Rent in Retirement

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Cipro
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Rent in Retirement

Post by Cipro » Sun Mar 18, 2018 9:47 am

I'm currently 59 yo and considering retirement in the next 2-3 years. Thinking of ways to reduce expenses and am considering selling house and renting moving forward. Empty-nesters - really no need for 4 bedroom/3.5 bath house anymore. There would be no capital gains on the on the sale (bought in 2004). Maintaining the house is by far biggest expense. Although there are psychological aspects to not owning, there may be freedoms as well. I currently pay around $3200/month in mortgage/tax/interest. Add on top of that, around $1800/month in utilities/maintenance/repairs (electricity/heating/lawncare/snow/painting etc...). In total, about $5000/month. Can see living well on around half of that if rent. My current expenses are quite high - would like to reduce in order to increase security that savings are sufficient.

Thoughts from other BH's appreciated.

mrgeeze
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Re: Rent in Retirement

Post by mrgeeze » Sun Mar 18, 2018 10:14 am

Dump the house.
You have too much costs.

Assuming you don't live in SF or some other ultra high rent neighborhood 1500-2500 should get you a decent monthly rental.
Add 500-1000/month for utilities and you're about half what you are now +-.

bob60014
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Re: Rent in Retirement

Post by bob60014 » Sun Mar 18, 2018 10:20 am

We were in a similar situation including home size, age and retirement. The psychological aspects were there, loved our house and area, but looking at the long term benefits it was a easy decision to make.

Having done it we reduced our cash outlay by 65 percent (money saved to be used in retirement) , the time to clean/maintain the property is minimal (more time to play/travel in retirement) and the comfort in knowing we can pack up and move at any time to another area of the country if we desire to.

Do we miss the home? At times yes, but again long term, the decision was a no brainer.

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Watty
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Re: Rent in Retirement

Post by Watty » Sun Mar 18, 2018 10:28 am

Downsizing sounds like it makes a lot of sense.

It sounds like you are comparing owning a large house to renting a much smaller house or an apartment.

To get a good cost comparisons you really need to make an "apples to apples" comparison and compare owning and renting similar things.

Here is a popular "rent or buy" calculator to help figure out the finances.

https://www.nytimes.com/interactive/201 ... lator.html

You could sell your place and rent something for a year and then decide if you want to buy or not when the lease is up. After living in a single family home for a long time it may take some adjustment to live in a different situation.

I have even heard of people that rented a condo or house to try it out and eventually buy in the same building or subdivision if they liked it there.
Cipro wrote:
Sun Mar 18, 2018 9:47 am
My current expenses are quite high - would like to reduce in order to increase security that savings are sufficient.
There are people that do rent an retirement and it works out fine but it may not be more secure.

If you rent then you will have three potential problems you don't have when you own property.
1) Rent increases.
2) Your home equity would be invested and the investments could do poorly.
3) Your landlord may not renew your lease and you will have to move which could be hard to do when you are elderly or widowed.

If you buy your home value may go up or down but if you live there the rest of your life that really only matters to whoever inherits it someday.

It helps that I live in a relatively low cost of living area but with a paid off house I could pretty much cover my other core living expenses with just my Social Security check if I had to. That would be a pretty frugal lifestyle but knowing that makes me feel pretty secure.

CurlyDave
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Re: Rent in Retirement

Post by CurlyDave » Sun Mar 18, 2018 10:34 am

You can always downsize and buy a smaller house instead of renting.

IMHO there is significant longevity risk in renting in retirement. Rents have a way of going up over time. Your income and withdrawals probably will not keep up.

A fixed rate mortgage, or even an outright purchase, will let your housing costs increase much more slowly. Many jurisdictions have breaks on property taxes for seniors. Investigate before purchase.

indexonlyplease
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Re: Rent in Retirement

Post by indexonlyplease » Sun Mar 18, 2018 10:42 am

Downsize. That is way to much of an expense for when your are retired. If you live in an expensive area, can you just sell and move when your retire.

I don't like renting, especially in retirement. You can't control when the owners of the property change their mind and ask you to move out. So you may end up moving more than you like.

I like the idea of owning your house (paid for) and you control your future. Also, purchase just what you need with low overhead cost.


