10 minutes worth $300K?

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Topic Author
Sourc3
Posts: 110
Joined: Wed Aug 05, 2015 4:45 pm

10 minutes worth $300K?

Post by Sourc3 » Fri Apr 26, 2019 6:04 pm

DW and I are considering moving in order to shorten my commute from 1h30 to 55-60mins (walk + commuter rail + subway). We narrowed it down to 2 towns.

Town #1 - Median housing price is X, commute is 60mins door to door.
Town #2 - Median housing price is X + $300K, commute is 50mins door to door.

Taxes, house size, lots are very comparable in both neighborhoods. They both involve walk + commuter rail + subway, the only difference is shorter commuter rail ride.

If a job change occurs, most jobs are clustered in the same area as my current job and the commute may go down +/- 5mins in either option.

Would you pick town #2 over #1 for the convenience of 10mins each way for 20+ years?

We can afford #2 but obviously that money could be invested or used for other purposes (such as child's college fund). Having commuted the 1h30min for 15+ years, option #2 seems worth it. However, I want to make this decision based on logic rather than just emotions. What would you do?

DoWahDaddy
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Re: 10 minutes worth $300K?

Post by DoWahDaddy » Fri Apr 26, 2019 6:10 pm

My commute has been 60-80 minutes for longer than I can remember. 10 minutes is irrelevant. Your commute just becomes part of your day, to use as you see fit depending on your mode. Choose for another reason or combination of reasons.

P.S. - Emotion is relevant to the decision regarding a home, don't kid yourself.
Me: 75/25 stocks/bonds | Son: 45/45/10 matchbox/hotwheels/thomas & friends

aqan
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Re: 10 minutes worth $300K?

Post by aqan » Fri Apr 26, 2019 6:16 pm

there has to be a real difference between two towns to justify the $300K difference. Better schools?

delamer
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Re: 10 minutes worth $300K?

Post by delamer » Fri Apr 26, 2019 6:18 pm

Does the shorter commute cost less?

pdavi21
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Re: 10 minutes worth $300K?

Post by pdavi21 » Fri Apr 26, 2019 6:19 pm

Nope.
"We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity." -Stephen Hawking

DonIce
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Re: 10 minutes worth $300K?

Post by DonIce » Fri Apr 26, 2019 6:32 pm

Sourc3 wrote:
Fri Apr 26, 2019 6:04 pm
Would you pick town #2 over #1 for the convenience of 10mins each way for 20+ years?

We can afford #2 but obviously that money could be invested or used for other purposes (such as child's college fund). Having commuted the 1h30min for 15+ years, option #2 seems worth it. However, I want to make this decision based on logic rather than just emotions. What would you do?
What do you value your time at?

In a year, you will do your commute ~500 times (twice each work day, times about 250 work days). At 10 minutes each time, that's a total of 5000 minutes, or 83 hours per year, or 7 hours per month. An extra $300k of mortgage will likely cost you ~$1400/month.

So you're basically spending $1400/month to save 7 hours per month. That's an hourly rate of ~$200/hour. If you value your time at less than this, it's not worth spending the $300k to move 10 minutes closer. If you value your time at more than this, then it is worth it.

Personally, I gladly spent an extra $200k to take my commute from 45 minutes to 15 minutes. The implied rate there was $42 per hour, and I value my time more highly than that.

(You can be more detailed on these calculations by also considering the rate of return on your real estate purchase, or separating out the principal component vs the interest/tax/insurance if you want. But this gives you a framework for thinking about it)
Last edited by DonIce on Fri Apr 26, 2019 6:35 pm, edited 2 times in total.

Thesaints
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Re: 10 minutes worth $300K?

Post by Thesaints » Fri Apr 26, 2019 6:33 pm

The 300k are not "lost", since they go into your new RE holdings.
What you lose is the difference between the future returns from investing 300k on the financial markets vs. having them invested in RE, namely in your new home.

michaeljc70
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Re: 10 minutes worth $300K?

Post by michaeljc70 » Fri Apr 26, 2019 6:37 pm

Sourc3 wrote:
Fri Apr 26, 2019 6:04 pm
DW and I are considering moving in order to shorten my commute from 1h30 to 55-60mins (walk + commuter rail + subway). We narrowed it down to 2 towns.

Town #1 - Median housing price is X, commute is 60mins door to door.
Town #2 - Median housing price is X + $300K, commute is 50mins door to door.

Taxes, house size, lots are very comparable in both neighborhoods. They both involve walk + commuter rail + subway, the only difference is shorter commuter rail ride.

