Getting a Mortgage...Have I Gone Completely Nuts?

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Robrus1
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Postby Robrus1 » Wed Aug 21, 2013 3:45 pm

Well, my reasons would be as follows:

1: The fence. We currently have a 6 foot cedar fence that I put in a few years ago and it's in great condition, but I have a dog the size of a small pony and when a jogger or bicycle goes down the alley he runs, barks, and tries to clear the fence, and he can get too close for comfort. He even got his collar stuck hung on a picket once.

2. The pool. I am 31 years old and am physically capable of maintaining the pool. From what I understand, saltwater pools are fairly inexpensive to maintain.

3. Outdoor kitchen. We entertain a lot, and we live in the Texas Panhandle. We sit outside most evenings and have for years. I grill 2-4 times per week, year round, so the outdoor kitchen would be used heavily, and in turn so would the fire pit and tv, etc. Yes, even when it's cold I could use it while grilling. Summer nights are nice here and I'd say 4-6 nights a week we would use the outdoor TV.

4. The park. True, we could load up 3 dogs and 2 kids in her SUV and drive a few miles to the nearest park. It'd just be nice to be 2 houses away so that the kids could go down there and ride their bikes anytime they like. It'd be nice to walk the dogs down there without having to load all of them up in the car.

What do you value in a house? I don't understand what else there is other than amenities, location, design, build quality, etc. Also I suppose I should note that I have enough to cut what we'd be financing in half if I wanted to, but I don't want all my eggs in one basket. I feel like our reasons are valid, but the spending isn't absolutely necessary, and this is my dilemma. I suppose there's no easy answer.
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Midori
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Postby Midori » Wed Aug 21, 2013 6:53 pm

Ah, cool beans. With the saltwater pool bit, I was thinking you were down Houston/Galveston way. I'm also in oil/gas/mesquite/cattle country over here. :o)

I actually think we value a lot of the same things in a house-- space, entertainment value, security. But I think (a) I'd be less likely to commit myself to sharing 20 or 30 years of debt with someone who may or may not marry me at some point during those 20 or 30 years, and (b) be less likely to commit 1/3rd of our collective income for the next 20 or 30 years. One third of Americans are one paycheck away from homelessness. 10% of Americans making over $100k/year would immediately miss their next mortgage payment. 61% of those would not be able to pay their rent or mortgage for more than 5 months.

So with that in mind, I would try and figure out what I wanted that I needed the house to have (ie, beds, baths, etc); features I wanted that I could put in myself at my own pace (outdoor kitchen one year, outdoor tv and stereo another year, etc); what could be changed with new paint/fixtures/flooring; and what features were really cool, but I could live without. (ie, municipal pool is $1/head; a membership at the country club is $x; cost of electricity/chemicals/water/parts/pool service is $y/mo; reminds me of a tenant who complained that her $425/mo rent was too high, but she bought a $200 pool that lasted three months before it got holes in it and spent $200 in water filling it twice because she couldn't be bothered to buy a pack of chlorine tabs.) Then I'd figure out my price point. I want this wishlist, but I only feel secure having to pay $z/month. Then I'd look at the options in my range, sort them according to geography (schools, commute, parks, etc), and see what had good bones that I could start with. I would end up saving myself ($100, $200, $300k) on the house itself, plus interest, over time, and I would be able to eventually get the features I wanted.

The houses I buy as investments tend to be acquired at wholesale, not retail. You're able to find that by finding motivated sellers and being willing to do some fixing up. I get great deals by buying in the winter... few people are voluntarily wanting to move between November and February, and yards don't show so well with brown grass and leafless trees, so sellers are more likely to be more flexible that time of year. Know the difference between structural and cosmetic issues. Lots of people can't see past the cosmetic issues, so that really cuts down on the competition, which puts the seller in a weaker spot. The person who's in a hurry is the one who loses. In my area, I get great steals by looking for FSBO signs... people who are trying to save themselves a realtor's commission. This one house, it was a group of eight heirs trying to sell this house to get the inheritence. The last one was a group of five heirs, who could have sold it a few years previously for three times the amount, but they couldn't agree among themselves. The one before that was one heir, looking to cash out his inheritance. The one before that was a house flipper who made a poor choice of where to buy a house sight-unseen, and just wanted to be rid of the thing. Before that, it was a bank foreclosure... trying to sell a house in the middle of nowhere at D/FW prices, and failing for 2 years. Before that, the guy was going to jail, and wanted to get some cash before he went away. Before that, it was a landlord who had soured on the biz and wanted to retire and wanted to be done with his houses. For our current primary residence, it sat on the market for two years, went through two different realtors, rejected our offer, went through two more realtors, went to auction twice, and the third time, we got it at an awesome price at about half of our first offer. We could never have touched a place like this in D/FW, but we moved in three Halloweens ago, and we'll have the whole thing paid off in Jan or Feb 2014 because we've been paying down 3x the note each month, but we could always go back to the minimum payment if we ever had a financial crisis.

