Bigger house for Tunaclan?

If the 30-years-from-now value of the house is bigger than $90K+taxes, we still win over just staying in the house we are in now, so it's still a pretty decent bet. I suppose taxes could go up to 50% on home sales or something...

tuna55 wrote: Finance guy has some numbers. Essentially, it's $20K cheaper over the next 30 years to rent this house and buy a new one than it is to sell this house and buy a new one. It's $90K more expensive to rent this house and buy a new one than it is to just stay put. In this scenario, though, we will have a property in which we do not live, which we can sell. Presumably, this will be worth more then $90K in 30 years, and thus, over the long haul, this is the financial winner even over doing nothing.

Is he basing those calcs on the assumption that you'll have a rent paying tenant every month for those 30 years? Any built in considerations for costs related to caring for the rental property or an emergency fund for things that might unexpectedly need replacement? Over 30 years of ownership, you'd certainly incur some major costs. A roof, HVAC, appliances, water heater, flooring etc would all need replacement in that time frame and that could chew up any money you might make. Based on what you've posted, it seems like those estimates are absolute best case scenarios, and may not be that likely.

I realize you're kind of tired of the space you have, but is there a chance you could buy the empty place next door for cheap, use that as a rental, and use the rental income to aggressively pay off your current house? You'd be tied to your place a bit longer, but you could have it paid off sooner, and the house next door would no longer be abandoned, which would make your house more appealing to sell when the time comes, and obviously you'd make more off of the sale of your current home if it were paid off.

tuna55 wrote: In reply to volvoclearinghouse: Greek greek greek. It sounds like I need to talk to an accountant.

Don't accountants cost, like, about as much as a paint job on a truck or something like that?

STM317 wrote:

tuna55 wrote: Finance guy has some numbers. Essentially, it's $20K cheaper over the next 30 years to rent this house and buy a new one than it is to sell this house and buy a new one. It's $90K more expensive to rent this house and buy a new one than it is to just stay put. In this scenario, though, we will have a property in which we do not live, which we can sell. Presumably, this will be worth more then $90K in 30 years, and thus, over the long haul, this is the financial winner even over doing nothing.

Is he basing those calcs on the assumption that you'll have a rent paying tenant every month for those 30 years? Any built in considerations for costs related to caring for the rental property or an emergency fund for things that might unexpectedly need replacement? Over 30 years of ownership, you'd certainly incur some major costs. A roof, HVAC, appliances, water heater, flooring etc would all need replacement in that time frame and that could chew up any money you might make. Based on what you've posted, it seems like those estimates are absolute best case scenarios, and may not be that likely. I realize you're kind of tired of the space you have, but is there a chance you could buy the empty place next door for cheap, use that as a rental, and use the rental income to aggressively pay off your current house? You'd be tied to your place a bit longer, but you could have it paid off sooner, and the house next door would no longer be abandoned, which would make your house more appealing to sell when the time comes, and obviously you'd make more off of the sale of your current home if it were paid off.

There is a lot to answer here.

We have no desire to buy the property next door. It was not taken care of. Also, it's not for sale. Not even yet foreclosed. Just vacant.

I ran the numbers quoted there based on his. He just gave me the mortgage and closing information. I assumed a rent 85% of the time, added taxes and insurance, considered monthly cashflow and a bunch of other things I really should post explicitly here.

I have not put anything in yet regarding upkeep. Home upkeep has been pretty cheap thus far, in ten years, so I'll come up with a number before pulling the trigger, but needless to say that it won't change the landscape dramatically.

In reply to tuna55: Glad you're doing your due diligence. Just keep in mind when you're coming up with a number for house maintenance, it's not the little things like landscaping/ lawncare and paint that will really impact your cost. 30 years pretty much exceeds the lifespan of most mechanical things in a home, and if you've been there for 10 already without major replacements, you can bet they're coming and they cost a chunk of money when they arrive. Some things may even need replacement multiple times in that 30 years, so consider that when you're doing your math.

STM317 wrote: In reply to tuna55: Glad you're doing your due diligence. Just keep in mind when you're coming up with a number for house maintenance, it's not the little things like landscaping/ lawncare and paint that will really impact your cost. 30 years pretty much exceeds the lifespan of most mechanical things in a home, and if you've been there for 10 already without major replacements, you can bet they're coming and they cost a chunk of money when they arrive. Some things may even need replacement multiple times in that 30 years, so consider that when you're doing your math.

