Well, we've had tons of trouble selling our house in NC - it's not even an issue of lowering the price - the market for more expensive houses completely disappeared and may be out for a while.
Through a management service we've found a tenant who is moving in this week. The prevailing NET (after fees) rental rate is only about 45%-50% of our monthly mortgage, but it also allows the tenant to offset other expenses, like utilities, lower insurance rates, the alarm, etc....
So I suppose the monthly rental income is something we can positively focus on - it certainly helps my finances if i'm laid off.
Regards, makingourway
Showing posts with label housing. Show all posts
Showing posts with label housing. Show all posts
Monday, December 22, 2008
Thursday, July 03, 2008
mid-year networth check
I've been so busy I've had little time to formally update our net worth, but here's a very quick measure:
It's approximately $740,000. For the entire year it has more or less been fluctuating from $730,000 to $771,000. Fluctuations have been heavily driven by overall market performance.
I have reduce my market exposure substantially, by:
a. selling most of our non-retirement diversified market index funds and using them to pay down HELOC on our primary house.
b. selling off most of our ETFs held in non-retirement accounts to provide cash liquidity.
c. I have already made my 401k contribution for the year, maxing out at $15,500.
d. I expect my wife will do the same between August and December.
Otherwise, we have not saved nearly as much as we have in the past.
This is most significantly limited by the economic burden of our unsold house in NC.
We will try renting it, which will staunch the monthly red-ink, but we'll still be negative cashflow on the house, just not our overall monthly budget.
Big company, in it's generosity, has given me a small (very small) second bonus, which I'll receive in July. My wife is scheduled for a raise in August, which will help.
By august, we should be mildly cash flow positive, but not enough to offset the economic damage we would face if Big Company laid me off.
I would love to be in a situation, where we could live off of only one of our incomes and save the other.
Getting rid of house #2, will help alot, but not cover enough of my pay.
In the end, I need to be earning more - perhaps as much as $100k more, plus selling the house. At that point we would have substantial cash savings.
Ahh the good old days, living in a less expensive local, but we should never forget the other challenges it entailed:
1. limited, but expensive shopping
2. over priced and limited professional services
3. very limited income for me unless I travelled 80%+
4. insufficient commericial and retail entertainment
5. challenges of integrating into a small town social network
6. very high fuel expenses
7. limited education options
In the end, we had to move to be true to our values, however, there are moments when I wish we kept renting instead of bought the house. i predict we'll be able to sell it in about 3 more years. How disappointing!
Regards,
makingourway
It's approximately $740,000. For the entire year it has more or less been fluctuating from $730,000 to $771,000. Fluctuations have been heavily driven by overall market performance.
I have reduce my market exposure substantially, by:
a. selling most of our non-retirement diversified market index funds and using them to pay down HELOC on our primary house.
b. selling off most of our ETFs held in non-retirement accounts to provide cash liquidity.
c. I have already made my 401k contribution for the year, maxing out at $15,500.
d. I expect my wife will do the same between August and December.
Otherwise, we have not saved nearly as much as we have in the past.
This is most significantly limited by the economic burden of our unsold house in NC.
We will try renting it, which will staunch the monthly red-ink, but we'll still be negative cashflow on the house, just not our overall monthly budget.
Big company, in it's generosity, has given me a small (very small) second bonus, which I'll receive in July. My wife is scheduled for a raise in August, which will help.
By august, we should be mildly cash flow positive, but not enough to offset the economic damage we would face if Big Company laid me off.
I would love to be in a situation, where we could live off of only one of our incomes and save the other.
Getting rid of house #2, will help alot, but not cover enough of my pay.
In the end, I need to be earning more - perhaps as much as $100k more, plus selling the house. At that point we would have substantial cash savings.
Ahh the good old days, living in a less expensive local, but we should never forget the other challenges it entailed:
1. limited, but expensive shopping
2. over priced and limited professional services
3. very limited income for me unless I travelled 80%+
4. insufficient commericial and retail entertainment
5. challenges of integrating into a small town social network
6. very high fuel expenses
7. limited education options
In the end, we had to move to be true to our values, however, there are moments when I wish we kept renting instead of bought the house. i predict we'll be able to sell it in about 3 more years. How disappointing!
Regards,
makingourway
Thursday, June 19, 2008
What to do with the other house?
Well, we still can't sell the second house and it's costing us about $3350 a month. The best we can do is rent it for about $1650 in the local market.
But doing so would mean we have to take it off the market for a year - guaranteeing about a $1650 loss each month.
With our current circumstances - I'm a bit nervous about my career at Big Company - it would help us reach cash flow bouyancy, however, if I lost my job it would still leave a painful expense.
I'm going to discuss with my realtor what we can do. As the house has been on the market for more than a year and there is no substantial improvement in the market, I'm leaning toward renting it out.
What would you do?
Regards,
makingourway
But doing so would mean we have to take it off the market for a year - guaranteeing about a $1650 loss each month.
With our current circumstances - I'm a bit nervous about my career at Big Company - it would help us reach cash flow bouyancy, however, if I lost my job it would still leave a painful expense.
