First Home Purchase - Property Tax vs Commuting Costs

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in_securities
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First Home Purchase - Property Tax vs Commuting Costs

Post by in_securities » Mon Mar 02, 2015 1:41 pm

My wife and I are looking to purchase our first home to raise our 2 kids in. We are looking at two options and trying to figure out the more financially prudent move.
We both work in NYC, so commuting is a factor.

OPTION A – Moving closer to NYC.

COMMUTE TIME 1 hour door to door. Walk to Train Station
COMMUTE COSTS $208 x 12 months = $2,496
PROPERTY TAXES $14 - $18k/year (and they’re only going to go up)
SCHOOLS Decent Schools, not great, but good enough

PROPERTY TAX + COMMUTE COSTS = $16,000 + $2,500 = $18,500
* This Option won’t require purchase of a 2nd vehicle and insurance, maintenance, etc of a 2nd car.

OPTION B – Moving further from NYC.

COMMUTE TIME 1:35- 1:45 door to door. Drive 20 minutes to and from Ferry.
COMMUTE COSTS $655 x 12 months - $7,860 + gas, wear & tear on car.
PROPERTY TAXES $8 - $10k/year
SCHOOLS Good to Really Good

PROPERTY TAX + COMMUTE COSTS = $17,000
*This Option will require purchase of 2nd vehicle, another auto insurance, maintenance, etc.

This is oversimplified and doesn’t take into account several other factors – difference in commute time and how to quantify that value, which home has a better chance of appreciating over the long haul, quality of life, etc. We want to make the best financial decision we can. Judging by the numbers above, does one option leave more $ in our pockets at the end of the year after tax deductions for Property Tax & Transportation Costs?

Thanks in advance for any input.

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SanityCheck
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Re: First Home Purchase - Property Tax vs Commuting Costs

Post by SanityCheck » Mon Mar 02, 2015 1:49 pm

I suggest plugging those numbers into a tax package on the Fed and State level to see the real financial impact. Property taxes are deductible on Sched A at the Fed layer. Some states give some type of deduction for commuting (like train passes etc).

Bottom line.....look at the "quality of life" aspect first. Do you really want to commute for almost 4 hours per day ??

terran
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Re: First Home Purchase - Property Tax vs Commuting Costs

Post by terran » Mon Mar 02, 2015 1:52 pm

Another thing to add to the calculation is the cost of your time: 0.5hours/commute (at least) * 2 commutes/day * 5 days/week * 50 weeks/year (2 weeks vacation) is 250 hours of extra commuting time per year. $1500/250 hours = $6 / hour.

So, are better schools worth taking a part time job "making" $6/hour that keeps you away from your kids an extra hour a day? I bet if you spent that hour working on homework with them that it would have more effect than the quality difference in schools. Just one way of thinking about it.

Mike Scott
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Re: First Home Purchase - Property Tax vs Commuting Costs

Post by Mike Scott » Mon Mar 02, 2015 1:55 pm

I did a similar calculation when we bought a house a few years ago. Commute cost vs tax was about even so I chose to spend less time in the car and pay higher property taxes. I did not think about the property taxes being detectable at the time but that only makes it better.

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Meg77
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Re: First Home Purchase - Property Tax vs Commuting Costs

Post by Meg77 » Mon Mar 02, 2015 2:07 pm

Move closer to NYC! Having to buy and maintain a second vehicle is a HUGE expense that shouldn't be discounted in a footnote. That puts the financial advantage squarely on option one.

But finances aren't the only factor here. Giving yourself AND your wife each 70-90 minutes of leisure time each day is worth many thousands of dollars a year in my opinion, particularly as you have kids. How much total free time do you have each day where you aren't working (or getting ready for work or commuting to work) or sleeping? Maybe 4 hours each? Giving up more than a quarter of your leisure time is a huge expense. That's time you could be exercising, spending with your kids, having sex, socializing, etc - all the things people really care about and which really matter.
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PowDay
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Re: First Home Purchase - Property Tax vs Commuting Costs

Post by PowDay » Mon Mar 02, 2015 2:19 pm

I vote closer to NYC.