New HVAC systems last summer. Roof was inspected last year and is good, will likely need one replacement in 30 years. Water heater same as roof. Vinyl siding should last and doesn't need regular care other than washing. landscaping and lawn care can be up to the tenant. The biggest thing is walking away from an awesome garden that Tunawife is working on!!

So, all of my numbers just got all borked up.

I added repair costs, and got estimates on real tax burdens and real insurance policies. I assumed that we can sell our $170K house for $230K in 30 years, based on 1% annual increase.

Grand total after 30 years looks like this:

Now: $155K
Buy & Sell: $251K
Equity line: $65K
Two mortgages: $177K

But we cannot afford the equity line option per month. Not even by a little (it means keeping our current 10 year mortgage along with a new 30 year mortgage and an equity line)

Explain what you mean by "grand total". Is that how much you net after 30 years?

It's the total cost of these housing options over the next 30 years

So you save a crap ton going with the equity thing.

I think you should revisit the Sell then Buy option. Yeah, the house next door is vacant and will drag down property value, but how much realistically? If you are willing and able to at least cut the grass over there while you're house is listed for sale, it may not look so bad. Contact a trusted realator and find out what the actual time on the market is for your neighborhood. You could factor in the lower sales price of your home as just part of the cost of homeschooling.

volvoclearinghouse wrote: So you save a crap ton going with the equity thing.

Yeah but cannot afford anything close to that monthly payment

IndyJoe wrote: I think you should revisit the Sell then Buy option. Yeah, the house next door is vacant and will drag down property value, but how much realistically? If you are willing and able to at least cut the grass over there while you're house is listed for sale, it may not look so bad. Contact a trusted realator and find out what the actual time on the market is for your neighborhood. You could factor in the lower sales price of your home as just part of the cost of homeschooling.

I think we need a Realtor and also a rental management company come and give us some real values before moving on.

Similar thought to IndyJoe (again), could the neighboring house be made to just look like no-one is home, vs. vacant? If it's not, and hasn't been, on the market, how would they know? It's not like it's been sitting at $X price forever waiting on a buyer..

I'd look into selling and then buying. How much of an eyesore is the vacant house next door?

dj06482 wrote: I'd look into selling and then buying. How much of an eyesore is the vacant house next door?

It's not awful, honestly. Landscaping is a mess, but someone (no idea who!) comes and mows. The mailbox fell over, and the playground in the back is all falling down. I could covertly take that stuff away I think.

Renting ours earns us $6,200 per year, though, assuming 85% occupancy and selling it for $230K in 30 years. That's not a bad side-job income.

tuna55 wrote: That's not a bad side-job income.

But honestly, are you looking for a side job or looking to move for more space? Can you and/or your wife deal with the hassle and frustration of managing two homes/rent/tenant interactions. My wife and I made the decision when we moved nearly 4 years ago, that it was NOT worth it for us. YMMV.

IndyJoe wrote:

tuna55 wrote: That's not a bad side-job income.

But honestly, are you looking for a side job or looking to move for more space? Can you and/or your wife deal with the hassle and frustration of managing two homes/rent/tenant interactions. My wife and I made the decision when we moved nearly 4 years ago, that it was NOT worth it for us. YMMV.

The truck would get done a lot faster if I could spend more. Got your point, though.

You can make up to 500K profit (If married still) Tax free from the sale of a home. Before 1997 you had to reinvest but clinton changed that.

In reply to bmw88rider:

I thought that was a one time deal, meaning you could only do that with one house in your lifetime.

In reply to tuna55:

1% return (assuming no repair costs) won't come close to keeping up with inflation.

I don't consider that a good side-job income.

It IS a pretty good tax deduction.

Budget four percent of each property value per year to keep it in good or better condition.

Toyman01 wrote: In reply to bmw88rider: I thought that was a one time deal, meaning you could only do that with one house in your lifetime.

nope. I've done it a couple times in the last decade.

In reply to OHSCrifle:

Interesting.

http://www.theonion.com/article/stoner-architect-drafts-all-foyer-mansion-1469