I paid of my house before I retired now just pay the expenses of the house. A lot easier to do with no mortgage.

btenny
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Re: Rent in Retirement

Post by btenny » Sun Mar 18, 2018 10:45 am

I agree you need to downsize your living accommodations now that the kids are gone. You certainly do not need a big home in retirement. So sell the big house. Then look around for what you like that is smaller and less expensive. Maybe renting a nice condo or a small apartment is what suits you. But maybe buying a nice small home also will work for you. I bet you can make enough cash from the big house sale to buy your next small home and pay it off in full.

Good Luck.

Bacchus01
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Re: Rent in Retirement

Post by Bacchus01 » Sun Mar 18, 2018 10:54 am

The upside to renting is obviously not worrying about major repairs. And the ability to move basically whenever you want.

The downside is that it is almost never cheaper to rent than own on a comparable property.

Chris K Jones
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Re: Rent in Retirement

Post by Chris K Jones » Sun Mar 18, 2018 11:01 am

I sold a big house and moved to a rental to avoid the maintenance expenses and time consuming chores. Currently rent, but figure I will buy a small place, probably a condo before I retire. I think renting in retirement is kind of risky because rents will trend upwards at an unknown rate.

Bmac
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Re: Rent in Retirement

Post by Bmac » Sun Mar 18, 2018 11:07 am

How about downsizing by selling the house and buying a condo? Likely much easier maintenance, simplifies any prolonged travel logisitics, avoids the vagaries of rent increases/need to (possibly) repeatedly move.

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Pajamas
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Re: Rent in Retirement

Post by Pajamas » Sun Mar 18, 2018 11:25 am

Downsizing does sound like a good idea but I agree that you should at least consider buying a condo or similar instead of renting. If there are any 55+ complexes near you, consider them. They are usually less expensive than similar non-55+ properties, have some advantages for older people, and although I only know a few people who live in them, they all like it a lot.
Bacchus01 wrote:
Sun Mar 18, 2018 10:54 am

The downside is that it is almost never cheaper to rent than own on a comparable property.
Judging from all of the posts here from people with rental properties with negative cash flow, that may not be true!

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tennisplyr
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Re: Rent in Retirement

Post by tennisplyr » Mon Mar 19, 2018 6:44 am

Retired and sold my house last year in a HCOL and downsized to a LCOL. Total expenses are roughly 1/2 of what they were while pocketing cash from the sale. Still enjoy the psychological aspects of ownership over renting. Owned my home almost all of my adult life.
Those who move forward with a happy spirit will find that things always work out.

Bacchus01
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Re: Rent in Retirement

Post by Bacchus01 » Mon Mar 19, 2018 7:27 am

Pajamas wrote:
Sun Mar 18, 2018 11:25 am
Downsizing does sound like a good idea but I agree that you should at least consider buying a condo or similar instead of renting. If there are any 55+ complexes near you, consider them. They are usually less expensive than similar non-55+ properties, have some advantages for older people, and although I only know a few people who live in them, they all like it a lot.
Bacchus01 wrote:
Sun Mar 18, 2018 10:54 am

The downside is that it is almost never cheaper to rent than own on a comparable property.
Judging from all of the posts here from people with rental properties with negative cash flow, that may not be true!
Sadly, that’s true. Of course, negative cash flow does not mean unprofitable

westrichj312
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Re: Rent in Retirement

Post by westrichj312 » Mon Mar 19, 2018 7:54 am

rent much less costs and stress.

THY4373
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Re: Rent in Retirement

Post by THY4373 » Mon Mar 19, 2018 10:25 am

Bacchus01 wrote:
Sun Mar 18, 2018 10:54 am

The downside is that it is almost never cheaper to rent than own on a comparable property.
Do you have some statistics to back that up? Not saying you are wrong but there have been plenty of counter examples on this forum especially in HCOL area even when you filter out the tendency of folks to rent less than they would buy.

I live in a moderate cost of living area and have run the numbers of buying a house on the street I rent. It was pretty much a wash to rent/buy. It very slightly favored buying prior to the recent tax reform, and now it very slightly favors renting (at least for me and my tax situation).

Texgal17
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Re: Rent in Retirement

Post by Texgal17 » Mon Mar 19, 2018 10:49 am


Well, I purchased a home almost 2 years ago right after I retired. I lived most of my adult life in rentals, except for 2 previous homes I bought over the years and then sold. I never wanted the responsibility of a home or to be tied down. My current home is bigger than I planned due to my adult daughter and grandchild moving in with me. Due to my daughter going back to school to get her degree and also work full time. My idea ( I know! What was I thinking, lol). So I care for my grandchild while Mom takes care of business. Having said that, I will probably sell and either rent or buy smaller, once they move out. It’s been a joy having them here, but I’m also ready to get back to living my retirement life! Renting and owning both have pros and cons, and it’s definitely a personal choice.