I'm going to discuss with my realtor what we can do. As the house has been on the market for more than a year and there is no substantial improvement in the market, I'm leaning toward renting it out.
What would you do?
Regards,
makingourway
Monday, March 17, 2008
So what does the new drop in Fed rate mean for you and me?
I suppose the first question I ask is about the economy - that's an easier question to ask - though not everyone seems to be in agreement as to the answer, yet bas%ic economic theory indicates it should be a stimulous.
What does it mean for us as individuals?
My realtor seems to think it will be easier to sell my other house - yet it still sits there - costing me more than $3000 a month.
I went to bankrate.com and checked IL jumbo rates. Most are about 7.5% APR with a select few under 7%, however the price is from Friday, so maybe it's no longer accurate.
I'm not sure if the short term rate cuts will effect long term bond prices - which seem to be the underlying factor for 30 year fixed rate mortgages, however I will call tomorrow and check out what this means.
Here are a few questions:
1. How much is it worth to refinance at 0 points? Is $400 enough or $1000?
2. If I refinance at $400 can I do it again three weeks later at the lower rate?
I'll find out the answers soon.
If you have any advice, please let me know.
Regards,
makingourway
What does it mean for us as individuals?
My realtor seems to think it will be easier to sell my other house - yet it still sits there - costing me more than $3000 a month.
I went to bankrate.com and checked IL jumbo rates. Most are about 7.5% APR with a select few under 7%, however the price is from Friday, so maybe it's no longer accurate.
I'm not sure if the short term rate cuts will effect long term bond prices - which seem to be the underlying factor for 30 year fixed rate mortgages, however I will call tomorrow and check out what this means.
Here are a few questions:
1. How much is it worth to refinance at 0 points? Is $400 enough or $1000?
2. If I refinance at $400 can I do it again three weeks later at the lower rate?
I'll find out the answers soon.
If you have any advice, please let me know.
Regards,
makingourway
Wednesday, February 13, 2008
Why will I spend money for a computer network in my house?
I've been asked why not use a wireless network?
My thoughts are:
1. Wireless networks have deadspots
2. Wired networks can reach 1000 mb/s - which is great for moving video files
3. Wired networks are more secure
4. I can always combine wired and wireless if i choose
5. Some network appliances do not support wireless yet - such as my flat screen tv's - Sony Bravia - which can display internet video
6. I can wire the places for less than $2000 - maybe as cheap as $1500
Regards,
makingourway
My thoughts are:
1. Wireless networks have deadspots
2. Wired networks can reach 1000 mb/s - which is great for moving video files
3. Wired networks are more secure
4. I can always combine wired and wireless if i choose
5. Some network appliances do not support wireless yet - such as my flat screen tv's - Sony Bravia - which can display internet video
6. I can wire the places for less than $2000 - maybe as cheap as $1500
Regards,
makingourway
Inexpensive network cabling
It's actually fairly difficult to find inexpensive network cabling - cat 5e. I'll be using large spools of cable and the electrician's will terminate each end for me.
The best price seems to be about $55 per 500 foot spool. Several retailers sell cable at this price. I was very suprised to see that home depot was one of them.
makingourway
The best price seems to be about $55 per 500 foot spool. Several retailers sell cable at this price. I was very suprised to see that home depot was one of them.
makingourway
Sunday, November 25, 2007
Quick update - massive expenditures
Quite a few things have happened in the last few weeks:
1. We decided to use some savings (my stomache cramps at the thought versus current cashflow) to finish outfitting our house. We reviewed our monthly cash flow and decided it was an acceptable risk.
2. Our second car, the one most frequently used by the live-in grandparents, became unstable and unreliable - stopping for two times in ten days. We had been planning to purchase a third car, but had been delaying the purchase for just such an occassion.
3. The purchases:
1. A mini-van (leased) $484 per month for three years
2. Furniture:
a. office furniture (high quality, best and most expensive we've ever purchased) $5,500 (most of this came out of operating income)
b. master bedroom furniture $1,450 (found a reasonably priced combination factory direct) - probably the lower quality tier, but at this price we can keep it for at least a few years and then either reposition in another room or donate to charity and replace. Bed frame, side tables, wall table/server
c. Flat panel LCD for family room, with stand and hdmi cable $1,900
d. Flat panel LCD for master bed room, with articulating wall bracket and hdmi cable $1,000
e. In August we bought a sectional sofa, ottoman and love seat for the family room at $1600
3. Home Improvements:
a. Fan for extra kitchen (we have an extra room that the sellers outfitted as a kitchen). $160 for hood ventilation unit and $400 for labor + extra for misc parts
b. $xxxx to repair water filtration system.
c. Possible: built-in dehumidifier for basement
d. Repaint master bedroom and remove old wallpaper $800
e. Replace window treatments in maste bedroom $400
f. Convert our propane grill to a natural gas grill $170
There are quite a few consequential decisions regarding the above. I'll write more about them in future posts.
The most important question here is why did we decide to dip into savings to make these changes:
1. Too often we've waited until just before moving to make necessary improvements, never having time to enjoy them
2. We think we'll live in this house for a long time - so we'll be around to enjoy the improvements
3. We've never had matching furniture except recently for the guest room.
4. Much of our past furniture didn't work with the new house (more rooms, bigger size)
5. We felt we could afford the expense, estimating it would be around $13k - $14k
6. We had to obtain a new vehicle with #2 being unstable
I'll also post in the future about several cash flow improving ideas.