If a job change occurs, most jobs are clustered in the same area as my current job and the commute may go down +/- 5mins in either option.

Would you pick town #2 over #1 for the convenience of 10mins each way for 20+ years?

We can afford #2 but obviously that money could be invested or used for other purposes (such as child's college fund). Having commuted the 1h30min for 15+ years, option #2 seems worth it. However, I want to make this decision based on logic rather than just emotions. What would you do?
You are distilling it down to 300k for a 10 minute difference in commute.

Do the houses have the same:

-Age?
-Finishes?
-Crime in the area?
-Schools?
-Prestige?
-Layout?
-Architecture?
-Proximity to common destinations (stores, downtown, entertainment venues)?

I mean, I can buy two houses in my city with the same lot size and house size and one can be $300k and one can be $2 million.

Topic Author
Sourc3
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Re: 10 minutes worth $300K?

Post by Sourc3 » Fri Apr 26, 2019 6:42 pm

aqan wrote:
Fri Apr 26, 2019 6:16 pm
there has to be a real difference between two towns to justify the $300K difference. Better schools?
There is a marginal difference, based on the same rating system they are 9-9-9 in one and 8-9-8 in the other. I am certain that the difference in quality won't be as dramatic as we both are very involved in educating kids.

Topic Author
Sourc3
Posts: 110
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Re: 10 minutes worth $300K?

Post by Sourc3 » Fri Apr 26, 2019 6:43 pm

DonIce wrote:
Fri Apr 26, 2019 6:32 pm
Sourc3 wrote:
Fri Apr 26, 2019 6:04 pm
Would you pick town #2 over #1 for the convenience of 10mins each way for 20+ years?

We can afford #2 but obviously that money could be invested or used for other purposes (such as child's college fund). Having commuted the 1h30min for 15+ years, option #2 seems worth it. However, I want to make this decision based on logic rather than just emotions. What would you do?
What do you value your time at?

In a year, you will do your commute ~500 times (twice each work day, times about 250 work days). At 10 minutes each time, that's a total of 5000 minutes, or 83 hours per year, or 7 hours per month. An extra $300k of mortgage will likely cost you ~$1400/month.

So you're basically spending $1400/month to save 7 hours per month. That's an hourly rate of ~$200/hour. If you value your time at less than this, it's not worth spending the $300k to move 10 minutes closer. If you value your time at more than this, then it is worth it.

Personally, I gladly spent an extra $200k to take my commute from 45 minutes to 15 minutes. The implied rate there was $42 per hour, and I value my time more highly than that.

(You can be more detailed on these calculations by also considering the rate of return on your real estate purchase, or separating out the principal component vs the interest/tax/insurance if you want. But this gives you a framework for thinking about it)

This is an excellent way of looking at it that I have not done so. With my current compensation it's definitely worth the difference. However, there is also no guarantee that I will be making the same amount in the next 20+ years.

Topic Author
Sourc3
Posts: 110
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Re: 10 minutes worth $300K?

Post by Sourc3 » Fri Apr 26, 2019 6:45 pm

michaeljc70 wrote:
Fri Apr 26, 2019 6:37 pm
Sourc3 wrote:
Fri Apr 26, 2019 6:04 pm
DW and I are considering moving in order to shorten my commute from 1h30 to 55-60mins (walk + commuter rail + subway). We narrowed it down to 2 towns.

Town #1 - Median housing price is X, commute is 60mins door to door.
Town #2 - Median housing price is X + $300K, commute is 50mins door to door.

Taxes, house size, lots are very comparable in both neighborhoods. They both involve walk + commuter rail + subway, the only difference is shorter commuter rail ride.

If a job change occurs, most jobs are clustered in the same area as my current job and the commute may go down +/- 5mins in either option.

Would you pick town #2 over #1 for the convenience of 10mins each way for 20+ years?

We can afford #2 but obviously that money could be invested or used for other purposes (such as child's college fund). Having commuted the 1h30min for 15+ years, option #2 seems worth it. However, I want to make this decision based on logic rather than just emotions. What would you do?
You are distilling it down to 300k for a 10 minute difference in commute.

Do the houses have the same:

-Age?
-Finishes?
-Crime in the area?
-Schools?
-Prestige?
-Layout?
-Architecture?
-Proximity to common destinations (stores, downtown, entertainment venues)?

