I Need a Bigger House

[legion]

Rammy's thread got me thinking...

I live in a 1600 sq. ft. house with a 3 car garage. We have more furniture (we inherited a lot of VERY nice stuff when my father passed) than we have room for. We have a few nice pieces out in the garage. The wife and I want to start a family in the next two years, but we don't have a place to put a crib or any of that stuff.

Both the wife and I are doing well professionally. Incomes are stable and appreciating at 3%-7% a year.

Over the weekend, I put together a spreadsheet to work out the numbers on buying a new house. I ran 4 scenarios of the house appreciating from 3% - 6% in the four years we have owned it. For each of those scenarios, I also put together numbers for selling with a realtor versus selling FSBO.

Based on what we want to move to, houses cost $200k - $225k. Based on the eight scenarious above, we would net (equity + appreciation) anywhere from $13k (3% appreciation selling w/ realtor) to $50k (6% appreciation selling w/o realtor).

We can pretty much only make the numbers work in the three most positive scenarios (4% - 6% appreciation selling w/o realtor). I don't want to move until things look good in ALL scenarios--which can be accomplished by just staying put and accumulating more equity and letting the house appreciated more.

Am I being too cautious?

[id10t]

Nope. House is the biggest financial investment you are likely to ever make...

Edit - don't forget to plan what will happen to your (or rather the wife's) income when you do have a baby...

[VINMAN]

Originally posted by legion

Based on what we want to move to, houses cost $200k - $225k.

$225k???Where is this Nirvana that you speak of??

[Tim Hancock]

Originally posted by VINMAN
$225k???Where is this Nirvana that you speak of??

Anywhere but the coasts!

[id10t]

VINMAN - come on down here to N. Florida. hour to either coast, less than 2 to Jax, about 2 to either Orlando or Tampa. Even cheaper a tad south of us (I'm in the Gainesville area)

[Moses]

Are you looking at the issue backwards?

What % of your income are you spending on your mortgage? You might be able to afford a bigger house without making a profit on the old one.

I've known people who would sell real estate at a loss in a "dead" area to buy property in a more desireable location. A family I know sold a 2,500 sq/ft home in a "decent" neighborhood to get into a better school district. They bought an 1,800 sq/ft house in the new neighborhood for more $$$ that they sold the original house for.

In 10 years, the old house appreciated 20% total. They have been in the new house for 10 years now. It has more than doubled in value. Had they waited for an "optimal" time to sell, they would have missed a lot of appreciation.

[VINMAN]

I just bought my house last year, we are already planning our next move. Between the mortgage and the murderous property tax we realized we made a mistake. But problem is, even if we sell now, we couldnt buy anything around here unless its a shed. Me and my wife are basically stuck here now due to our jobs and family ( my elderly parents). We love the house but it is way more than we need , since the kids are gone. I wanted it for the huge garage and the property. But in a way I regret buying it.
Guess what I'm trying to say is really really plan it out before you make a move.

[stevepaa]

Our first house was 1300 with 4 bedrooms and we did not move up to 2000 until our second child was born. Are the schools good in your neighbor hood, are there lots of kids and young starting familes, is it a court or through street? I think those are the best reasons when looking for a house, followed by a southern exposure for the back yard and a big garage.

[JeremyD]

You can always stick a FSBO sign up, ask top price and see what happens.

What does the comparables sld in the last few months in your area say?

How about Zillow? You can always contact a few agents and ask them for a comparative market analysis then sell FSBO or at least try FSBO.

I would really take a long look at what you can afford. It sucks to be house poor.

[legion]

To answer a few questions:

We could afford more house for our salaries, but if we have a family, there are other costs that come into play that we don't have now (like childcare). Basically it works out that we need to keep our house payments the same to afford those additional costs. We're spending roughly 35% of our take-home pay on the mortgage.

I should also add that the numbers only really work at the bottom end of our prospective price range.