Following the above expenditures, the majority of rooms in our house will have been furnished and updated. The most important rooms not update and subject to future expense will be:
1. Children's rooms - we can go slowly on these as the children are happy with what they have(while young)
2. Living room - we'll need to re-upholster the couch and change the window treatments; est. $1,700 (we can wait a while on this as we're still trying to decide what to do about the couch)
At the end of the day, we've accelerated the furnishing of our house while making necessary repairs. The flat panel TVs are a luxury plain and simple.
Regards,
makingourway
1. We decided to use some savings (my stomache cramps at the thought versus current cashflow) to finish outfitting our house. We reviewed our monthly cash flow and decided it was an acceptable risk.
2. Our second car, the one most frequently used by the live-in grandparents, became unstable and unreliable - stopping for two times in ten days. We had been planning to purchase a third car, but had been delaying the purchase for just such an occassion.
3. The purchases:
1. A mini-van (leased) $484 per month for three years
2. Furniture:
a. office furniture (high quality, best and most expensive we've ever purchased) $5,500 (most of this came out of operating income)
b. master bedroom furniture $1,450 (found a reasonably priced combination factory direct) - probably the lower quality tier, but at this price we can keep it for at least a few years and then either reposition in another room or donate to charity and replace. Bed frame, side tables, wall table/server
c. Flat panel LCD for family room, with stand and hdmi cable $1,900
d. Flat panel LCD for master bed room, with articulating wall bracket and hdmi cable $1,000
e. In August we bought a sectional sofa, ottoman and love seat for the family room at $1600
3. Home Improvements:
a. Fan for extra kitchen (we have an extra room that the sellers outfitted as a kitchen). $160 for hood ventilation unit and $400 for labor + extra for misc parts
b. $xxxx to repair water filtration system.
c. Possible: built-in dehumidifier for basement
d. Repaint master bedroom and remove old wallpaper $800
e. Replace window treatments in maste bedroom $400
f. Convert our propane grill to a natural gas grill $170
There are quite a few consequential decisions regarding the above. I'll write more about them in future posts.
The most important question here is why did we decide to dip into savings to make these changes:
1. Too often we've waited until just before moving to make necessary improvements, never having time to enjoy them
2. We think we'll live in this house for a long time - so we'll be around to enjoy the improvements
3. We've never had matching furniture except recently for the guest room.
4. Much of our past furniture didn't work with the new house (more rooms, bigger size)
5. We felt we could afford the expense, estimating it would be around $13k - $14k
6. We had to obtain a new vehicle with #2 being unstable
I'll also post in the future about several cash flow improving ideas.
Following the above expenditures, the majority of rooms in our house will have been furnished and updated. The most important rooms not update and subject to future expense will be:
1. Children's rooms - we can go slowly on these as the children are happy with what they have(while young)
2. Living room - we'll need to re-upholster the couch and change the window treatments; est. $1,700 (we can wait a while on this as we're still trying to decide what to do about the couch)
At the end of the day, we've accelerated the furnishing of our house while making necessary repairs. The flat panel TVs are a luxury plain and simple.
Regards,
makingourway
Friday, September 21, 2007
How much is a clear driveway worth?
I recently signed up for a driveway plowing service.
It cost $350 for the first 10 plowings and $35 per plowing thereafter. I paid an additional $100 for hand shoveling near garage doors 10 times for a total of $450.
It's possible a snowy day may generate more than one plowing.
With young children, older parents and a wife alone, I'm willing to pay extra for the security that none of them have to do this work. Also, when I am working at home, I really don't have time to do the shovelling (10 hr+ work day).
Is $45 to plow a very long and large driveway reasonable?
Would you do it?
Regards, makingourway
It cost $350 for the first 10 plowings and $35 per plowing thereafter. I paid an additional $100 for hand shoveling near garage doors 10 times for a total of $450.
It's possible a snowy day may generate more than one plowing.
With young children, older parents and a wife alone, I'm willing to pay extra for the security that none of them have to do this work. Also, when I am working at home, I really don't have time to do the shovelling (10 hr+ work day).
Is $45 to plow a very long and large driveway reasonable?
Would you do it?
Regards, makingourway
Wednesday, September 19, 2007
The two house crunch and negative cash flow
It's quite challenging waiting for our other home to sell while at the same time paying a hefty mortgage in Chicago.
Something quite painful - eats up all of our savings and then costs us a bit extra.
I'm still working out our monthly run rate, with so many one time, move in expenses occuring it's hard to separate the one timers from ongoing. I think we're at a negateive $1300 per month.
The current situation makes it very difficult to:
a. think about future investing plans
b. look positively about future savings
I had been expecting a decent raise this summer, especially after the fantastic performance i had in my current job - a management change seems to have removed that possibility. Substantial raises at our firm seem more realisticly grounded in promotions than performance - frustrating for me.