I mean, I can buy two houses in my city with the same lot size and house size and one can be $300k and one can be $2 million.
Interestingly, the age of houses in #1 (more expensive option) is older. Personally I am not into the older houses.

Point
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Re: 10 minutes worth $300K?

Post by Point » Fri Apr 26, 2019 6:45 pm

I spent far more time driving each day. 4-7 hours a day.Enjoyed my audio books. Still do.

quantAndHold
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Re: 10 minutes worth $300K?

Post by quantAndHold » Fri Apr 26, 2019 6:46 pm

I wouldn’t choose either house. Both commutes are too long.

TheExMexican
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Re: 10 minutes worth $300K?

Post by TheExMexican » Fri Apr 26, 2019 6:46 pm

It seems the few posts I have have all the same caveat: I'm the cheapest SOB I know. However, I hate commuting (there are plenty of things I dislike, very few I hate! ), and time is extremely valuable to me (because it seems I never have enough!). As you pointed out, I would look at it in the most logical way:

1. Take those $300k and convert them into an extra hour to do whatever you want every week (almost two hours if that commute time is one-way) for 20 years. That works out to about 800 hours (or 1,600 if you're saving 20 minutes a day) over 20 years.

2. Take those $300k and instead of getting a bit of time every day for a long time, you can buy a big chunk of time at the end (i.e., use them to retire 6-8 years early, etc.) Let's say you invest those $300k now and it works out you can only quit 3 years "early". Three years of zero commute (and no work!) is something like 6000 hours you get to do whatever you want ;)

Of course, if that commute is grueling, maybe it's worth to pay up front and suffer less for 20 years....

michaeljc70
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Re: 10 minutes worth $300K?

Post by michaeljc70 » Fri Apr 26, 2019 6:57 pm

How much are the houses with a 20-30 minute commute?

As pointed out by someone else, the extra money spent is not going down the drain. Since the property taxes are the same, that is probably the next biggest fixed expense. I would also consider the prospects each house has in terms of future appreciation.

If the houses are truly equivalent to you (except 10 more minute commute), I think you've answered your own question.

You also didn't give an amount. Paying $300k more on a $3M property is not the same as $300k more on a $500k property.

DonIce
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Re: 10 minutes worth $300K?

Post by DonIce » Fri Apr 26, 2019 7:05 pm

Sourc3 wrote:
Fri Apr 26, 2019 6:43 pm
This is an excellent way of looking at it that I have not done so. With my current compensation it's definitely worth the difference. However, there is also no guarantee that I will be making the same amount in the next 20+ years.
Well, it's about what YOU value your time at, not necessarily what your employer pays you (unless you have the unrestricted option of working extra hours for extra pay, which you probably don't, most people making that much are salaried).

Some people value their free time (which your commute eats into) much lower than their hourly pay rate. For example, some people spend their time clipping coupons, driving for uber, driving to a further gas station for a 10c/gallon cheaper fillup, or whatever, to make/save a few extra bucks at a rate much lower than what their employer pays them. Others value their free time much higher than their work hours. A busy upper middle class person might value the 1 hour a day they get to spend with a young child much more highly than the pay they receive for an hour of work.

Your compensation may change over the next 20 years, but the value you assign to your own time may change much less than your compensation does. Also there's no real need to consider 20 years out, you are more likely to have moved within 10 years let alone 20.

FireSekr
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Re: 10 minutes worth $300K?

Post by FireSekr » Fri Apr 26, 2019 7:09 pm

quantAndHold wrote:
Fri Apr 26, 2019 6:46 pm
I wouldn’t choose either house. Both commutes are too long.
+1

30 minutes each way is the top of my limit. I’d make an exception if I only went to the office 2-3 days a week

Do you have the option of working home part time?

Starfish
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Re: 10 minutes worth $300K?

Post by Starfish » Fri Apr 26, 2019 7:14 pm

DonIce wrote:
Fri Apr 26, 2019 6:32 pm
Sourc3 wrote:
Fri Apr 26, 2019 6:04 pm
Would you pick town #2 over #1 for the convenience of 10mins each way for 20+ years?

We can afford #2 but obviously that money could be invested or used for other purposes (such as child's college fund). Having commuted the 1h30min for 15+ years, option #2 seems worth it. However, I want to make this decision based on logic rather than just emotions. What would you do?
What do you value your time at?

In a year, you will do your commute ~500 times (twice each work day, times about 250 work days). At 10 minutes each time, that's a total of 5000 minutes, or 83 hours per year, or 7 hours per month. An extra $300k of mortgage will likely cost you ~$1400/month.

