I thought that our current home would be a long-term purchase, but I’ve been having second thoughts. I never wanted a primary home to be a significant portion of our net worth, so I bought a cheap house ($175,000 in June of 2013). I spent a whole lot of time (4-year slog) and $100,000 fixing it up which increased its value. At the same time, Boulder County prices went bonkers. The home is now worth $550,000. I didn’t see this coming.
We have $450,000 in equity and I don’t like this one bit. The $450,000 isn’t working for us. It just sits there tied up in wood studs, tile, light bulbs and toilets. While those toilets serve a crucial purpose, they aren’t earning money. I can’t rent the toilets out. I can’t send them to work. They do make me smarter (reading time), but that’s a topic for another post. Or not. I digress.
Mrs. 1500 note: OMG, really? You can’t make it through one post without toilet comments???
I don’t believe our home will continue to appreciate like it has for the past 4+ years, so the money would be better off elsewhere.
I also don’t subscribe to the myth that homes are a wonderful investment. I bought it because I knew I could put some sweat equity into it and increase the value. Deep down, we’re really long-term, live-in flippers.
Garages, Yards and Crapcycles
I like our house and neighborhood, but I don’t love either of them:
I’d like a bigger garage: It would be fun to have a workshop to carry on my mad scientist experiments. You really can’t have too much garage in life.
A bigger yard would be nice too: I have a tiny yard. I’d love to have a bigger one. Of course, every man wants a bigger yard. Some will tell you that it’s not about the size of the yard, but how you use it. I don’t care. I want a bigger one.
Mrs. 1500 note: Totally agree on this one. Our yard is about 9 square inches.
Mr. 1500 note: Sigh…
I’d like to live in an area with a lower density of rentals: We have a lot of rentals on our street which makes for a transient population of folks who don’t care as much. Most of the renters are nice enough, but the house across the street is a rental and the landlord isn’t picky. The current tenants are fine, but the last ones were not. When they moved out, they left behind piles of animal waste and junk they picked up on Craigslist including a fleet of crapcycles:
Side note: A couple rentals have sold recently. Every time the for-sale sign goes up in the yard, I’m hopeful that a homeowner buys it:
They’re asking $275,000 for a home that brings in $1,200 in income per month. Surely, these numbers don’t make sense to an investor! A homeowner will buy it.
But then another landlord buys it anyway. Why?!???
Option #1: Cash-out refi: I’m completely against paying off the house. That would just add to the problem. Our mortgage is only 3.25%, so we’re borrowing cheap money.
However, I’ve considered doing the opposite; a cash-out refi. We already have a HELOC ($200,000), but that is a floating rate. A cash-out refi would lock us in. Rates are going up, so it’s now or never.
Mrs. 1500 note: I’m on board with this option. I don’t like having all that equity sitting in the house, doing nothing for me.
Option #2: Rent a room: We have 4 bedrooms and only 3 of them are regularly used. We could put the 4th one on Airbnb.
Mrs. 1500 note: Less enthused with this option, as we have small children.
Option #3: Buy elsewhere: We could move to a cheaper part of town or to a new area altogether. I could get the same home 15 miles away for half the price. I’m not a fan of the latter option because I don’t want to uproot the children.
Mrs. 1500 note: This is NOT happening. I have never, in my whole life, lived in one house for more than 5 years. I’m hitting the 6-year mark on this house. And the 7, 8, 10, 20…
Option #4: Rent: We could sell and then rent our next place. I’m slightly leery of this, especially in our own neighborhood. Our 4 bedroom, 3 bathroom home costs us $1,250/month (mortgage, taxes and insurance). Half of a duplex on our street (850 square feet, 2 beds, 1 bath), costs $1,300/month to rent. Of course, we’d have that $400,000 in principle working for us, so maybe it’s dumb to worry about rising rents?
Mrs. 1500 note: This is the dumbest suggestion yet. I’m NOT renting.
Option #5: Move to a trailer park: Mrs. 1500 and I recently bought a trailer park. These are incredibly cheap to live in. I’ve already proposed the idea of moving to our park. Mrs. 1500 was not agreeable:
Mrs. 1500 note: Oh look, an idea even stupider than the last one. No.
Option #6: Call it a day and stay put: Why did I ask this question? What is the whole point of this exercise? More money of course.
At the time of this post:
- I have $1,528,000 in investments.
- I have $450,000 in home equity and $65,000 in other crap.
- I have income from this blog and from Mrs. 1500.
Mrs. 1500 note: You have income from me?
Mr. 1500 note: Yes. You are a wife and a profit center.
Per the 4% Rule, I could spend $60,000/year and be OK. Per my own rules, I think that I could spend 6% ($90,000/year) and still be OK. We only need $40,000 to live on. So, I have backup plans for my backup plans.
Maybe I should just take my own advice, declare that I have Enough and stay put.
Mrs. 1500 note: This one. Choose this one!
The desire to earn money is something that I struggle with. I don’t want anything else in life, but the game of making money is fun.
Do you have a lot of equity in a home? If so, does it drive you crazy?
Or, do you rent? If so, how do you like that?
Do you have enough money, but still try to make more for no reason like me?
One more thing
Mrs. 1500 note: Plus, I’ll be there. If you’d like to talk about how real estate is an EXCELLENT investment, apparently I’m the only 1500 that thinks it’s a good idea.
Mr. 1500 note: Is your plane ticket refundable?
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