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midareff
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Re: Rent in Retirement

Post by midareff » Mon Mar 19, 2018 10:58 am

$5K a month is a whole lot of money considering it's for 2. We have a nice 2/2 condo on the water for $2300 pays all including property tax, electric, condo maintenance, repairs and mortgage.

anonenigma
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Re: Rent in Retirement

Post by anonenigma » Mon Mar 19, 2018 11:32 am

If you plan to rent, check whether there is an applicable rent control ordinance. I live in a building built before 10/1/1978, so my landlord is permitted to raise the rent by a maximum of 3% per year. It's a nice inflation protection.
Last edited by anonenigma on Fri Mar 23, 2018 11:06 am, edited 1 time in total.

adamthesmythe
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Re: Rent in Retirement

Post by adamthesmythe » Mon Mar 19, 2018 12:25 pm

Try renting and see if you like (or can stand) it

you can always buy later.

(That is one heck of a lot of house and housing expenses to carry into retirement).

Bacchus01
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Re: Rent in Retirement

Post by Bacchus01 » Mon Mar 19, 2018 12:41 pm

THY4373 wrote:
Mon Mar 19, 2018 10:25 am
Bacchus01 wrote:
Sun Mar 18, 2018 10:54 am

The downside is that it is almost never cheaper to rent than own on a comparable property.
Do you have some statistics to back that up? Not saying you are wrong but there have been plenty of counter examples on this forum especially in HCOL area even when you filter out the tendency of folks to rent less than they would buy.

I live in a moderate cost of living area and have run the numbers of buying a house on the street I rent. It was pretty much a wash to rent/buy. It very slightly favored buying prior to the recent tax reform, and now it very slightly favors renting (at least for me and my tax situation).
I don’t need to have the statistics. Over the long term, if it was cheaper to rent than buy, then no one would rent out their property. There are many cases where this will not be true and certainly not at certain times, but overall it is true.

As for your math, did you include the cost of major repairs?

PartIrish
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Re: Rent in Retirement

Post by PartIrish » Mon Mar 19, 2018 3:30 pm

One factor not yet mentioned is that if you decide to rent in retirement, you may be forced to move multiple times. We own several rentals, and as the local property values rise, they reach a point where it makes more financial sense for us to sell. (Just completing one of those this month in Seattle. Fortunately our tenant could afford to buy at our asking price, so she doesn't have to move.) As tenants, you will not have control over remaining in a place as long as you want--that will be up to the landlord.

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greg24
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Re: Rent in Retirement

Post by greg24 » Mon Mar 19, 2018 3:41 pm

Cipro wrote:
Sun Mar 18, 2018 9:47 am
Add on top of that, around $1800/month in utilities/maintenance/repairs (electricity/heating/lawncare/snow/painting etc...).
$1800 a month in utilities/maintenance/repairs? Seems really high.

WhiteMaxima
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Re: Rent in Retirement

Post by WhiteMaxima » Mon Mar 19, 2018 3:44 pm

depend on your life style. Sometimes, rent is better than own (buy).

ncbill
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Re: Rent in Retirement

Post by ncbill » Mon Mar 19, 2018 6:59 pm

as other posters said, do both - own a townhome/condo.

paid off my 3 bedroom/3 bath 2-story brick townhome over a decade ago.

we jokingly call our development the old folks home, since most here are elderly who have downsized from a single-family residence.

my monthly costs (rounding up):

$200 - HOA fee (includes water/sewer/trash/recycling) & covers all exterior maintenance including painting.