I've analyzed our reserves and we can go a very long time if we need to do so (at negative $1300 per month) however, it also means that improvements and capital expenditures are put off or minimized. That is also very frustrating. My wife would really like to furnish the house.
One thing for sure, she has a raise contractually scheduled for next September that will cover our hole (after taxes too), however, I'd like to think that we'll have something sooner. I just hope it doesn't require changing jobs.
It seems in the world of big corporations your performance matters less than 'paying your time'. It's very demotivating.
Although we can justify the negative cash flow (as something that's temporary and will see an increase in income to cover it), I hate being in this position.
Regards, makingourway
Something quite painful - eats up all of our savings and then costs us a bit extra.
I'm still working out our monthly run rate, with so many one time, move in expenses occuring it's hard to separate the one timers from ongoing. I think we're at a negateive $1300 per month.
The current situation makes it very difficult to:
a. think about future investing plans
b. look positively about future savings
I had been expecting a decent raise this summer, especially after the fantastic performance i had in my current job - a management change seems to have removed that possibility. Substantial raises at our firm seem more realisticly grounded in promotions than performance - frustrating for me.
I've analyzed our reserves and we can go a very long time if we need to do so (at negative $1300 per month) however, it also means that improvements and capital expenditures are put off or minimized. That is also very frustrating. My wife would really like to furnish the house.
One thing for sure, she has a raise contractually scheduled for next September that will cover our hole (after taxes too), however, I'd like to think that we'll have something sooner. I just hope it doesn't require changing jobs.
It seems in the world of big corporations your performance matters less than 'paying your time'. It's very demotivating.
Although we can justify the negative cash flow (as something that's temporary and will see an increase in income to cover it), I hate being in this position.
Regards, makingourway
Wednesday, September 05, 2007
Cost Benefit of a swimming pool
If you could buy a house with a swimming pool installed, would it be worthwhile? Can it be cost justified? What's the cost benefit?
Having a swimming pool in Chicago is somewhat unique - not many families have one.
Weekly maintenance runs about $65 per week plus materials.
Pre-summer and post-summer openings and closings run about $550 or so each.
A high end alarm with motion sensors and wave sensors costs abut $240. If you have children or children nearbye, you'll want the alarm.
If you have children, a swimming pool is a nightmare and a blessing. Like the biggest swimset, all the neighborhood children will want to visit and swim. Unlike a swimset, parents always have a nagging concern that their children could fall in the pool - despite their best efforts, alarms, etc.... Obviously fencing can help, but is fairly impractical in stopping your own children if they're over 3 years old.
Here are some quick thoughts:
4.5 months of maintenance = $1,350
Opening and closing = $1,100
Additional gas and electrical costs TBD
Direct cost = $2,450
Now what may the benefits be? They certainly are more intangible:
1. Less recreational expense as entertainment may be at home - savings $60/weekend $1,080
2. Ability to host parties for friends and family (hmmm is this an additional cost?)
3. Increased social benefits - friends tend to visit your country house with the pool more often - convience and city parking saved
4. Pleasure of swimming for the whole family
5. Certainty that if anyone is peeing in the pool, at least it's a family member
6. Reduced need for weekend get aways (your pool and backyard are your getaway) - two trips at $150/night (min. with kids) + gas = $350 x2 = $700
Total Benefit $1,780
Still about $670 difference. Is the convenience and social benefit worth it? I'd say so.
What are your thoughts? Is a swimming pool something you can cost justify?
It's almost impossible to justify building one, but purchasing a house with one already installed might be a good deal. The numbers would be very upside down if you had to incorporate amortizing the actual pool.
Regards, makingourway
Having a swimming pool in Chicago is somewhat unique - not many families have one.
Weekly maintenance runs about $65 per week plus materials.
Pre-summer and post-summer openings and closings run about $550 or so each.
A high end alarm with motion sensors and wave sensors costs abut $240. If you have children or children nearbye, you'll want the alarm.
If you have children, a swimming pool is a nightmare and a blessing. Like the biggest swimset, all the neighborhood children will want to visit and swim. Unlike a swimset, parents always have a nagging concern that their children could fall in the pool - despite their best efforts, alarms, etc.... Obviously fencing can help, but is fairly impractical in stopping your own children if they're over 3 years old.
Here are some quick thoughts:
4.5 months of maintenance = $1,350
Opening and closing = $1,100
Additional gas and electrical costs TBD
Direct cost = $2,450
Now what may the benefits be? They certainly are more intangible:
1. Less recreational expense as entertainment may be at home - savings $60/weekend $1,080
2. Ability to host parties for friends and family (hmmm is this an additional cost?)
3. Increased social benefits - friends tend to visit your country house with the pool more often - convience and city parking saved
4. Pleasure of swimming for the whole family
5. Certainty that if anyone is peeing in the pool, at least it's a family member
6. Reduced need for weekend get aways (your pool and backyard are your getaway) - two trips at $150/night (min. with kids) + gas = $350 x2 = $700
Total Benefit $1,780
Still about $670 difference. Is the convenience and social benefit worth it? I'd say so.
What are your thoughts? Is a swimming pool something you can cost justify?