I just got a promotion and am getting another raise in May, so I'll re-evaluate then.

We also currently have two car payments (one is paid off in October, the other the following April), so more cash will be freed up in the next year or so--though I would like to replace my 951 with a Boxster or my F150 with a new Silverado...

[azasadny]

Chris,
What about staying in the house you have and putting on an addition? Is this feasible for you to consider? We added 1200sq ft to our 1250sq ft home almost 2 years ago and it's worked out well for us. We loved the house and neighbors, just needed more room. Our next-door neighbor builds homes "on the side" and acted as architect, gen contractor, electrician, plumber, carpenter, etc... and it worked out great for us. We have exactly the house we've always wanted and we didn't have to move. Not for everyone, but may be worth considering...

[stevepaa]

I would hold off on any new car payments as they will afffect your ability to get a mortgage.

What do you spend a year on that 951?

You don't really need a new house unitl the kids start walking around outside looking for playmates. Then you want to find a neighborhood with mostly new starting families.

[legion]

Art,

Though housing is relatively cheap in our area, home improvement is very expensive (costs are some of the highest in the country) as there are virtually no laborers of dubious immigration status around for various reasons. It might cost $50k - $100k to add-on, on a house that cost me $125k!

Additionally, my wife has nixed the idea of adding-on--that really makes the idea DOA. (It's what I wanted to do, but there is no convincing her.)

[legion]

Originally posted by stevepaa
What do you spend a year on that 951?

I took out a loan to buy it. (3% APR at my credit union.) It's costing me about $2400 a year in car payments, $3000 a year in maintenance, $420 a year in insurance, and $150 a year in gas.

[jyl]

Seems odd that in a 1600 sq ft house w/ 3-car garage, there's not enough room for a crib. Actually, it seems unbelieveable.

Either you have way too much "stuff", or it is a very weirdly configured house, you have a very big crib in mind, or, well, I dunno. Plus you have a 3-car garage, 1 bay could be converted (not for the crib, presumably, but for whatever other use is taking up all the room in the house)?

My other comment is that even though major investment decisions like houses are important, they are still much less important than major family decisions like, well, when to start that family. I would never let the less important thing dictate the more important thing.

On the scale of important, cars are even lower. So if the desire to replace 951 with Boxster and F150 with Silverado is controlling your thinking on the house, which in turn is controlling your decision on the family, then in my opinion you are really letting the trivial dictate the vital.

[lendaddy]

Originally posted by id10t

Edit - don't forget to plan what will happen to your (or rather the wife's) income when you do have a baby...

No **** there.

[many944s]

Originally posted by Wayne at Pelican Parts
Housing as a 100% owned stock is not a great investment. What makes housing attractive is the financing element that includes both leverage and tax deductions.

-Wayne

AMEN!
I just payed off my house at the beginning of '06, man did it SUCK to not have that mortgage credit come tax time!

-Nick

[stevepaa]

That's when you buy your daughter a condo in LA for more than your house cost

[legion]

Originally posted by jyl
Seems odd that in a 1600 sq ft house w/ 3-car garage, there's not enough room for a crib. Actually, it seems unbelieveable.

Weirdly configured.

We have a large living room and family room, but the bedrooms are very small and filled with furniture. (We have 5 dressers, for example--I sold four over the summer and the only ones I kept were the family heirlooms.) We don't have a basement. If we did, that could become an area to store "stuff" instead of bedrooms. I'm holding on to a lot of stuff to give to my little sister when she gets a bigger place (she's in a one-room studio in Chicago).

There is no water, or heat in the garage. It is "L" shaped and the third bay is not attached to the heated part of the house.

I don't do anything without a solid plan of how to pay for it in a worst-case scenario ahead of time.

[daepp]

Buy a house because you want a house. Don't buy one for an investment. Don't count on appreciation. Just make sure you can afford it.

And if you think a house payment is too much, wait till you have children. The most expensive and the best move I ever made - Emily, Amy and Andrew!