$200 - property tax

$100 - electricity/natural gas

$200 - cable/internet/phone

$100 - special assessment (starting this summer) for 60 months to cover roof replacement

Cipro
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Re: Rent in Retirement

Post by Cipro » Mon Mar 19, 2018 8:15 pm

I live in greater Boston (high COL). I figure $1800/month in maintenance and utilities as: $300/month for lawn/snow removal, $250/month electricity ((yes), $250/month heat, 12500/year general upkeep (painting/landscaping/plumbing). Not interested in condo/townhouse though think it likely that will sell and buy smaller house. Lived in this house about 15 years - have about 300k equity. Not enough to buy house outright in this area. Would need another mortgage (I hope smaller than 300k I currently owe).

harrychan
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Re: Rent in Retirement

Post by harrychan » Mon Mar 19, 2018 8:38 pm

westrichj312 wrote:
Mon Mar 19, 2018 7:54 am
rent much less costs and stress.
Not the case if you have a paid for home. You can potentially make the argument that rent CAN cost less than property tax and upkeep but that is also subjective. I have close to zero stress at my current SFH residence. Renting on the other hand causes tremendous stress due to yielding control to landlords and potential troublesome neighbors moving next door.
This is not legal or certified financial advice but you know that already.

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Top99%
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Re: Rent in Retirement

Post by Top99% » Tue Mar 20, 2018 7:20 am

I would recommend spending the time to do a fairly detailed analysis on renting Vs owning. There is probably a Google sheet out there with details but some often over-looked costs of owning include:
1) Loss of income on money tied up in the house
2) Repairs / replacement of appliances, roof, hot water heater, HVAC, periodic exterior painting. Landlords will often be able to pay less than retail for these items while you will pay retail unless you DIY.
3) Remodeling expense temptation

Cost wise it might come out different than you think for your area, especially if you think you might move in less than 10 years.
Adapt or perish

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VictoriaF
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Re: Rent in Retirement

Post by VictoriaF » Tue Mar 20, 2018 10:33 am

I have rented all my life, and renting rather than owning was a major factor in my ability to retire early. I was moving to the jobs and with the jobs, and the time I was saving on the commute I was putting into enhancing my career. I was thinking that in retirement I won't have to move for a job and ownership may be more prudent. But after retirement I have changed my mind.

1. Owned home is a large undiversified asset. If something happens to the building or to the area, the quality of life and the price can deteriorate very quickly.
2. Ownership comes with additional expenses. You spend more money on furnishing and decorating an owned home than a rented one. And you have to account for spikes in expenses, e.g., plumbing, heating, broken refrigerator, etc.
3. Ownership limits your ability for long-term travel, or requires paying someone to manage your property in your absence.
4. A frequently mentioned comment that a landlord can evict you at will is a minor to non-existent issue. I rent in apartment complexes rather than from individual owners, and apartment managers do not arbitrarily evict good tenants. When my rent rises, I get an advanced notice and have a choice to stay or move elsewhere. Moving to another apartment is much easier and cheaper than selling owned home.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

WhiteMaxima
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Re: Rent in Retirement

Post by WhiteMaxima » Tue Mar 20, 2018 10:47 am

rent is very common is many other countries. If you rent, in many cases it is cheaper than own, you should invest the additional cash flow wisely. For many people, purchasing a primary house on a leveraged loan in a job hub could be the biggest and best investment.

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mhadden1
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Re: Rent in Retirement

Post by mhadden1 » Tue Mar 20, 2018 10:48 am

Texgal17 wrote:
Mon Mar 19, 2018 10:49 am

So I care for my grandchild while Mom takes care of business.
When I retired, it turned out that I was able to do that while DD-in-law finished nursing school. It was very satisfying. :happy

Apart from that, wow! OP's reported housing costs are an order of magnitude higher than mine! And, mine may be high, for my LCOL area. Might even be MCOL.

I would have to flee to a more affordable area, where both owning and renting are much less expensive. Luckily there are always many pleasant destination candidates.
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

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Sandtrap
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Re: Rent in Retirement

Post by Sandtrap » Tue Mar 20, 2018 10:54 am

Sell then Rent
Sell and Downsize to a home, townhouse, condo, with reduced expenses.
Sell and rent in a lower cost of living area. (HCOL to LCOL)
Sell and Downsize to a smaller home, townhouse, condo, in a lower cost of living area. (HCOL to LCOL)

The advantages of moving from a HCOL to LCOL area are reduced expenses across the board. And, if a State with lower property taxes, income taxes, etc. then all the better.

aloha,
j

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Sandtrap
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Re: Rent in Retirement

Post by Sandtrap » Tue Mar 20, 2018 10:59 am

VictoriaF wrote:
Tue Mar 20, 2018 10:33 am
I have rented all my life, and renting rather than owning was a major factor in my ability to retire early. I was moving to the jobs and with the jobs, and the time I was saving on the commute I was putting into enhancing my career. I was thinking that in retirement I won't have to move for a job and ownership may be more prudent. But after retirement I have changed my mind.

