A crazy idea
Posted on | October 28, 2008 |
So I had a positively crazy idea the other day.
Given the housing market crisis that is likely impending, i was thinking about selling our house now, rather than waiting until we start into the construction of the new house. The theory is that if the market does tank (even a percentage of the tankage of the US market would be detrimental to our plans), then we will have pocketed a larger portion of the profit on our house.
All along, we’ve been expecting to net at least $70,000 (hopefully closer to $100,000) on our house, given what similar houses on our street have sold for, the quality of our landscaping and the remainder of what we owe on our mortgage. This, in addition to whatever we’ve paid into the purchase of the lot would serve as the down-payment on the new house. Our total budget for the new house is around $300,000. If we can manage to put down a third of that, our new mortgage payment should be close to what we’re paying now, plus we won’t have any heating costs to speak of due to the passive solar nature of the design. Win-win, right?
Back to the crazy idea. So we sell the house now, pocket a tidy profit and either invest it in a low risk GIC at 3-5% or pay down the land and other debt. Then, we move into an apartment in the city. Given the size of our family, we’d need a fairly large apartment. Three bedroom apartments in the Clayton Park area seem to be going for about $1,100/month and include heat and power. This would save us about $600/month over our current mortgage and oil bill. We would then pour this into paying down our land.
So, the pros of this idea would mainly be monetary, which is not necessarily always inline with lifestyle or family. However, my wife isn’t entirely opposed to the plan either. Being closer to the city would allow me to use my car less and ride my bike, run or walk to the office, saving on gas.
The cons are a bit numerous though:
- finding a big enough apartment that would allow us to save some money every month.
- finding a dog-friendly apartment. Giving Putney away is not an option, and he’s not a small dog.
- We’ll likely need to store a bit of stuff, so that adds an additional monthly expense (anyone know how much these cost?)
- Sam will need to drive back out to Hammonds Plains to work and drop off the kids at school/daycare. Her vehicle is bigger and less fuel efficient than mine, but at least shed’ be going against traffic. This also means that I would rarely be able to pick up or drop off the kids, which could be problematic.
Comments
8 Responses to “A crazy idea”
Leave a Reply
October 28th, 2008 @ 10:15 am
It could definitely work! It’d be one hell of an adjustment but hey, buying/selling/building houses is never a particularly smooth transition. If your family is on board and it makes sense financially, go for it!
You’re right though, the main difficulty will be finding a dog-friendly landlord. I haven’t heard of many locally but they must be out there…
October 28th, 2008 @ 10:56 am
Well, as a long term renter, I would say that the big downside to renting is that you can never recoup the money that you spend on rent. If you would only be renting for a short period of time, it makes sense, but if it ends up being years of renting, then that sounds like a lot of money that is just going to go to make someone else rich. Also, the amount of money that you would save on gas is peanuts compared to the loss via rent.
All-in-all it is an interesting dilemma, and I would love to see a spreadsheet that takes into account all the various changes in expenses vs. waiting to see what the housing market does.
October 28th, 2008 @ 11:02 am
When I moved from house to apartment I rented a 12×10 storage unit at Metro Self Storage in Burnside. The cost was close to $120/month. I think $1/sq.ft. is a safe estimate for cold storage.
October 28th, 2008 @ 11:06 am
I wish it were possible to know exactly what kind of loss in resale the downturn would have on the value of our house. That’s the biggest unknown here and the hardest thing to account for.
Thanks for the comments so far, it’s definitely helping me to make up my mind.
October 29th, 2008 @ 9:12 am
Jeff, I’d say the apartment is a bad idea. An outdoorsy family of five and a dog? You’ll go nuts (at least my family would). Renting a house on the outskirts of the city might run you a bit more but at least you’ll have some sort of yard and possibly a shed or a basement for storage. A few extra k’s for cycling isn’t a bad idea either!
October 31st, 2008 @ 4:10 am
Hey Jeff, sounds like you have alot to think about…I agree with Oliver. I think you’d all go nuts in an apartment and I’m fairly sure you wouldn’t find one that would allow you to keep Putney. I think you will definitely rest easier knowing that your mortgage payments won’t need to be made using your organs!
Why not just scrap it all and move to the passage?!
Love ya….Kid
February 16th, 2009 @ 7:47 pm
Something to consider before you sell is the financing through the banks. Make sure your banker is aware of your plan because they are reluctant to lend money without real property that they can put their hands on meaning your old house. The problem they have with new construction is the builder has first right to the new home if things go south. Aside from that, your builder will want draws on the construction up front and the bank expects you to provide that. They provide the draws at the end of each stage. I made the mistake of taking my equity and purchasing my land outright instead of mortgaging the land. When it came time to pay the first draw to the contractor I was shocked by the banks refusal to lend me money even though I was approved for $300,000. I had to get bridge financing to pay the contractor before he would start. $$$
I am in BC so things might be different there, i haven’t lived in NS for 12 years.
By the way - I got to your site because I was searching for Don Roscoe. He designed a friends house in Chester Grant and I was looking for tips. Good Luck! You are in for an adventure. Great site!
February 16th, 2009 @ 7:52 pm
Thanks for your comment, Robert. That’s a pitfall we’ll watch out for as well!