It's almost impossible to justify building one, but purchasing a house with one already installed might be a good deal. The numbers would be very upside down if you had to incorporate amortizing the actual pool.
Regards, makingourway
Friday, May 18, 2007
insurance for the new house
I spent quite a bit of time today talking with an insurance broker. Home owners insurance for "very expensive houses" is truely quite expensive.
Chub and Atlantic Mutual are two of the players commonly considered.
Typical deductibles start at $5,000.
Overall premiums are about $3,000 for the year. Overall at least 25% more expensive than my NC house (which also includes a very expensive wind insurance policy). On the other hand, my Chicago house does cost twice as much.
Both players want you to insure your automobiles with them as well. Atlantic gives a 10% deductible.
Both companies are allegedly much more flexible when it comes to claims.
One thing for sure is the amount of default (included) coverages are much more generous. Usually $5,000 - $10,000 for jewelry. $5,000 for furs, etc.... Very impressive differences.
Both companies have great reputations, but Chubb is the gold standard for higher end properties.
I'm still trying to resolve the flood claim from several years ago -- it's with one of the main line carriers. I have a feeling Chubb would have been much better.
A friend of mine is a claims manager for an insurance company. He's offered to help me package and finish the claims submission. I'm quite excited.
Regards, makingourway
Chub and Atlantic Mutual are two of the players commonly considered.
Typical deductibles start at $5,000.
Overall premiums are about $3,000 for the year. Overall at least 25% more expensive than my NC house (which also includes a very expensive wind insurance policy). On the other hand, my Chicago house does cost twice as much.
Both players want you to insure your automobiles with them as well. Atlantic gives a 10% deductible.
Both companies are allegedly much more flexible when it comes to claims.
One thing for sure is the amount of default (included) coverages are much more generous. Usually $5,000 - $10,000 for jewelry. $5,000 for furs, etc.... Very impressive differences.
Both companies have great reputations, but Chubb is the gold standard for higher end properties.
I'm still trying to resolve the flood claim from several years ago -- it's with one of the main line carriers. I have a feeling Chubb would have been much better.
A friend of mine is a claims manager for an insurance company. He's offered to help me package and finish the claims submission. I'm quite excited.
Regards, makingourway
Sunday, April 29, 2007
a guestimate of future cash flows and networth
Reviewed our networth update. Still looks good - better than I thought - close to $100k gain by end of month (4/30). This summer will eat a good amount of that if markets are static or negative. I'll post the monthly tomorrow.
Yesterday was the first day where most of my advanced transactions were available for September. I accelerated entry of a few and finished out the month.
June through August will be a challenging period as I'll be the only one working, we'll be in a new house and my wife will be travelling on holiday. Bad combination for the cash conscious. Especially after the few months my wife took off 2006. We just came back and now it's going back out!
I've put in an expected monthly outflow for two mortgages. The current house is easy - I'm already paying that. The new house is more challenging as the closing hasn't occurred yet - so I'm estimating.
I estimate my tax benefit for the mortage interest to be about 1/3 of the mortgage payment - 10% (buffer). I expect the tax benefit for the property tax to be about 1/3. I reduced the estimated mortgage payment by the resulting benefit numbers to understand the net monthly outgoing cash flow, but this ONLY WORKS, if I talk with my accountant and reduce withholding accordingly.
I will attempt to do that tomorrow. Better to make the adjustment as soon as possiblee.
The bottom line:
If I get the tax breaks I expect:
$1,600 per month saved while making two mortgage payments
$4,400 per month saved when making only one mortgage payment (after original house sold)
The challenge:
My cash reserve will take a huge hit and be converted to illiquid home equity.
It will further be depleted by $25,000 to cover expense gaps while I'm the sole provider.
The reserve:
I'll still have about $46k in backup accounts and about $89k in non-retirement equity, but will try as hard as possible to touch very little of it, as the expenditures will not be converted to equity.
New expenses:
New expenses will be interesting. We'll have to gate off an access area to the swimming pool, open it for the season and maintain it weekly.
Not sure what other expenses will hit us, but some decorations always do, like window treatements. Lots of windows in this house...makes me worry.
I have a few potential avenues for additional tax, such as old business expenses reimbursement, flex spending accounts, etc.... I also have an old insurance claim being resolved. These can add to our situation. Am wondering what effect they have.
I could completely skimp on meals while travelling to save the per diem, big quality of life hit, but might do it. Maybe, I'll lose weight? It would suck to work as hard as I do (12 hours plus) to save $38 - $58 per day, but it does add up.
The good news is that:
a. We can cover both our mortgages
b. We have a chance to still save money
c. Once we sell the old house, we'll save a decent amount per month
Regards,
makingourway
Yesterday was the first day where most of my advanced transactions were available for September. I accelerated entry of a few and finished out the month.
June through August will be a challenging period as I'll be the only one working, we'll be in a new house and my wife will be travelling on holiday. Bad combination for the cash conscious. Especially after the few months my wife took off 2006. We just came back and now it's going back out!
I've put in an expected monthly outflow for two mortgages. The current house is easy - I'm already paying that. The new house is more challenging as the closing hasn't occurred yet - so I'm estimating.