So you're basically spending $1400/month to save 7 hours per month. That's an hourly rate of ~$200/hour. If you value your time at less than this, it's not worth spending the $300k to move 10 minutes closer. If you value your time at more than this, then it is worth it.
It is not really like that, because most people who make 200$/h (net, in disposable income) cannot "sell" 1 additional hour for 200$.
You can argue that one can put that time towards bonuses or better income in the future, but it is still very hard to quantify.

DonIce
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Re: 10 minutes worth $300K?

Post by DonIce » Fri Apr 26, 2019 7:20 pm

Starfish wrote:
Fri Apr 26, 2019 7:14 pm
It is not really like that, because most people who make 200$/h (net, in disposable income) cannot "sell" 1 additional hour for 200$.
You can argue that one can put that time towards bonuses or better income in the future, but it is still very hard to quantify.
As I said, it's about what YOU value your time at, not necessarily what your employer pays you for your time. The two numbers could be similar for some people, especially hourly workers that are free to work more or less time as they desire, but could be very different for other people. I think its worth having a ballpark estimate in your mind of what your (free) time is worth.

This simplifies a lot of decisions in life, like:
Is it worth filling out a survey for $5 that takes me an hour?
Is it worth driving an hour out of town to pick up a free couch from someone on craiglist rather than ordering it online and having it delivered for $500?
Should I clean up my house myself, or hire someone to do it for me?
Should I spend an hour cooking, or pick up some ready food from the Whole Foods?
Should I spend 30 minutes on the phone to fix a $20 billing error on my cell phone bill?

Rather than thinking about all of these things in isolation and how much you feel like doing any of those tasks, you can quickly compare them to what your time is worth (to you) and essentially "automate" the decision.

EnjoyIt
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Re: 10 minutes worth $300K?

Post by EnjoyIt » Fri Apr 26, 2019 7:25 pm

quantAndHold wrote:
Fri Apr 26, 2019 6:46 pm
I wouldn’t choose either house. Both commutes are too long.
+1
Are there better options 30 minutes away?

I had a 1 hour commute each way many years ago. Never again unless I really really really must.

My time is very valuable to me these days.

aristotelian
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Re: 10 minutes worth $300K?

Post by aristotelian » Fri Apr 26, 2019 7:34 pm

Sourc3 wrote:
Fri Apr 26, 2019 6:43 pm
This is an excellent way of looking at it that I have not done so. With my current compensation it's definitely worth the difference. However, there is also no guarantee that I will be making the same amount in the next 20+ years.
That is a fallacious way of putting it. Your free time is worth a lot less than your work time. The question is whether it is worth it to you to save the time or the money. You might make $1M a year and still find it worthwhile to mow your lawn. I personally would want a much bigger return on $300K than shaving a few minutes.

finite_difference
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Re: 10 minutes worth $300K?

Post by finite_difference » Fri Apr 26, 2019 7:36 pm

quantAndHold wrote:
Fri Apr 26, 2019 6:46 pm
I wouldn’t choose either house. Both commutes are too long.
+1 if the commutes are both driving.

Otherwise, if it’s a train or subway for example, I would pick the neighborhood you like best, although bonus points to the one with a shorter commute.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

Starfish
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Re: 10 minutes worth $300K?

Post by Starfish » Fri Apr 26, 2019 7:36 pm

DonIce wrote:
Fri Apr 26, 2019 7:20 pm
Starfish wrote:
Fri Apr 26, 2019 7:14 pm
It is not really like that, because most people who make 200$/h (net, in disposable income) cannot "sell" 1 additional hour for 200$.
You can argue that one can put that time towards bonuses or better income in the future, but it is still very hard to quantify.
As I said, it's about what YOU value your time at, not necessarily what your employer pays you for your time. The two numbers could be similar for some people, especially hourly workers that are free to work more or less time as they desire, but could be very different for other people. I think its worth having a ballpark estimate in your mind of what your (free) time is worth.

This simplifies a lot of decisions in life, like:
Is it worth filling out a survey for $5 that takes me an hour?
Is it worth driving an hour out of town to pick up a free couch from someone on craiglist rather than ordering it online and having it delivered for $500?
Should I clean up my house myself, or hire someone to do it for me?
Should I spend an hour cooking, or pick up some ready food from the Whole Foods?
Should I spend 30 minutes on the phone to fix a $20 billing error on my cell phone bill?