1. Owned home is a large undiversified asset. If something happens to the building or to the area, the quality of life and the price can deteriorate very quickly.
2. Ownership comes with additional expenses. You spend more money on furnishing and decorating an owned home than a rented one. And you have to account for spikes in expenses, e.g., plumbing, heating, broken refrigerator, etc.
3. Ownership limits your ability for long-term travel, or requires paying someone to manage your property in your absence.
4. A frequently mentioned comment that a landlord can evict you at will is a minor to non-existent issue. I rent in apartment complexes rather than from individual owners, and apartment managers do not arbitrarily evict good tenants. When my rent rises, I get an advanced notice and have a choice to stay or move elsewhere. Moving to another apartment is much easier and cheaper than selling owned home.

Victoria
Thanks Victoria.
Outstanding post on reasons to rent!

But, but for those inclined to unauthorized remodeling of a rented residence :shock: , or unable to resist painting the walls neon pink :shock: , or absolutely must have 5 barking pit bull dogs and 4 screeching Amazon Parrots :shock: , then homeownership is a must.

j :D

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bobcat2
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Re: Rent in Retirement

Post by bobcat2 » Tue Mar 20, 2018 11:06 am

Sandtrap wrote:
Tue Mar 20, 2018 10:54 am
Sell then Rent
Sell and Downsize to a home, townhouse, condo, with reduced expenses.
Sell and rent in a lower cost of living area. (HCOL to LCOL)
Sell and Downsize to a smaller home, townhouse, condo, in a lower cost of living area. (HCOL to LCOL)
:sharebeer

In addition most people are much better off with a reverse mortgage line of credit in retirement. I realize a lot of people @ Bogleheads are aghast at the thought of a reverse mortgage, but that doesn't keep it from being true that a reverse mortgage is a wonderful financial asset for retirees. A renter has no access to a reverse mortgage. :(

BobK
In finance risk is defined as uncertainty that is consequential (nontrivial). | The two main methods of dealing with financial risk are the matching of assets to goals & diversifying.

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Sandtrap
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Re: Rent in Retirement

Post by Sandtrap » Tue Mar 20, 2018 11:21 am

You can also look into the viability of an SPIA or SPIA ladder with a percentage of the inherited funds. That would lock in an alternative income stream.
mahalo,
j

2015
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Re: Rent in Retirement

Post by 2015 » Tue Mar 20, 2018 11:31 am

tennisplyr wrote:
Mon Mar 19, 2018 6:44 am
Retired and sold my house last year in a HCOL and downsized to a LCOL. Total expenses are roughly 1/2 of what they were while pocketing cash from the sale. Still enjoy the psychological aspects of ownership over renting. Owned my home almost all of my adult life.
This will be me in less than a year. A recent study shows I currently live in a city that is ranked number one in the entire world. For the 6th year in a row. For traffic congestion.

http://www.latimes.com/local/lanow/la-m ... story.html

I can't wait to move to my new LCOL area home!

craimund
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Re: Rent in Retirement

Post by craimund » Tue Mar 20, 2018 11:37 am

Cipro wrote:
Mon Mar 19, 2018 8:15 pm
I live in greater Boston (high COL). I figure $1800/month in maintenance and utilities as: $300/month for lawn/snow removal, $250/month electricity ((yes), $250/month heat, 12500/year general upkeep (painting/landscaping/plumbing). Not interested in condo/townhouse though think it likely that will sell and buy smaller house. Lived in this house about 15 years - have about 300k equity. Not enough to buy house outright in this area. Would need another mortgage (I hope smaller than 300k I currently owe).
$250/month electricity + $250/month heat? Are you averaging $500.00/month for electricity and heat combined year round? I can't imagine you would be paying much for heat 6 months of the year. $250.00 seems high for electricity except maybe 2-3 months in the Summer for A/C. We pay less than $300.00/month avg. for electricity (over 4000 sq. ft house all electric - heat pumps and electric/hybrid heat pump water heaters so no separate heating bill) in Northern VA. Granted, your heating bills would be much higher but we require more A/C down here. Is it a large, old and poorly insulated house? If so, maybe a smaller and more energy efficient house would be in order.
"When you ain't got nothing, you got nothing to lose"-Bob Dylan 1965. "When you think that you've lost everything, you find out you can always lose a little more"-Dylan 1997

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