thoughts on rental budget - emotional more than numbers

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Timon0201
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thoughts on rental budget - emotional more than numbers

Post by Timon0201 » Wed Jun 13, 2018 5:09 pm

i live in a UHCOL area. currently own a 2 bedroom condo with about $600K of equity and very cheap mortgage for the area (mortgage is almost what people rent a room at in our area). My family makes about $17K after taxes and maxing out 401k a month, not including about $70K in bonuses throughout the year.

we have a 1.5 year old who has one room, and then my husband and I live like college students with our office desks in our bedroom (constantly tripping over our furniture in here, but we both work from home a lot, so desks are necessary). We are now expecting #2 and need more space. we'd be okay renting out a 3 bedroom condo, but those just aren't available in our area at the moment. We've been trying to buy but keep getting outbid and with our market the way it is, now can't afford what we wanted just a few months ago. haha

We can rent what i would call my dream home for $5K a month. After budgeting, it would still leave us to save about $5K month before the added childcare for the second baby, but not including the additional savings from bonuses.

would you live like a cramped sardine with 2 kids and an office in a 2 bedroom condo to keep saving money, or rent the bigger space and know that we can afford it, but just won't be such generous savers for the the next year or two. the frugal in me, says to make the condo work, but the YOLO in me says that we've been trying to move out of this condo for years and maybe we enjoy life a little and give our little girl a yard to play in!

slap me with the hard truth!

chevca
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Re: thoughts on rental budget - emotional more than numbers

Post by chevca » Wed Jun 13, 2018 5:13 pm

I'd be out of the condo in a minute! Sounds way to cramped to me. But, I'm a house and yard person for me and the family, so...

Would you sell the condo if you were to rent the house?

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Pajamas
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Re: thoughts on rental budget - emotional more than numbers

Post by Pajamas » Wed Jun 13, 2018 5:23 pm

I would buy the condo next door and combine them or else buy a smaller condo in the building to use as an office and guest apartment. That's very common here. There's a very high demand for studios when most of the apartments in a building are one or two bedrooms. Makes a nice master bedroom suite or office. Then when your kids are older teenagers you can move them into it for your own sanity.

Oh, and it is a situation where 1+1 = 2 1/2 when you sell. If I were to sell my apartment I would approach the neighbors on either side to see if they wanted to sell their apartment at the same time and market them as a possible combo for the extra value.

Timon0201
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Re: thoughts on rental budget - emotional more than numbers

Post by Timon0201 » Wed Jun 13, 2018 6:28 pm

we would rent out our condo. we'd net a profit after taxes of like $150 a month, so basically a wash.

we've thought about buying another condo, but with what our condo is worth and buying a new one, it'd be the same as selling our condo and buying a house. nice thinking outside of the box though!

Olemiss540
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Re: thoughts on rental budget - emotional more than numbers

Post by Olemiss540 » Wed Jun 13, 2018 6:44 pm

Why? Strong desire to become a landlord?
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

momvesting
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Re: thoughts on rental budget - emotional more than numbers

Post by momvesting » Wed Jun 13, 2018 7:10 pm

Because you are in an UHCOL area, I would first talk to an architect about what could possibly be done with your current space to make it more usable and practical for your situation. It's possible that a remodel of the condo could get you the space you need if there are space-saving methods and organization that is customized for you. If that absolutely will not work, then I would look at other options.

chevca
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Re: thoughts on rental budget - emotional more than numbers

Post by chevca » Wed Jun 13, 2018 7:18 pm

Timon0201 wrote:
Wed Jun 13, 2018 6:28 pm
we would rent out our condo. we'd net a profit after taxes of like $150 a month, so basically a wash.

we've thought about buying another condo, but with what our condo is worth and buying a new one, it'd be the same as selling our condo and buying a house. nice thinking outside of the box though!
Why not do that then?

If you're mortgage is about what people rent a room out for around there and you would only make $150/month off your 2 BR condo, that doesn't seem to line up. High HOA fees? By selling now you would get capital gains exclusion on $500k of the $600k you have in equity. That's a pretty good deal to pass up for $150/month, IMO.

Sell the condo and buy a house rather then rent one.

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leeks
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Re: thoughts on rental budget - emotional more than numbers

Post by leeks » Wed Jun 13, 2018 11:29 pm

You can afford to rent the place. I would consider it if it also meets the "dream home" criteria for your spouse. We have two little children and we moved a few months ago to a more expensive rental and are so glad we did despite the higher rent (+500/month) and very high cost of moving (around $10K in up-front costs). We were ready to pay more after the second was born but it took us a year and a half to find the right place within our small neighborhood. It's more than I thought I would ever be willing to pay in rent, but we can afford it and still meet our savings goals. Our new place is only slightly larger (still two bedrooms and they are actually smaller than before) but the layout is much better with a more functional kitchen (with this fantastic new thing called a dishwasher), more usable outdoor play space for the kids, a vegetable garden which I really enjoy, and a home workout area in a finished basement which my husband really enjoys (and doubles as guest space so it is easier for family to visit us). Immediately we were more comfortable. Home life with the kids is less stressful. It has been absolutely worth it.

I'm assuming the dream home you could rent for $5K is not something you can afford to buy right now. In my neighborhood purchasing a home at current prices would lead to a monthly cost far higher than what the place would rent for. It doesn't make sense to me but that's where the market is and it is part of why we are renting for now.

Timon0201
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Re: thoughts on rental budget - emotional more than numbers

Post by Timon0201 » Thu Jun 14, 2018 11:46 am

renting our condo for 2 reasons:

1. like knowing that incase of job loss or something, we always have a cheap place to come back to that's ours (if we are renting elsewhere)
2. our condo has gone up in value $50-100K every year the last few years. not to say this is going to continue, but as an investment, the $150 a month is like my dividend, but hoping the principal appreciates over time.

also, yes mortgage is cheap, but when you add property taxes, insurance, hoa, taxes on the net income, etc, profit dwindles to nill!

i'm shocked, i thought the board would be telling me to make it work in the condo! thanks for all your input!

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