Rather than thinking about all of these things in isolation and how much you feel like doing any of those tasks, you can quickly compare them to what your time is worth (to you) and essentially "automate" the decision.
If 300k was an expense, the question could be distilled to: would I sell 1h of my time (not really 1h of time) for 200$ net, disposable/additional income.
200$ of additional tax free money it's a large quantity of money even for well paid people. 1h of time is not completely lost because is actually commute which is not like hard work. Listening to music, ebooks, podcasts makes it probably better than working.

But of course 300k is not an expense. It's RE investment, probably in a nicer neighborhood. Presumably the money can be easily recovered, especially if a low interest mortgage is used. So actually it does not cost much.
All things being equal I would probably go with the more expensive house.

DonIce
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Re: 10 minutes worth $300K?

Post by DonIce » Fri Apr 26, 2019 7:39 pm

Starfish wrote:
Fri Apr 26, 2019 7:36 pm
If 300k was an expense, the question could be distilled to: would I sell 1h of my time (not really 1h of time) for 200$ net, disposable/additional income.
200$ of additional tax free money it's a large quantity of money even for well paid people.
Actually that's backwards. It's not about whether you would sell 1h of time for $200, but about whether you would BUY 1h of time for $200. Someone that is paid $40/hour would gladly sell their time for $200/hour, but would probably not buy time for $200/hour.

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Watty
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Re: 10 minutes worth $300K?

Post by Watty » Fri Apr 26, 2019 7:47 pm

You could get the less expensive house and then "buy" that time back by paying someone to do work that you normally do.

For example if you normally mow your own grass then you could hire someone to cut your grass for you to free up an hour or two a week to offset the extra time you are commuting.

Starfish
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Re: 10 minutes worth $300K?

Post by Starfish » Fri Apr 26, 2019 7:55 pm

DonIce wrote:
Fri Apr 26, 2019 7:39 pm
Starfish wrote:
Fri Apr 26, 2019 7:36 pm
If 300k was an expense, the question could be distilled to: would I sell 1h of my time (not really 1h of time) for 200$ net, disposable/additional income.
200$ of additional tax free money it's a large quantity of money even for well paid people.
Actually that's backwards. It's not about whether you would sell 1h of time for $200, but about whether you would BUY 1h of time for $200. Someone that is paid $40/hour would gladly sell their time for $200/hour, but would probably not buy time for $200/hour.
The difference between the 2 situations is 200$ (in net savings) and 1h of commute. 1h of commute is exchanged - sold - for 200$ of net payment. It's like regular work were I sell my time for money.

Starfish
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Re: 10 minutes worth $300K?

Post by Starfish » Fri Apr 26, 2019 7:57 pm

Watty wrote:
Fri Apr 26, 2019 7:47 pm
You could get the less expensive house and then "buy" that time back by paying someone to do work that you normally do.

For example if you normally mow your own grass then you could hire someone to cut your grass for you to free up an hour or two a week to offset the extra time you are commuting.

This one is the worst option.
Paying for work is money spent. Paying for RE is money invested. In the first case you nothing back. He ends up spending the same amount of money per month, the same time, and at the end he has the cheap house.

bhsince87
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Re: 10 minutes worth $300K?

Post by bhsince87 » Fri Apr 26, 2019 7:59 pm

Do you do anything productive or entertaining while you're on the train?

If so, it's not like it's totally wasted time.
"If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace." Samuel Adams

OnTrack2020
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Re: 10 minutes worth $300K?

Post by OnTrack2020 » Fri Apr 26, 2019 8:00 pm

Sourc3 wrote:
Fri Apr 26, 2019 6:04 pm
DW and I are considering moving in order to shorten my commute from 1h30 to 55-60mins (walk + commuter rail + subway). We narrowed it down to 2 towns.

Town #1 - Median housing price is X, commute is 60mins door to door.
Town #2 - Median housing price is X + $300K, commute is 50mins door to door.

Taxes, house size, lots are very comparable in both neighborhoods. They both involve walk + commuter rail + subway, the only difference is shorter commuter rail ride.

If a job change occurs, most jobs are clustered in the same area as my current job and the commute may go down +/- 5mins in either option.

Would you pick town #2 over #1 for the convenience of 10mins each way for 20+ years?

We can afford #2 but obviously that money could be invested or used for other purposes (such as child's college fund). Having commuted the 1h30min for 15+ years, option #2 seems worth it. However, I want to make this decision based on logic rather than just emotions. What would you do?
If you are in your 20s, no move.
If you are in your 30s, Town #1
If you are in your 40s, Town #2
If you are in your 50s, find something within 5 minutes of the office

I'm thinking you are probably in yours 40s or close to it. Is there a happy medium somewhere between Town #2 and close to the office--say 20 minutes or so?