I ran the same math in Boston, and 6 months in I'm thrilled with the decision.

I know my more expensive housing payment isn't an "investment" but its far better then paying increased commuting and car payments.

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Watty
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Re: First Home Purchase - Property Tax vs Commuting Costs

Post by Watty » Mon Mar 02, 2015 2:22 pm

Be careful with the commute time calculations. Those are likely the commute times on a good day, you may find out that in reality that means;
1) Once a week it is a bad day and takes much longer.
2) A couple of times per month it is terrible.
3) A couple of times each year it is the commute from hell.
4) Every couple of years the commute is so bad that you don't make it to work or home.

I don't think there is a good answer.
Last edited by Watty on Mon Mar 02, 2015 2:34 pm, edited 2 times in total.

Boglegrappler
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Re: First Home Purchase - Property Tax vs Commuting Costs

Post by Boglegrappler » Mon Mar 02, 2015 2:26 pm

All incremental commuting times should be considered as a fraction of your total free or discretionary time, to be properly factored into your decision. And extra half hour is sometimes 100% of your personal free time.

randomguy
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Re: First Home Purchase - Property Tax vs Commuting Costs

Post by randomguy » Mon Mar 02, 2015 2:29 pm

The money doesn't matter. It is all about if you want to spend 1 more hour/day commuting. Even if you can do things like work, read, and s on that is still a lot of your life your spending in a car,train, or boat.

And if you really care about the numbers remember property tax is deductible. Commuting costs may or may not have tax breaks.

Mitchell777
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Re: First Home Purchase - Property Tax vs Commuting Costs

Post by Mitchell777 » Mon Mar 02, 2015 2:29 pm

I can only suggest that, for me, as the years have gone on and I've become much more financially secure, the extra commute time is a real negative in numerous ways. Of course you can always move later

Userdc
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Re: First Home Purchase - Property Tax vs Commuting Costs

Post by Userdc » Mon Mar 02, 2015 2:46 pm

Living in a closer suburb vs a further suburb is not a math problem. There are major differences between these two lifestyles that will have a much larger impact on your life than a miniscule difference in commuting costs.

Personally, I live in an option 1 town because I like a shorter commute, a dense walkable community, and proximity to the city on weekends. I'm willing to live in a smaller house, smaller lot, and deal with more traffic to get those things.

DaftInvestor
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Re: First Home Purchase - Property Tax vs Commuting Costs

Post by DaftInvestor » Mon Mar 02, 2015 2:58 pm

To me the choice between "Decent schools" for the kids and "Good to really good" Schools for the kids would be worth the extra 10-15 minutes of commute time as well as the extra car expense. As someone else mentioned - lifestyle comes into play as well. What are your weekend activities, your kids inclinations, etc. and which community better meets them....

Jill07
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Re: First Home Purchase - Property Tax vs Commuting Costs

Post by Jill07 » Mon Mar 02, 2015 3:20 pm

I would really look into the schools in the high tax neighborhood. Are they improving or declining? How active are the families in the schools? If the schools are ‘not that great’, the property taxes are too high for most families. Many families will opt for the lower property taxes with the better schools. Families that are very wealthy will opt for the shorter commute and private school (further eroding the community support for the public schools).

Is there any way that you or your wife can work at least part-time from home? That would sure help!

Good luck with your decision.
Jill

Mitchell777
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Re: First Home Purchase - Property Tax vs Commuting Costs

Post by Mitchell777 » Mon Mar 02, 2015 3:38 pm

I would agree that being able to work from home even one or two days a week can make a world of difference if the commute is long

Topic Author
in_securities
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Re: First Home Purchase - Property Tax vs Commuting Costs

Post by in_securities » Wed Mar 04, 2015 11:30 am

SanityCheck wrote:I suggest plugging those numbers into a tax package on the Fed and State level to see the real financial impact. Property taxes are deductible on Sched A at the Fed layer. Some states give some type of deduction for commuting (like train passes etc).