I estimate my tax benefit for the mortage interest to be about 1/3 of the mortgage payment - 10% (buffer). I expect the tax benefit for the property tax to be about 1/3. I reduced the estimated mortgage payment by the resulting benefit numbers to understand the net monthly outgoing cash flow, but this ONLY WORKS, if I talk with my accountant and reduce withholding accordingly.
I will attempt to do that tomorrow. Better to make the adjustment as soon as possiblee.
The bottom line:
If I get the tax breaks I expect:
$1,600 per month saved while making two mortgage payments
$4,400 per month saved when making only one mortgage payment (after original house sold)
The challenge:
My cash reserve will take a huge hit and be converted to illiquid home equity.
It will further be depleted by $25,000 to cover expense gaps while I'm the sole provider.
The reserve:
I'll still have about $46k in backup accounts and about $89k in non-retirement equity, but will try as hard as possible to touch very little of it, as the expenditures will not be converted to equity.
New expenses:
New expenses will be interesting. We'll have to gate off an access area to the swimming pool, open it for the season and maintain it weekly.
Not sure what other expenses will hit us, but some decorations always do, like window treatements. Lots of windows in this house...makes me worry.
I have a few potential avenues for additional tax, such as old business expenses reimbursement, flex spending accounts, etc.... I also have an old insurance claim being resolved. These can add to our situation. Am wondering what effect they have.
I could completely skimp on meals while travelling to save the per diem, big quality of life hit, but might do it. Maybe, I'll lose weight? It would suck to work as hard as I do (12 hours plus) to save $38 - $58 per day, but it does add up.
The good news is that:
a. We can cover both our mortgages
b. We have a chance to still save money
c. Once we sell the old house, we'll save a decent amount per month
Regards,
makingourway
Tuesday, April 24, 2007
thoughts on our financial situation
My wife and I have been reviewing our imminent financial situation.
As mentioned, we'll be moving to Chicago to a much more expensive house.
My wife will take a few months off before returning to work - one income for a while.
Understanding our pending finances is still a bit of a mystery:
* my wife's salary will be different after taxes
* we'll have substantial mortgage interest, which may increase our take home pay
* we'll have new expenses for the new house - the actuality of these expenses are tbd
* we'll have maintenance expenses for the old house - uncertain what that will be or how much matinenance costs will be
Our current house is on the market, but moving very slowly. I'm expecting the mortgage for the old house to eat substantially into our monthly savings.
The real challenge will be understanding our actual monthly net once tax adjustments and new living expenses are factored in.
I've set Quicken to enter repeating expenses (and placeholder expenses)for several months in advance, however, I'll need to wait a bit longer before I can see the actual cashflow impact of the new mortgage once my wife returns to work.
Later this month I'll request that our accountant analyze our tax situation to determine withholding adjustments. I assume both mortgages will be fully deductible, but I have a sneaking subscription there will be only a partial deduction.
With our significant tax obligations this year and the downpayment for the new home pending, I'm fairly uncomfortable with our diminished cash reserve. Once I have a better understanding of our monthly overhead I can calculate how long the new reserve will last.
With such uncertainty regarding our reserves, my wife and I have agreed to delay spending money decorating the new house. The most I expect is to install venetian blinds, if necessary.
I'm very tempted to install a computer network, however, I'll have to put it off until our cash situation is measurable and we're comfortable with it.
At this point, I'm fairly certain we're over-paying income tax. We should be able to reduce future withholdings to offset the over payment. I suppose we'll see where things are at in a few weeks.
Regards, makingourway
As mentioned, we'll be moving to Chicago to a much more expensive house.
My wife will take a few months off before returning to work - one income for a while.
Understanding our pending finances is still a bit of a mystery:
* my wife's salary will be different after taxes
* we'll have substantial mortgage interest, which may increase our take home pay
* we'll have new expenses for the new house - the actuality of these expenses are tbd
* we'll have maintenance expenses for the old house - uncertain what that will be or how much matinenance costs will be
Our current house is on the market, but moving very slowly. I'm expecting the mortgage for the old house to eat substantially into our monthly savings.
The real challenge will be understanding our actual monthly net once tax adjustments and new living expenses are factored in.
I've set Quicken to enter repeating expenses (and placeholder expenses)for several months in advance, however, I'll need to wait a bit longer before I can see the actual cashflow impact of the new mortgage once my wife returns to work.
Later this month I'll request that our accountant analyze our tax situation to determine withholding adjustments. I assume both mortgages will be fully deductible, but I have a sneaking subscription there will be only a partial deduction.
With our significant tax obligations this year and the downpayment for the new home pending, I'm fairly uncomfortable with our diminished cash reserve. Once I have a better understanding of our monthly overhead I can calculate how long the new reserve will last.
With such uncertainty regarding our reserves, my wife and I have agreed to delay spending money decorating the new house. The most I expect is to install venetian blinds, if necessary.
I'm very tempted to install a computer network, however, I'll have to put it off until our cash situation is measurable and we're comfortable with it.
At this point, I'm fairly certain we're over-paying income tax. We should be able to reduce future withholdings to offset the over payment. I suppose we'll see where things are at in a few weeks.