DonIce
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Re: 10 minutes worth $300K?

Post by DonIce » Fri Apr 26, 2019 8:00 pm

Starfish wrote:
Fri Apr 26, 2019 7:55 pm
The difference between the 2 situations is 200$ (in net savings) and 1h of commute. 1h of commute is exchanged - sold - for 200$ of net payment. It's like regular work were I sell my time for money.
Pause and think about this some more. If you could pay $100k to save one minute, that's $6M/hour. Are you buying the time at that rate, or selling the time at that rate? Would you take this deal or not?

bhsince87
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Re: 10 minutes worth $300K?

Post by bhsince87 » Fri Apr 26, 2019 8:02 pm

Starfish wrote:
Fri Apr 26, 2019 7:57 pm
Watty wrote:
Fri Apr 26, 2019 7:47 pm
You could get the less expensive house and then "buy" that time back by paying someone to do work that you normally do.

For example if you normally mow your own grass then you could hire someone to cut your grass for you to free up an hour or two a week to offset the extra time you are commuting.

This one is the worst option.
Paying for work is money spent. Paying for RE is money invested. In the first case you nothing back. He ends up spending the same amount of money per month, the same time, and at the end he has the cheap house.

You're assuming the real estate will be a guaranteed positive return. If it tanks for some reason, he could actually be on the hook for a larger loss with the more expensive house.
"If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace." Samuel Adams

Starfish
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Re: 10 minutes worth $300K?

Post by Starfish » Fri Apr 26, 2019 8:10 pm

bhsince87 wrote:
Fri Apr 26, 2019 8:02 pm
Starfish wrote:
Fri Apr 26, 2019 7:57 pm
Watty wrote:
Fri Apr 26, 2019 7:47 pm
You could get the less expensive house and then "buy" that time back by paying someone to do work that you normally do.

For example if you normally mow your own grass then you could hire someone to cut your grass for you to free up an hour or two a week to offset the extra time you are commuting.

This one is the worst option.
Paying for work is money spent. Paying for RE is money invested. In the first case you nothing back. He ends up spending the same amount of money per month, the same time, and at the end he has the cheap house.

You're assuming the real estate will be a guaranteed positive return. If it tanks for some reason, he could actually be on the hook for a larger loss with the more expensive house.
I am just assuming that RE is, on average, a better investment than just spending money. Historically it tracked inflation. I agree tat RE returns are not guaranteed but spending the money is guaranteed to be a loss.
Of course I assume both houses are well within the means of the OP. If not the question changes significantly.

Starfish
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Re: 10 minutes worth $300K?

Post by Starfish » Fri Apr 26, 2019 8:14 pm

DonIce wrote:
Fri Apr 26, 2019 8:00 pm
Starfish wrote:
Fri Apr 26, 2019 7:55 pm
The difference between the 2 situations is 200$ (in net savings) and 1h of commute. 1h of commute is exchanged - sold - for 200$ of net payment. It's like regular work were I sell my time for money.
Pause and think about this some more. If you could pay $100k to save one minute, that's $6M/hour. Are you buying the time at that rate, or selling the time at that rate? Would you take this deal or not?

If I pay, I am buying. If I get or save money, I am selling. In this case the OP gets/saves money by selling (commute) time. You cannot buy time, the day is still 24h. You can just sell time.
Anyway I think the point is clear, regardless of the semantics.

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mrspock
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Re: 10 minutes worth $300K?

Post by mrspock » Fri Apr 26, 2019 8:18 pm

Thesaints wrote:
Fri Apr 26, 2019 6:33 pm
The 300k are not "lost", since they go into your new RE holdings.
What you lose is the difference between the future returns from investing 300k on the financial markets vs. having them invested in RE, namely in your new home.
+1. This is $1M over 20 years or $1.7M over 30 years @ 6% real rate (backing out inflation of ~2%), RE will return ~0% (ok MAYBE 1%) real historically. The decision for me is a no brainer....I'll drive the extra 10min, and gain back that and more when I retire about 10 years sooner than my buddies who live 10 minutes closer. For those who like math.... that's about 83 days (@ 16hrs awake) of my time driving for an extra 10+ years of retirement.