I'm not saying "Go buy a slum, fix it up, and be happy". :oP But I am saying to take your time, get a feel for what's out there in your area of interest, watch what comes on the market, how long it stays, what it sells for, etc. Find five, ten, fifteen, twenty fabulous houses that would be absolutely perfect for you and your family, so that when you do find "the perfect one", you're not comparing it to what you currently have... you're comparing it to the competition, in all aspects of the competition. Enjoy your mortgage-free house in the meantime, save up, get yourself in a good position, and don't make yourself vulnerable two, three, four years down the road by buying too expensive, too fast.

Robrus1
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Postby Robrus1 » Thu Aug 22, 2013 8:33 am

Yeah I suppose it's a good idea to spend considerable time searching for the right one and making absolutely sure. The problem with finding 15-20 perfect for us houses, is that's difficult to do in a city of about 200K. There's just not as much to choose from like there is in Houston/DFW. There's only 3 houses for sale right now in the neighborhood we'd like to live in most, and two of them are over 1M so that's not happening.
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Midori
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Postby Midori » Thu Aug 22, 2013 10:32 am

I hear ya.

Do you guys get HGTV? It's fascinating watching some of the househunting shows and follow people's decision-making processes. Like, "I'm thinking about this $250k house, but I think I'll pass, because the faucets aren't my style." Or, "I'm talking really big about how fabulous it would be to live in Germany, and how it's my dream to live in an old-fashioned German house, but once I see what old-fashioned German houses are, I pick the most American-ish house possible." Or, "I love this 500 sf apartment that rents for $3k/month! It's perfect!"

I'm personally rather fond of the renovation shows. But it might be interesting to live judiciously through other people while you're getting your ducks in a row, if you've narrowed it down as far a specific neighborhood is concerned.

Robrus1
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Postby Robrus1 » Fri Aug 23, 2013 7:51 am

Yeah, the house hunting shows seem like maybe they're fake or something. I just can't imagine looking at 3, and only 3, places to pick from, and you HAVE to pick one of them. I'm always kind of jealous of the ones buying a vacation home somewhere with a 1.1M budget. That would be super. The renovation shows are pretty good too, it gives me a good idea of what's possible with some imagination and know-how.
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Midori
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Postby Midori » Fri Aug 23, 2013 8:38 am

Heh. Good nose. :o) For HH, they only film buyers who are already in escrow; you need to have a purchase agreement already signed and access to your new house and your old house for the four days of filming. Some of their house-hunting shows that don't have that setup (ie, PV) often times end up with their potential buyers deciding there's nothing good out there, and that it's okay to sit and wait. Enormously practical attitude, but ends in rather a fizzle as far as entertainment value goes. But it's still an interesting look into other people's markets, other people's decision-making processes, and how people value x over y.

(Now, if we want to talk about painfully fake house shows, Property Wars on Discovery is agony to try and watch. :oP)

Hope things work out well for you. :o)

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Postby HookEmHorns » Mon Sep 02, 2013 10:54 pm

Trade a paid for house for a mortgage with someone I'm not married to? Heck no.

Not trying to sound too harsh, but you seem too willing to accommodate your new roommate and her kids. If your going to do this, you need to be married first. And I'm not saying that because I'm a conservative right winger, I'm saying that because if you do decide to go along with this, you need some legal protections just in case. From what you've written you sound like a very financially responsible guy. She knows this. She could up and leave and never pay another dime, knowing you wouldn't be willing to have the house go down as a foreclosure.

Don't do it dude!
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Robrus1
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Postby Robrus1 » Tue Sep 03, 2013 8:51 am

I agree with both of you, and after much thought I've decided to hold off on this for now. Thanks for the different perspective.
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Midori
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Postby Midori » Tue Sep 03, 2013 12:19 pm

Very sensible decision. I'm happy for you. :o)

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Postby JayS10 » Mon Oct 07, 2013 4:37 pm

midori - seem like you have much real estate knowledge, mind if i shoot you a PM? I'm a first time home buyer currently in the process of saving up!
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