Bottom line.....look at the "quality of life" aspect first. Do you really want to commute for almost 4 hours per day ??
It seems like the deductions are fairly even so will definitely consider the quality of life factor. thanks.
terran wrote:Another thing to add to the calculation is the cost of your time: 0.5hours/commute (at least) * 2 commutes/day * 5 days/week * 50 weeks/year (2 weeks vacation) is 250 hours of extra commuting time per year. $1500/250 hours = $6 / hour.

So, are better schools worth taking a part time job "making" $6/hour that keeps you away from your kids an extra hour a day? I bet if you spent that hour working on homework with them that it would have more effect than the quality difference in schools. Just one way of thinking about it.
Terran - thanks for breaking it down like that, definitely a convincing argument for Option 1.
Mike Scott wrote:I did a similar calculation when we bought a house a few years ago. Commute cost vs tax was about even so I chose to spend less time in the car and pay higher property taxes. I did not think about the property taxes being detectable at the time but that only makes it better.
We're leaning the same way. thanks.
Meg77 wrote:Move closer to NYC! Having to buy and maintain a second vehicle is a HUGE expense that shouldn't be discounted in a footnote. That puts the financial advantage squarely on option one.

But finances aren't the only factor here. Giving yourself AND your wife each 70-90 minutes of leisure time each day is worth many thousands of dollars a year in my opinion, particularly as you have kids. How much total free time do you have each day where you aren't working (or getting ready for work or commuting to work) or sleeping? Maybe 4 hours each? Giving up more than a quarter of your leisure time is a huge expense. That's time you could be exercising, spending with your kids, having sex, socializing, etc - all the things people really care about and which really matter.
I like the way you think... Option 1 for the win.
PowDay wrote:I vote closer to NYC.

I ran the same math in Boston, and 6 months in I'm thrilled with the decision.

I know my more expensive housing payment isn't an "investment" but its far better then paying increased commuting and car payments.
Glad it's working out for you, congrats!
Watty wrote:Be careful with the commute time calculations. Those are likely the commute times on a good day, you may find out that in reality that means;
1) Once a week it is a bad day and takes much longer.
2) A couple of times per month it is terrible.
3) A couple of times each year it is the commute from hell.
4) Every couple of years the commute is so bad that you don't make it to work or home.

I don't think there is a good answer.
[Sigh] City Living... If only they'd allow me to telecommute...
Boglegrappler wrote:All incremental commuting times should be considered as a fraction of your total free or discretionary time, to be properly factored into your decision. And extra half hour is sometimes 100% of your personal free time.
Unfortunately, that is the case sometimes.
randomguy wrote:The money doesn't matter. It is all about if you want to spend 1 more hour/day commuting. Even if you can do things like work, read, and s on that is still a lot of your life your spending in a car,train, or boat.

And if you really care about the numbers remember property tax is deductible. Commuting costs may or may not have tax breaks.
Agreed, Option 1 is pulling ahead here.
Mitchell777 wrote:I can only suggest that, for me, as the years have gone on and I've become much more financially secure, the extra commute time is a real negative in numerous ways. Of course you can always move later
Thanks for your input.
Userdc wrote:Living in a closer suburb vs a further suburb is not a math problem. There are major differences between these two lifestyles that will have a much larger impact on your life than a miniscule difference in commuting costs.

Personally, I live in an option 1 town because I like a shorter commute, a dense walkable community, and proximity to the city on weekends. I'm willing to live in a smaller house, smaller lot, and deal with more traffic to get those things.
Absolutely agree, I think there will be enough culture and space for the little ones and adults to make us happy.
DaftInvestor wrote:To me the choice between "Decent schools" for the kids and "Good to really good" Schools for the kids would be worth the extra 10-15 minutes of commute time as well as the extra car expense. As someone else mentioned - lifestyle comes into play as well. What are your weekend activities, your kids inclinations, etc. and which community better meets them....
Good points to think about. I think both school districts are good, however the suburb closer to the city has a wider range of socio-economic students which tends to lower the overall State test scores.
Jill07 wrote:I would really look into the schools in the high tax neighborhood. Are they improving or declining? How active are the families in the schools? If the schools are ‘not that great’, the property taxes are too high for most families. Many families will opt for the lower property taxes with the better schools. Families that are very wealthy will opt for the shorter commute and private school (further eroding the community support for the public schools).