Now of course, those 10 years from the age of 50-60 are probably not the same as 60-70, so maybe put a 1.5x-2x multiplier on that, not to mention if we start pricing in the probability of early death (maybe another 1.2x?). I'd drive the extra 10min, this is classic delayed gratification choice.

staythecourse
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Re: 10 minutes worth $300K?

Post by staythecourse » Fri Apr 26, 2019 8:28 pm

The only thing I can GUARANTEE is that you won't be at your current job in 30 years. You will either choose to leave or be sent packing. There are not many folks who will be saying, "I worked in the same job for 30 years" going forward outside of those who work for government or pension providing employers (teachers for example).

Taking that into account and as mentioned above do NOT make this decision based on a 10 minute difference in commute. Do you have kids or extended family where those implications would make a difference? Green space differences for kids? Type of neighbors? Affluency/ stuck up attitudes? These all would make more of a difference.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

2commaBH
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Re: 10 minutes worth $300K?

Post by 2commaBH » Fri Apr 26, 2019 8:29 pm

All things equal and if I could afford it within my budgeting guidelines, I would probably go with the more expensive house. In doing so, I am making the assumption that it is generally closer to city center/jobs than the cheaper house. If true, I think this house would be more valuable in both up and down RE markets. I follow the old adage about RE: location, location, location.

Side note: note that the tax-adjusted difference may be even larger than $300k if the $750k mortgage interest cap comes into play.

Starfish
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Re: 10 minutes worth $300K?

Post by Starfish » Fri Apr 26, 2019 8:37 pm

mrspock wrote:
Fri Apr 26, 2019 8:18 pm
Thesaints wrote:
Fri Apr 26, 2019 6:33 pm
The 300k are not "lost", since they go into your new RE holdings.
What you lose is the difference between the future returns from investing 300k on the financial markets vs. having them invested in RE, namely in your new home.
+1. This is $1M over 20 years or $1.7M over 30 years @ 6% real rate (backing out inflation of ~2%), RE will return ~0% (ok MAYBE 1%) real historically. The decision for me is a no brainer....I'll drive the extra 10min, and gain back that and more when I retire about 10 years sooner than my buddies who live 10 minutes closer. For those who like math.... that's about 83 days (@ 16hrs awake) of my time driving for an extra 10+ years of retirement.

Now of course, those 10 years from the age of 50-60 are probably not the same as 60-70, so maybe put a 1.5x-2x multiplier on that, not to mention if we start pricing in the probability of early death (maybe another 1.2x?). I'd drive the extra 10min, this is classic delayed gratification choice.
But he does not use the cash. He gets a fixed 30y low interest rate mortgage for 80% of the 300k. Maybe the interest rate is not that far from RE return.

rjbraun
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Re: 10 minutes worth $300K?

Post by rjbraun » Fri Apr 26, 2019 8:47 pm

If one town (presumably Town #1?) results in greater likelihood of you getting a seat on the commuter train / subway, and that's something that you value, that could be a consideration in your decision.

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Sourc3
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Re: 10 minutes worth $300K?

Post by Sourc3 » Fri Apr 26, 2019 8:51 pm

2commaBH wrote:
Fri Apr 26, 2019 8:29 pm
All things equal and if I could afford it within my budgeting guidelines, I would probably go with the more expensive house. In doing so, I am making the assumption that it is generally closer to city center/jobs than the cheaper house. If true, I think this house would be more valuable in both up and down RE markets. I follow the old adage about RE: location, location, location.

Side note: note that the tax-adjusted difference may be even larger than $300k if the $750k mortgage interest cap comes into play.
Really interesting point above regarding the valuation in a down market. Thank you.

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Sourc3
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Re: 10 minutes worth $300K?

Post by Sourc3 » Fri Apr 26, 2019 8:55 pm

bhsince87 wrote:
Fri Apr 26, 2019 7:59 pm
Do you do anything productive or entertaining while you're on the train?

If so, it's not like it's totally wasted time.
I literally completed almost all master's degree assignments while on the train 10 years ago. However as trains get more crowded and I get older my tolerance to do work cramped up is going down.

I'd rather be home working out or doing something productive in comfort.

strafe
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Re: 10 minutes worth $300K?

Post by strafe » Fri Apr 26, 2019 8:56 pm

This seems like a false choice. Both options are miserable.

What does a 15min commute look like?

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Sourc3
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Re: 10 minutes worth $300K?

Post by Sourc3 » Fri Apr 26, 2019 9:09 pm

strafe wrote:
Fri Apr 26, 2019 8:56 pm
This seems like a false choice. Both options are miserable.

