Hi,

 

I am a single mother by choice of 2.5 year old twins and I plan to adopt a third child within the next 7 months. I live in a 3 bedroom, 2 bathroom 1,500 sq ft house and my mom moved in to help me with my sons. So, there are 4 of us in 3 bedrooms and soon to be 5! I make $240K/yr and I have no debt except for the mortgage. I save 25% of my income for retirement. I can pay off the mortgage in 3 years.  I have not started saving for my kids' college yet. My thought is to do that once I stop paying for the nanny and they attend kindergarten. 

The home has barely appreciated since I bought it  12 years ago (+ $75K in 12 years) because the neighborhood is a cookie-cutter one with all the houses looking the same. It is a great place to live and has A+ schools, close to the beach, parks and a big swimming pool. My only issues are that the house isn't going up in value and it will soon be too small.

I am thinking of purchasing a new, larger home that is walking distance to the beach, with A+ schools and similar commute to work. However, part of me is very excited to be debt free. The other part of me realizes that it is likely that I will be priced out of the real estate market closer to the beach and I would like to start getting more appreciation on a home.  I will likely need to get a new car, too, to fit three car seats. I have figured out how much a third child will cost for food, nanny, medical, etc and I have adjusted the amount of home I can buy to accommodate these extra expenses....I am struggling with being close to debt free, close to being priced out of the market near the beach and wanting to give my kids more space. HELP!

Original Post

I know this isn't the most helpful response, but it really depends on what you value the most. Would you rather be debt free or have a larger home in an area where your property may appreciate faster?

Staying in your current home makes a lot of sense so you don't have that additional expense on top of the other upcoming costs (a new car, adoption fees, additional child care, other child-related expenses). Do you think there's a way to make space in the home you have now? Is your mom living there temporarily or permanently? Could the kids share the same room? Is there an unused dining room or garage that could be converted into an additional bedroom?

Debt free living is wonderful, but if the lack of space would drive you crazy, buying a larger house may be the better option. Your salary, savings and lack of non-mortgage debt makes it seem like you'd be a good candidate for a new home in the area you desire. You'd just be stuck paying a mortgage loan for longer than you'd like.

Given that you seem to be very adept at analyzing your finances & pursuing your financial goals, I don't think I have anything to contribute to that side of the decision.

However, I am of the opinion that children need their own space, especially as they get older! 5 people, 3 of which are children, in a 3-bedroom home is too tight. & if you will be priced out if you don't make the move now, I see it as a smart move in the long term. It will give your children the space they need to grow & thrive!

All else aside, I advocate to make the move! Less space for kids is a sacrifice that, if given the choice, you should avoid. The benefits of moving to a larger home to their well-being far outweigh the benefits of remaining in your current home. 

I would start with one question.  Of all the things you own, which other one has appreciated 75K in 12 years?  Any thoughts of keeping that home, purchasing one nearby and allowing your Mother to live or rent your current home from you?  With your annual income, Uncle Sam is likely getting a fairly healthy good bite out of that. 

I happen to be a proponent of real estate acquisitions for investment, but I also readily admit it is a lot of work and can be a challenge.  Without knowing the current value of your present home, can you figure the annual percentage of that increase over 12 years? The average stock investment return in a good market is about 6%.

Rental property can offer tax write offs and deductions, an income stream to offset your debt and if you find your time to manage is limited, a good and reliable property manager can relieve some of your headaches.

Lately, I've been considering the possibility of purchasing something to use as an AirBnB because I love the concept.  Being near a beach would be perfect, as long as your zoning ordinances and any homeowners assoc allow short term rentals.

 

Nicole D. posted:

I know this isn't the most helpful response, but it really depends on what you value the most. Would you rather be debt free or have a larger home in an area where your property may appreciate faster?

Staying in your current home makes a lot of sense so you don't have that additional expense on top of the other upcoming costs (a new car, adoption fees, additional child care, other child-related expenses). Do you think there's a way to make space in the home you have now? Is your mom living there temporarily or permanently? Could the kids share the same room? Is there an unused dining room or garage that could be converted into an additional bedroom?

Debt free living is wonderful, but if the lack of space would drive you crazy, buying a larger house may be the better option. Your salary, savings and lack of non-mortgage debt makes it seem like you'd be a good candidate for a new home in the area you desire. You'd just be stuck paying a mortgage loan for longer than you'd like.

Thank you for your input. Your reply gave me the inspiration to think creatively about my home, like could I convert the dining room or convert the attic into another room. Thanks for sparking my creativity!

2.1% seems a bit shy to me too, but if you become interested in either selling or renting, I would recommend setting appointments up with 2-3 real estate agents who do a lot of business in your immediate area, that being either your immediate neighborhood or community. They can do a comparative market analysis and most do it without charge in hopes they will obtain your business, selling or buying. If you decide to keep the house and lease, the analysis will also give you a good base line for down the road.

Some people use county or city assessed amounts from the tax assessors office to determine sales price, and that is a very very inaccurate way to determine current market value.  I my area of FL for example the assessed values are historically way lower than market value.  So start with either a good appraisal (you will pay for and meet with an appraiser at your home) or at the least a good market analysis from a real estate agent who will walk thru your home and ask you questions. 

You may already know this, so posting some pathways helps those who might be making decisions, as well.

A mortgage company can let you know if you can qualify for an additional mortgage while keeping your current residence.  They will also let you know if you will need to consider the 2nd purchase as an investment property or if you can claim it as your primary and leave the current home as an investment without owning the home free and clear.

Lots to think about!  It appears you have several options to choose from and good luck!

 

 

 

 

 

 

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