Is there any way that you or your wife can work at least part-time from home? That would sure help!

Good luck with your decision.
Jill
From what I've gathered, the PTA and parent involvement in the "decent" school is really strong. I believe about 12% of families in that neighborhood send their kids to private schools, which seems to be about the average for adjacent towns, so I don't think it's indicative of a declining school.
Mitchell777 wrote:I would agree that being able to work from home even one or two days a week can make a world of difference if the commute is long
This would be ideal, unfortunately, my wife and I are freelance so each week or month is different regarding which clients we work with and where they're located.

Thanks to all for your time, I have a lot to chew on. Now if I can only find a way to make waaaaay more money...

Grt2bOutdoors
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Re: First Home Purchase - Property Tax vs Commuting Costs

Post by Grt2bOutdoors » Wed Mar 04, 2015 11:38 am

Don't ever underestimate the value of having a low commute time. I assure you, after experiencing a ferry delay due to "frozen rivers" or bad weather, or even a train delay, you will thank your lucky stars you live closer to, than far away. This comes into play when you need to get to your kids or home, asap.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
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Re: First Home Purchase - Property Tax vs Commuting Costs

Post by Grt2bOutdoors » Wed Mar 04, 2015 11:48 am

in_securities wrote:[Good points to think about. I think both school districts are good, however the suburb closer to the city has a wider range of socio-economic students which tends to lower the overall State test scores.


Thanks to all for your time, I have a lot to chew on. Now if I can only find a way to make waaaaay more money...
Get over it, as long as you are not moving to an Abbott district, and taxes are what you say they are $14-$18K, chances are you're not moving to the "hood". I came from a lower income family, turned out just fine and now live in an upper/middle class (depending on who you talk to) neighborhood. On the other hand, I had childhood friends who came from upper middle class families and they failed to launch. So, the moral of the story is "test scores" or "socio-economic backgrounds" don't dictate the final outcome. There are other factors as well. Given the property taxes you cite, you have a fair selection of upper middle class towns from which to choose. Other points to consider, you don't want to raise your children in a town where the majority of households are making much more than you, not only do kids talk and observe, but the level of snootiness will be readily apparent everywhere you turn. I can name a few towns right off the bat, where the air is apparently "rarefied". :wink:
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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in_securities
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Re: First Home Purchase - Property Tax vs Commuting Costs

Post by in_securities » Wed Mar 04, 2015 12:07 pm

Grt2bOutdoors wrote:
in_securities wrote:[Good points to think about. I think both school districts are good, however the suburb closer to the city has a wider range of socio-economic students which tends to lower the overall State test scores.


Thanks to all for your time, I have a lot to chew on. Now if I can only find a way to make waaaaay more money...
Get over it, as long as you are not moving to an Abbott district, and taxes are what you say they are $14-$18K, chances are you're not moving to the "hood". I came from a lower income family, turned out just fine and now live in an upper/middle class (depending on who you talk to) neighborhood. On the other hand, I had childhood friends who came from upper middle class families and they failed to launch. So, the moral of the story is "test scores" or "socio-economic backgrounds" don't dictate the final outcome. There are other factors as well. Given the property taxes you cite, you have a fair selection of upper middle class towns from which to choose. Other points to consider, you don't want to raise your children in a town where the majority of households are making much more than you, not only do kids talk and observe, but the level of snootiness will be readily apparent everywhere you turn. I can name a few towns right off the bat, where the air is apparently "rarefied". :wink:
I totally agree. I came from a town in which the schools ranked about a 1 out of 10, 1 being the worst. A single-parent household to boot, and ended up putting myself through college and doing just as well, if not better, than peers from the wealthy towns next door. Character, work ethic, and tenacity can't be taught through curriculums geared toward state-mandated tests.

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