Choosing Your Home
It's a huge debate in modern society whether renting or buying is best. Endless financial experts bomb you with statistics and financials supporting or debunking each method. Today's savvy spender is just looking for a reasonable answer. What about a compromise?
Over the course of the past 3 years, I started and edited endless spreadsheets depicting outcomes based on a wide range of scenarios. RV living, building a mini-warehouse, a livable garage, renting, building new and buying a fixer-upper were among the possibilities. I wanted to find a suitable option that wouldn't have me married to a mortgage or endlessly in debt. And so, I began a research project on debt. A recent publication estimated a person in the US to pay $279,002.00 in lifetime interest. Credit card interest, mortgage interest, and more piled on and on. That's not to include costs of insurance for your health, home and even your money (If you have enough to warrant extensive protection). You don't just make money, you have to protect it and the items you buy with it. My vehicle costs me $559.50 per month. In addition, I have about $95.00 a month in insurance, $250.00 a month in fuel, $265.00 annually in taxes and an average $530.00 a year in maintenance costs. Total, that's $720.75 per month for an asset (less than 5 years old) not worth quite half that. Breaking down your money will at least give you a baseline and a number value on true cost.
After entering data into my spreadsheets on the cost of living for multiple scenarios, I decided to set a few goals. First, the ideal home would provide me with space for a home office since I do a lot of online work. Secondly, I wanted to pay the asset off in less than 5 years, so after some careful calculations, my budget became 1.5 times my annual salary. If I couldn't pay off a purchase in 5 years, I wasn't going to purchase, but rent instead. Finally, I wanted to equal or greater than asset value after 5 years. The mini-warehouse/home became impossible quickly unless its location had interstate access and the asset could be converted into a business. By mini-warehouse, I mean a concrete floor, steel building pre-fab of about five to six thousand square feet. These are amazingly affordable and a great home option for some people. Building was out given the cost of permits, utility installs, land purchase, loans, etc. because that debt would be spread across too many loans, all looking for payment immediately. RV/camper option wasn't a bad option, as long as I could sacrifice space and secure a lot to install utilities. RV/camper loans aren't horrible, but they come on top of lot/space rentals and utility fees as well. Eventually, I found a fixer-upper that didn't need too much work.
My selection was a 2 story town-home/condo with 3 bedrooms, 2.5 baths, 1 bay garage and barely any yard. The livable space was about 1,350 sq.ft., a 250 sq.ft. attached garage and all sitting on a neat 2,400 sq.ft. lot. It was an 11 year old rental unit less than 5 miles from a college with over 22,000 students enrolled. Most of the work was cosmetic. It needed dry wall repairs, paint, fixtures and hardware replacement or repair. After 2 weeks off and a few weekend Home Depot trips, I had it looking relatively impressive compared to the initial purchase. I have not yet had another appraisal, but am positive it will be close to what I paid for it in 5 years.
Over the course of the past 3 years, I started and edited endless spreadsheets depicting outcomes based on a wide range of scenarios. RV living, building a mini-warehouse, a livable garage, renting, building new and buying a fixer-upper were among the possibilities. I wanted to find a suitable option that wouldn't have me married to a mortgage or endlessly in debt. And so, I began a research project on debt. A recent publication estimated a person in the US to pay $279,002.00 in lifetime interest. Credit card interest, mortgage interest, and more piled on and on. That's not to include costs of insurance for your health, home and even your money (If you have enough to warrant extensive protection). You don't just make money, you have to protect it and the items you buy with it. My vehicle costs me $559.50 per month. In addition, I have about $95.00 a month in insurance, $250.00 a month in fuel, $265.00 annually in taxes and an average $530.00 a year in maintenance costs. Total, that's $720.75 per month for an asset (less than 5 years old) not worth quite half that. Breaking down your money will at least give you a baseline and a number value on true cost.
After entering data into my spreadsheets on the cost of living for multiple scenarios, I decided to set a few goals. First, the ideal home would provide me with space for a home office since I do a lot of online work. Secondly, I wanted to pay the asset off in less than 5 years, so after some careful calculations, my budget became 1.5 times my annual salary. If I couldn't pay off a purchase in 5 years, I wasn't going to purchase, but rent instead. Finally, I wanted to equal or greater than asset value after 5 years. The mini-warehouse/home became impossible quickly unless its location had interstate access and the asset could be converted into a business. By mini-warehouse, I mean a concrete floor, steel building pre-fab of about five to six thousand square feet. These are amazingly affordable and a great home option for some people. Building was out given the cost of permits, utility installs, land purchase, loans, etc. because that debt would be spread across too many loans, all looking for payment immediately. RV/camper option wasn't a bad option, as long as I could sacrifice space and secure a lot to install utilities. RV/camper loans aren't horrible, but they come on top of lot/space rentals and utility fees as well. Eventually, I found a fixer-upper that didn't need too much work.
My selection was a 2 story town-home/condo with 3 bedrooms, 2.5 baths, 1 bay garage and barely any yard. The livable space was about 1,350 sq.ft., a 250 sq.ft. attached garage and all sitting on a neat 2,400 sq.ft. lot. It was an 11 year old rental unit less than 5 miles from a college with over 22,000 students enrolled. Most of the work was cosmetic. It needed dry wall repairs, paint, fixtures and hardware replacement or repair. After 2 weeks off and a few weekend Home Depot trips, I had it looking relatively impressive compared to the initial purchase. I have not yet had another appraisal, but am positive it will be close to what I paid for it in 5 years.
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