Regards, makingourway
Monday, March 12, 2007
We made a housing decision...the expensive one
Well...we made a decision...the expensive one. Actually, we spent an inordinate amount of time last week looking at many houses.
We ranged the top houses and listed the top five best houses. Their prices ran from $750k to $850k to $950k to $1.2M and another in between. On our last day of looking we decided to look at one more house that had just come on the market.
Boom - it hit us! This was the one. Beautiful house. Very large. Lots of bed rooms - more than enough space for in-laws, children and a nanny! Great neighborhood. Not the most expensive house in the area. Phenomenal school system. Very safe. Costco not too far away. Not too far from my wife's office and from mine. Seems perfect. Unfortunately, it's $1.1M, which is a bit past our comfort zone. We won't have to do anything right away.
We ran the numbers quickly. Decided we could afford it. We put an offer in. Less than what the sellers want, but more than what we would love. We'll see what happens over the next few days. It certainly will be interested.
On the trip home, we ran the numbers again. Our new budget has quite a few assumptions about taxes and paychecks. I'll need to run through the numbers with my accountant to get a more solid idea. The key point is that we should still be able to save some money each month - in addition to a very generouse reserve for household maintenance, accrual for vacations and assumptions for regular spending.
We also anticipate income increases (if I can keep my job - so far everything looks good), which will increase our rate of savings. However, we certainly won't be able to maintain our current savings rate due to the doubling in housing costs.
The real challenge - although a controlable and measurable one - is managing expenses between the period of the move and when my wife starts her new job. We'll have about 3 months without her portion of our monthly earnings. We'll manage, but it will be painful.
I'll have to draw up a detailed cash flow plan before we're comfortable with everything that's happening.
We do adore the house and are very excitied about the possibility. The next step is seeing if they accept our offer - I expect they will counter a bit.
If timing weren't everything ... I have a major presentation to our joint venture partner's CEO coming up (several weeks ahead of schedule). At the same time I'll need to arrange for building inspection, etc.... Sometimes life can suck despite a rosey future!
Regars, makingourway
We ranged the top houses and listed the top five best houses. Their prices ran from $750k to $850k to $950k to $1.2M and another in between. On our last day of looking we decided to look at one more house that had just come on the market.
Boom - it hit us! This was the one. Beautiful house. Very large. Lots of bed rooms - more than enough space for in-laws, children and a nanny! Great neighborhood. Not the most expensive house in the area. Phenomenal school system. Very safe. Costco not too far away. Not too far from my wife's office and from mine. Seems perfect. Unfortunately, it's $1.1M, which is a bit past our comfort zone. We won't have to do anything right away.
We ran the numbers quickly. Decided we could afford it. We put an offer in. Less than what the sellers want, but more than what we would love. We'll see what happens over the next few days. It certainly will be interested.
On the trip home, we ran the numbers again. Our new budget has quite a few assumptions about taxes and paychecks. I'll need to run through the numbers with my accountant to get a more solid idea. The key point is that we should still be able to save some money each month - in addition to a very generouse reserve for household maintenance, accrual for vacations and assumptions for regular spending.
We also anticipate income increases (if I can keep my job - so far everything looks good), which will increase our rate of savings. However, we certainly won't be able to maintain our current savings rate due to the doubling in housing costs.
The real challenge - although a controlable and measurable one - is managing expenses between the period of the move and when my wife starts her new job. We'll have about 3 months without her portion of our monthly earnings. We'll manage, but it will be painful.
I'll have to draw up a detailed cash flow plan before we're comfortable with everything that's happening.
We do adore the house and are very excitied about the possibility. The next step is seeing if they accept our offer - I expect they will counter a bit.
If timing weren't everything ... I have a major presentation to our joint venture partner's CEO coming up (several weeks ahead of schedule). At the same time I'll need to arrange for building inspection, etc.... Sometimes life can suck despite a rosey future!
Regars, makingourway
Sunday, March 11, 2007
so many houses
We've spent the last few days looking at houses in Chicago.
After the first five they all tend to blend together.
With my wife's help, we have a top four list.
Prices tend to run from $740k to $1.2M.
At the moment, interest is picking up with the spring thaw, yet there are stil lvery many houses on the market for 6 months plus.
We're expecting comps for the top 4 later tonight. We'll probably make an offer this week.
I'm kicking myself for not being pre-approved for a mortgage before beginning the search, however, we have a regular repeat relationship with our mortgage broker so it should move fairly quickly.
We are wondering what our finances will look like after a move to Chicago. The key issues are:
1. new expenses - not sure what all of them will be
2. net cash earnings from salary - we've been making accelerated 401k contributions and don't know our normal post tax payments
3. actual cost of housing - prices vary by $400k - what will it really cost
4. my wife will take time off before starting new job - how will that impact us in terms of cash flow
5. moving costs (Big Company and my wife's new employer will pick up most of the costs)
The big issue now is this question:
Do you buy a $750k house that is in good shape, but would benefit from $150k in improvements OR
Do you buy a $950k house that's in great shape, but you'd like to spend $50k changing the kitchen?
Your thoughts and recommendations?
Oh, btw, I have learned that the houses I would truely prefer frun between $2M - $4M. I have a loooong way to go.