What does a 15min commute look like?
Not an option due to DW commute to work, and schooling options.

anhonymous
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Re: 10 minutes worth $300K?

Post by anhonymous » Fri Apr 26, 2019 9:12 pm

what is the variability/predictability in those commute times? Even otherwise don't put the money in expensive house.

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Sourc3
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Re: 10 minutes worth $300K?

Post by Sourc3 » Fri Apr 26, 2019 9:19 pm

anhonymous wrote:
Fri Apr 26, 2019 9:12 pm
what is the variability/predictability in those commute times? Even otherwise don't put the money in expensive house.
They are neighboring stations on the same line. So an issue on the tracks would impact both the same.

pasadena
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Re: 10 minutes worth $300K?

Post by pasadena » Fri Apr 26, 2019 9:26 pm

I also wouldn't want to live an hour away from work if I had to commute every day. But regardless of the actual numbers, I wouldn't base my choice on a 10 minutes difference. There are other criteria that are much, much more important.

But then, a #300k difference has exist for a reason somehow. I'd investigate that.

FireSekr
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Re: 10 minutes worth $300K?

Post by FireSekr » Fri Apr 26, 2019 10:08 pm

Starfish wrote:
Fri Apr 26, 2019 8:10 pm
bhsince87 wrote:
Fri Apr 26, 2019 8:02 pm
Starfish wrote:
Fri Apr 26, 2019 7:57 pm
Watty wrote:
Fri Apr 26, 2019 7:47 pm
You could get the less expensive house and then "buy" that time back by paying someone to do work that you normally do.

For example if you normally mow your own grass then you could hire someone to cut your grass for you to free up an hour or two a week to offset the extra time you are commuting.

This one is the worst option.
Paying for work is money spent. Paying for RE is money invested. In the first case you nothing back. He ends up spending the same amount of money per month, the same time, and at the end he has the cheap house.

You're assuming the real estate will be a guaranteed positive return. If it tanks for some reason, he could actually be on the hook for a larger loss with the more expensive house.
I am just assuming that RE is, on average, a better investment than just spending money. Historically it tracked inflation. I agree tat RE returns are not guaranteed but spending the money is guaranteed to be a loss.
Of course I assume both houses are well within the means of the OP. If not the question changes significantly.
But it’s a $300k difference. Over 20 years that’s $15k a year. If OP pays someone $200/month to clean the house that’s only 2400 a year, plus the convenience of not having to do the work, time savings, and there’s no guarantee that the property will hold value.

mega317
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Re: 10 minutes worth $300K?

Post by mega317 » Fri Apr 26, 2019 10:39 pm

10 minutes on a train would be nothing to me, I wouldn't even consider it in the decision. I realize you would rather be home working out but there are a lot of ways to spend those 10 minutes doing something you'd do anyway--mediation, reading, call your mother, email or bogleheads on your phone.

ohai
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Re: 10 minutes worth $300K?

Post by ohai » Fri Apr 26, 2019 11:30 pm

What are the actual prices of these houses? People are always so cryptic here. The decision process would be different for someone considering a $500k vs $800k house or a $3 million vs $3.3 million house.

If $300k is a lot to you, then no, it's probably not worth paying that to save 10 minutes of commute given that you are already commuting for quite a long time. I've already spent 10 minutes reading this website right now, and I could do that on the train too.

If $300k is a large percentage of housing prices in that area, then there must be something else that those people are paying for - better schools, nicer town, closer commute to other places, and so on. You should figure out if those things are important to you.

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Watty
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Re: 10 minutes worth $300K?

Post by Watty » Sat Apr 27, 2019 4:17 am

Starfish wrote:
Fri Apr 26, 2019 7:57 pm
Watty wrote:
Fri Apr 26, 2019 7:47 pm
You could get the less expensive house and then "buy" that time back by paying someone to do work that you normally do.

For example if you normally mow your own grass then you could hire someone to cut your grass for you to free up an hour or two a week to offset the extra time you are commuting.

This one is the worst option.
Paying for work is money spent. Paying for RE is money invested. In the first case you nothing back. He ends up spending the same amount of money per month, the same time, and at the end he has the cheap house.

If the homes would be bought for cash and the less expensive house was purchased then the additional $300k would be invested.

mrmass
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Re: 10 minutes worth $300K?

Post by mrmass » Sat Apr 27, 2019 5:25 am

That 10 minutes today might be 5 or 25 another day and 15 another day. The likelihood of both trains being that precise is unlikely.

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