Background: Wife and I moved from the east coast to a midwest city for my new gig. She was 9 mo pregnant at the time, so quit her job, she is looking for work now.
The Figures: Ratios etc. are all in-line, with some wiggle room. Budget would be tight without her working, would be able to save only about 1k/month if we were frugal. With her working we would be able to save about 4k/month, after daycare. Job hunting has been slow for her, so a bit concerning, would not want to live a meager house poor existence for a prolonged period of time. Outside of 401k and IRA balances, and the 20% down payment/closing costs, the majority of our savings are tied up in an investment that I am not ready to sell.
The house: In a top golf club neighborhood, excellent school district, 1/2 mile from the freeway with retail etc. at the top of the development. Would halve my commute from our current abode. Purchase price is 2.5x my annual gross, and with wife working would be less than 2x annual gross. Has been re-done with new siding, new windows, and spruced up from top-to-bottom inside, totally turn-key…except it needs new roof and new furnace. With this new equipment I would be at a comfortable all-in number on the house, even in a down RE market since the neighborhood is very desirable.
My concerns are:
Being house poor
Buying a house not knowing where wife will be working, potentially locking her into a long commute or eliminating certain areas from her job search.
Are my concerns legit or am I just being a huge puss?
Home is 50 yrs old. I think 3% annually for maintenance would be high, there is not much of a yard, landscaping or driveway to maintain. Couldnt see spending more than 100 bucks on gas for lawn mower/snow blower which i already own. Have home warranty which would cover most repairs. What am i missing? I think about 1% would cover but ill budget 2%. Capital needs will be the major expenses but will eliminate repairs expense to hvac and roof.
LOL oh man. You are in for a rude awakening. Things you didn’t even know existed will break. A 50 year old house? Then in my guess 3% is low, 2-4% is national average. How old are your windows, doors? New home owners don’t even realize those have a limited life. You will have leaks, appliances break, heaters / AC go, just random stuff that will die. Your basement may develop moisture, your lawn may get a disease and die off requiring $5k to replant. I’m not making these things up and until you own a home you won’t understand how common this is. Just put the 3% in or don’t and then regret it later.
Furnace will need to be replaced this year but that is already budgeted along with roof. Windows and siding brand new. Tiny shaded lawn, wont be spending on landscaping. I own plenty of real estate, but this feels different since its not an investment. my main fear is the plumbing behind the walls. Do have home warranty included though.
I’m telling you, 3% is national average for a house that age and you’re being incredibly naive. The things I mentioned are breakdown issues and even new stuff will have costs, it’s just a fact of life. You’re definitely setting yourself up to be house poor by budgeting otherwise, I’m simply offering you basic statistics.
Will be renting and waiting for wife to get her job. Also going to look for a newer place to save on maintenance. Save up a bit more and jump into the next level of homes which are going to check off more boxes on our wish list as well. And hopefully the market cools a bit in the meantime. Wasnt willing to compete over homes that we werent going to be satisfied with…
There’s usually no “market dip” for real estate, since sellers don’t like to mark down their house. They’d rather sit on the market for 2y then sell it 10% down. So, a bear market in housing is more like flat prices over some time (negative with inflation, I guess). In the mean time, if you are a buyer, of course you could be using that capital to make returns in other assets.