Regards,
makingourway
After the first five they all tend to blend together.
With my wife's help, we have a top four list.
Prices tend to run from $740k to $1.2M.
At the moment, interest is picking up with the spring thaw, yet there are stil lvery many houses on the market for 6 months plus.
We're expecting comps for the top 4 later tonight. We'll probably make an offer this week.
I'm kicking myself for not being pre-approved for a mortgage before beginning the search, however, we have a regular repeat relationship with our mortgage broker so it should move fairly quickly.
We are wondering what our finances will look like after a move to Chicago. The key issues are:
1. new expenses - not sure what all of them will be
2. net cash earnings from salary - we've been making accelerated 401k contributions and don't know our normal post tax payments
3. actual cost of housing - prices vary by $400k - what will it really cost
4. my wife will take time off before starting new job - how will that impact us in terms of cash flow
5. moving costs (Big Company and my wife's new employer will pick up most of the costs)
The big issue now is this question:
Do you buy a $750k house that is in good shape, but would benefit from $150k in improvements OR
Do you buy a $950k house that's in great shape, but you'd like to spend $50k changing the kitchen?
Your thoughts and recommendations?
Oh, btw, I have learned that the houses I would truely prefer frun between $2M - $4M. I have a loooong way to go.
Regards,
makingourway
Wednesday, March 07, 2007
looking at houses in Chicago
My wife is driving the real estate search.
We have about 40 houses to look at. Some are tier 1 (most interested), tier 2 (interested), and tier 3 (maybe). Our realtor has offered to review the tier 3's to see if we should spend time looking at them.
We'll visit Chicago this coming week and look at the houses over 3 days. We've planned to take our eldest, however, my wife is worried the rapid pace will be too much for him. I know he'll be disappointed and I'll miss him horribly, but it might not be fair to drag him around through such an aggressive schedule.
I'm expecting a Chicagoland house will cost about $850,000 - $1,050,000. Somehow I just don't feel comfortable spending more than $1M. I've heard there are formulas you can use to calculate how much house you should own. Some say never buy more than twice your income; i.e. a salary of $100k should buy a $200k or less house. Others say limit mortgage and related payments to 25% of your income (or less).
One of the questions is whether we should look for a larger lot - perhaps in a less densely populated neighborhood with 1-2 acres OR a smaller lot - about 1/4 acre - in a more densely populated area. The smaller lot approach assumes neighbors would have children in adjacent back yards, etc.... Would more neighbors in closer proximity increase the number of playmates for our young children?
I doubt our house in North Carolina will sell for much of a profit, if any. It's probably worth about $500k +/- $20k. We've barely lived in it for a year. The greatest challenge will be absorbing the broker's commission cost. The rule of thumb seems to be about 7% for commissions, transfer taxes, etc.... I'm skeptical we'll arrive where we need to be to break even - though we might get lucky. I need to budget for several months duplicate mortgages - the thought is very depressing. We may also be in a situation where our buyers in NC ask for a contingency on the sale of their home - I really don't like that - it locks up our house without a buyer's commitment.
We need to find the new house by May and would hope to move into it in June. That will be a truely interesting experience. Big Company and my wife's employer will both help with the move. I wonder how much we'll have to personally throw in after it happens.
Regards, makingourway
We have about 40 houses to look at. Some are tier 1 (most interested), tier 2 (interested), and tier 3 (maybe). Our realtor has offered to review the tier 3's to see if we should spend time looking at them.
We'll visit Chicago this coming week and look at the houses over 3 days. We've planned to take our eldest, however, my wife is worried the rapid pace will be too much for him. I know he'll be disappointed and I'll miss him horribly, but it might not be fair to drag him around through such an aggressive schedule.
I'm expecting a Chicagoland house will cost about $850,000 - $1,050,000. Somehow I just don't feel comfortable spending more than $1M. I've heard there are formulas you can use to calculate how much house you should own. Some say never buy more than twice your income; i.e. a salary of $100k should buy a $200k or less house. Others say limit mortgage and related payments to 25% of your income (or less).
One of the questions is whether we should look for a larger lot - perhaps in a less densely populated neighborhood with 1-2 acres OR a smaller lot - about 1/4 acre - in a more densely populated area. The smaller lot approach assumes neighbors would have children in adjacent back yards, etc.... Would more neighbors in closer proximity increase the number of playmates for our young children?
I doubt our house in North Carolina will sell for much of a profit, if any. It's probably worth about $500k +/- $20k. We've barely lived in it for a year. The greatest challenge will be absorbing the broker's commission cost. The rule of thumb seems to be about 7% for commissions, transfer taxes, etc.... I'm skeptical we'll arrive where we need to be to break even - though we might get lucky. I need to budget for several months duplicate mortgages - the thought is very depressing. We may also be in a situation where our buyers in NC ask for a contingency on the sale of their home - I really don't like that - it locks up our house without a buyer's commitment.
We need to find the new house by May and would hope to move into it in June. That will be a truely interesting experience. Big Company and my wife's employer will both help with the move. I wonder how much we'll have to personally throw in after it happens.
Regards, makingourway
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