Tuesday, February 20, 2007
$2,859 per month
What's with this title? Its about a little agreement between my fiancee' and myself. You see, that is the difference between our rent and what we expect our monthly costs for a home ownership. We're going to save that amount every month to see if we can really afford the type of homes we want.
Now, I admit that the home is nicer than the apartment we have contracted to rent. Much nicer. Our rent is $1,735/month. Home ownership in total is estimated at $5,544 (with tax benefits getting us $2,859). Ok, you have two analysts getting married... be afraid, very afraid.
For this excercise, we're talking about a $850k home with all of the associated taxes, insurance, and such. Yes, taxes go both ways... that's part of the number we came up with. Maybe you'll assume a different number here or there. $100 either way shouldn't really matter. :)
Do note this is only one bit of monthly expenses. We also plan to save "10%" of net pay too. For that would be our target once we do purchase. The rest of our take home will go to enjoying our honeymoon year. :)
We're cheating a little bit. Estimates for "home repairs" go to the 2007 furniture fund. So this won't be a one for one comparison to the ultimate level. Cest la vie. Close enough. This is only an excercise for her and I. Let's put it this way, what happens if we cannot put $2,859 that month into our "slush fund?" Ummm... we don't. We consider why we missed our payment and then move on.
If we realize this is too much... We have tempered our ambitions. She thinks we can afford a certain monthly payment... I think we should back off about 10%... Most of me hopes she is right. :) If its too much of a struggle? We aim downmarket.
Notice I said nothing about a down payment? That we already have saved. None of this money if for that. It is for a "slush fund" after we buy a home so that life isn't so tight that we hate our experience. We also excluded utility differences, the need to buy appliances, etc. There is money set asside for purchasing stuff around the house, so let's leave it out of the equation today.
1. This is for a home we would like. For a home that we could love is probably too much dinero.
2. Why the lack of cost analysis? Simple, a home will have far more space, etc. As I've noted before, I place a high value on the benefits of home ownership. But that implies a certain level of amenities we won't have in the apartment:
A. Easy parking. Ugh... one thing I dislike about apartment living. Yes, we'll have a garage. That doesn't help with friends.
B. Fruit trees. We love them and enjoy the experience of picking our own fruit.
C. Yard space.
E. Not having to move again for a very long period of time! (We're buying for 10+ years.)
D. Attic space. Oh... we could use a bit of attic space. Already! Yikes!
Besides, I know rent/buy ratios. This post is in another direction.
3. Why not rent a house? For the next year I'm looking at 60+ hour mandatory weeks anyway. I didn't want to worry about yardwork, etc. Yes, that can be bought, but no home that we was on the market with an experienced landlord. Hence, we went for an apartment.
Convieniently, this leaves us out of the housing market until mid-March 2008. :) I'm expecting my current duty to exent until august or so... Then back to Redondo Beach!
Now, isn't this conviently near the Fall 2008 "buying window" I'm expecting. :) Actually, I might have manuevered in job position a little to optimize a bit here or there... ;)
Expect an occasional blog on this. We do plan to live well while saving. This excercise will see if we can really love life at the spending level home ownership will impose.
Again as I've noted so many times.
I cannot lose by waiting (to buy a home).
The housing Bulls who chant "buy now or be priced out forever" probably cannot understand this strategy.
If nothing else, we'll see if we can budget well as a couple without the stress of having to make it every month.
This is HER idea. :)
Not that I wasn't going to suggest something similar... But not right away.