What Happens, Happens. Breath

We’ve had a lot going on lately.

  • In February we refinanced our duplex.
  • A the end of February we bought a new car.
  • In March our offer on a new house was accepted.
  • We close on the new house May 10th.
  • We’re in the process of finishing work on our apartment.
  • We’re in the process of renting out our apartment (we’re keeping our duplex).
  • My Photography business is just getting started.
  • I started a new Outdoors Blog.
  • Our first baby is due June 4th.
  • Rachel has been put on bed-rest until the due date.
  • Stressful things are afoot at work (some that I like, some that I don’t).

With all that’s going on I constantly need to remind myself to just slow down & breathe.  It’s hard sometimes.  There’s a lot to get done and it often feels like I’m not getting anywhere.  I get tired of people telling me about it though, I’m fine.  I take it all in stride, and whatever happens happens and we’ll deal with it as it comes.

Ze posted a song a while back that I had totally forgotten about until today, when he posted the story of how he made it.  It resonates with me perfectly.  I get it.

http://bandcamp.com/EmbeddedPlayer.swf/track=397380065/size=venti/bgcol=FFFFFF/linkcol=4285BB/

Hey, I’m Ok.

I’ll be fine.

Just Breathe.

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The Rental vs Ownership Lifestyle Choice

Authors Note: This post is in response to Mint’s latest article The Renter’s Manifesto which makes a pretty good argument for renting

Some people like to say

Renting is throwing your money away.  At the end of your lease you have nothing to show for it.

I’m sorry, but I need to disagree.  Not only does renting not throw your money away (you’re getting a place to LIVE remember?) but it’s also cheaper than buying in a lot of scenarios.  You may not be building equity, but what can you do with that extra 300 or more per month?  That’s right… build LIQUID equity.

You’d have a hard time convincing me that a Single Family Home is a good investment.  To me owning a house is nothing more than a LifeStyle choice. If it were a purely financial decision there would be a lot fewer home owners.

However; owning a rental unit is 100% different from owning a house.  It’s an investment.  We made that investment a few years ago, and it’s paying off.

Some numbers:

When we were renting we were paying $715 out of pocket per month.  That’s it.  Stupidly, we didn’t have renters insurance, so there’s $25-50/month we should have been paying that we weren’t.   So really… $740/mo

When we bought the house that dropped to about $600 out of pocket per month.  Add on about 75/mo for insurance (for the whole house) and you’re now at $675/mo.  Then there’s maintenance.  We’ve done a lot, to both sides.  new kitchen, lots of new drywall/paint/cleaning/etc.  My records show somewhere in the neighborhood of $2-300/month amortized across the life of our residency.  Now we’re up to $975/month without even trying.

Those are the hard numbers, now the soft:

When we bought the house we put a 10% down payment on it so we had a decent (not huge, and certainly not useful) amount of equity right away.  This put us in a good situation with the principle, however our interest rate was at 7.25% only .25% above the average and we could have gotten better, but it would have increased the bottom line on the house.  The previous owner gave us a hell of a deal (by my accounts at least a 10% discount off the true market value of the home) because we didn’t involve any realtors or banks.

4 years later and we just completed a refinance.  This hurt, a LOT.  but it was also one of the best decisions we’ve made.  It took us from 7.25% to 5% flat but it cost us about 3 years.  It’ll take us 3 years to recoup the cost of the refinance.  That’s ok though, because we’re in it for the long haul.

Now we’re down to about 775/mo out of pocket and we’re not done.

We just bought a single family house because our family is growing and we’re running out of room (remember that I said it’s a life style choice).  That and because now we can finally treat the rental property more like a business instead of an extension of our home.  I expect maintenance costs to shrink dramatically as a result.

If you look at our current out of pocket monthly expenses… it’s almost a no brainer to buy a duplex as a starter home.  I recommend it to every one I know that’s looking for a house.  As long as you’re a little handy and can deal with the tenants calling you in the middle of the night to tell you the pilot light is out… you’re owning for next to nothing.  Yes our out of pocket is more than what it was when we were renting, but there’s a few factors there:

  1. It’s not that much different.  $775 vs $715? 60 bucks and you have the freedom to do whatever you want?
  2. We’ve done a LOT to our house.  $300/mo is way more than necessary and I hope to bring that down in the coming months.  New drywall, new roof, new kitchen… have all been done.
  3. Equity.  While it will cost us 3 years to recoup the cost of the refinance, in those 3 years we’ll not only make that money back, but also pay all that money down on the principle and more essentially getting a 200% ROI.
  4. Going along with Equity… Increased home value.  Our house has increased in value about another 12% since we bought it (remember that we bought it at around 10-12% below market value at the time of purchase) and we’re only paying 60/month more than we were when renting.  Right now we have over 30% equity in our house and more than half of that is being built up by the tenants NOT us.

Buying a single home though…

Just remember that it’s a LifeStyle choice, not a financial one.  If it was a financial one, you already know the answer, it’s going to cost you more for the same quality of home and location…   Financial decisions are all about getting the most for your money which isn’t the case with a house, unless you consider the lifestyle ‘more’.

Oh and one more thing to add…  If someone is renting a house to you, it’s costing them less to own it than they’re charging you, otherwise they’d be pretty dumb.  However; they’ve probably owned it for years and years, which pretty much wipes away the initial cost of ownership.  Closing costs Suck and eat a huge amount of your equity up right away. Just food for thought.

The Great Lamp Caper

Quite possibly the funniest email thread I’ve ever seen(update: link removed to protect the innocent) is being passed around work lately. This is how it starts:

Subject: my Lamp

The lamp from my table disappeared when I was on vacations. Could you please help me to return it back?

Thank you

~Alex (Developer)

Names have all been changed and, besides possible leads on the great Lamp caper, there’s no company confidential information in the entire thread so I have no problem sharing it. To understand why this is funny, you need to know who the 2 parties involved are.

Alex is just a low level Software Developer. Possibly been here a few years, maybe not.

His email is addressed to Dave aka CEO who responds below, and the conversation continues from there.

Dave (CEO): I’m sorry about your lamp. What would you suggest I do?

Alex (Developer): I do not know… as I understand some service people removed lamps from a lot of desks. Some people did not allow them to do this, but I was on vacation. Probably you can tell me who did this, by whose order or/and who is responsible and what I have to do to request the lamp back…

Dave (CEO): On the assumption that you are serious, I have copied Carl in our real estate group who can look into the great lamp caper. I wish you all the best.

Alex (Developer): I sent these emails mistakenly not looking at where I send them. I am so sorry. Please accept my apologies.

Dave (CEO): Don’t apologize. It’s ok. Chris will sort it out.

I find it awesome that he responded and I love the responses, but I sorta feel bad for the guy because it’s been passed on to EVERYONE.