320. The two house condo that just went up around the corner is selling at over double that per unit and they have to share a wall and a yard.
Thanks. On your second point on making more and more money, I wish that were true Over the last 3 years my salary has been stagnant. I don't have a lot of optimism given the current nature of the economy that its going to go up and up. Also, if I applied Dave Ramsey formula of 25% of net pay, then the max I can afford would be $1925 assuming a $7700 take home.
In order to pay $3000 a month, my take home would need to be $12000 which in absolute gross annual income translates to $205,714 assuming a 30% tax bracket. That is almost a bump of 35% that I need to get on my current salary which is definitely not going to happen. This makes me question as to if $1925 is the maximum I can afford, that is the same as what I pay today with my townhome. Does it mean I cannot afford something bigger?
Ramsey's formula is at the ultra conservative level (he's also advocating a 15yr not 30yr mortgage). The banks will tell you to keep mortgage plus prop. tax plus insurance to 32% of pre-tax income which in your case is $4,000. Split the difference between em. Your in the ballpark.
Not to plug another site, but the Motley Fool forums are a great resource for these kinds of affordability questions..
We bought a 3 br plus bonus room in basement expanded cape cod in SPF for around 400-425k range two years ago. Built in 50s, reno/addition in 90s. Yes, we had to put in ductless ac (around 10k) and insulation (<2 k). But our energy bills are now averaging approx $150 per month. And taxes on our .11 acre slice of heaven are < 10k
You partially answered your own question. If the rent in your townhouse is covering everything (mortgage/taxes/upkeep), then you can in fact cut into what you save per month a little (not the 401k) to get the house you desire. The building equity is offsetting the cashflow you are using to buy more house. Your wife is also correct in that as that pays down it becomes a pseudo retirement account. This all assumes you have the stomach to be in the landlord business of course.
The other assumption you have to weigh is that since you make a nice income and clearly your a person who thinks about things correctly, that you will over time be making more and more money. So while you are correctly hedging and planning for worst you also need to weigh that against the place you and your family live, which is very important (schools, peace of mind, etc).
One way to cut thru all this is to adhere to the "Dave Ramsey" formula of keeping your mortgage payment to 25% of your TAKE HOME pay. Not as a strict guideline but a ballpark. No one is more conservative than Ramsey.
"Dave Ramsey" formula works for low cost of living cities in Tennessee, where houses are $150k, property taxes are around $1-2k. Forget about that when you are living in Northern jersey.
Thanks. On your second point on making more and more money, I wish that were true Over the last 3 years my salary has been stagnant. I don't have a lot of optimism given the current nature of the economy that its going to go up and up. Also, if I applied Dave Ramsey formula of 25% of net pay, then the max I can afford would be $1925 assuming a $7700 take home.
In order to pay $3000 a month, my take home would need to be $12000 which in absolute gross annual income translates to $205,714 assuming a 30% tax bracket. That is almost a bump of 35% that I need to get on my current salary which is definitely not going to happen. This makes me question as to if $1925 is the maximum I can afford, that is the same as what I pay today with my townhome. Does it mean I cannot afford something bigger?
Your salary is stagnant because you are already making very good income even in NJ standards. It can't go much higher unless you are in a high management position, doctor or lawyer.
Most young families I know are dual incomes to be able to afford a $500k house, $250k-300k, dual income with the kid in day care. Now we are talking some serious cash.
"Dave Ramsey" formula works for low cost of living cities in Tennessee, where houses are $150k, property taxes are around $1-2k. Forget about that when you are living in Northern jersey.
If your definition of "works" is not slaving to pay for mortgage/prop tax then his definition "works" regardless of the area. If your choice is to live to service the debt and taxes on your house, have little left for savings, vacations etc, then so be it. A formula doesnt cease to exist based on where in the country you apply the formula. So no.
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Over the last 3 years my salary has been stagnant. I don't have a lot of optimism given the current nature of the economy that its going to go up and up. Also, if I applied Dave Ramsey formula of 25% of net pay, then the max I can afford would be $1925 assuming a $7700 take home. 
