Reflections on Homeownership: 4.5 Years In

 

Life was so busy this summer that I forgot to write my annual reflections on homeownership post, so here I am at 4.5 years in instead. I cannot believe that I am coming up on my five year anniversary of buying this wonderful condo come this spring! This fall marks 5 years since I started looking for a piece of real estate to buy.

There have been many discussions lately over the fact that in today’s hot real estate markets, you need to decide pretty quickly whether you are committed to spending several hundred thousand dollars on a particular piece of real estate. Yet, every week it seems we discover something new and fascinating about this condo in which we live.

Lately, one question has been “How much did I really think through this neighborhood selection?” Within a mile radius, we have what I thought was pretty much everything one needed: a post office, courier services, multiple grocery stores, a library, a drug store or two, a hair salon, barber shop(s), a gas station, park(s), and multiple restaurants. Yet, whenever we want to go to a restaurant, our first choices are never the local ones, which results in Uber’ing to another neighborhood. There is no takeout in the area that I like. (Is that a good thing or a bad thing? Probably not so bad for the wallet.) Our friend in the nearest proximity is a full mile away. It is pretty easy to get downtown and it’s easy for friends to park near us if they drive to visit. The commute to my job at the time was pretty good, as it is to my husband’s job, but my commute to campus is a bit inconvenient, as was my commute to my last job.

We finally finished the furniture tetris game I mentioned last time we talked about my ideas on homeownership. We now have furniture that we both love and that we chose together. We repainted many rooms. We’ve decorated together. It really solidly feels like our place. It is wonderful. Our home brings us joy again.

A realtor told me that they would list this condo of mine for ~45% more than what I paid for it. Two more years or so and that would run up against the $250,000 single capital gains exemption for home value increases, though we may not need to worry about that as we got married and that increases the exemption to a ludicrous $500,000. (I’m unsure what exactly the requirements are to qualify for the married exemption over the single one, however.)

In 2016, this condo cost a whopping $14,000 in housing expenses (mortgage interest, HOA dues, property taxes, condo insurance, electricity, repairs, interest lost from having the equity locked up, and tax savings).

I was pretty conservative in my calculations when I bought this place, which has now put my husband and I in the situation where our housing costs (including the full required mortgage payment of which only the interest is included in the $14,000 figure) are around 6% of our combined gross income in 2016. If you take out the principal portion of the regular payment, it’s even lower.

Perhaps I skipped the 4 year post back in the summer because we were super busy going to open houses every weekend. We were frustrated with our furniture tetris and unsure that we would ever figure it out, so we became convinced that we might need a larger place. This condo has two bedrooms and is relatively spacious in the lower 1000 sqft range, but we were not utilizing the space particularly well. With our then-existing furnishings, there wasn’t enough room for each of us to feel like we had personal space to pursue our home-based hobbies. The increasing market ranges mean that we would need to spend about 40-50% more than the value of this condo to get a three bedroom townhouse. We developed the mantra “Is this cheaper than moving?” (which is pretty much true for everything when your alternative is to spend several hundred thousand dollars) and we started trying new hypotheses. We hired an interior designer to help us refurnish the living room, who came up with ideas that we never would have. It was expensive, yes, but it sure was cheaper than moving. The designer asked us early in the process “How long do you plan on staying here?” and our answer was “So long as we stay in this city and don’t have children, quite possibly decades.”

Homeownership means that our lives revolve around our central home, rather than our home moving as our lives shift.

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19 thoughts on “Reflections on Homeownership: 4.5 Years In

    • Thanks! Haha yeah we both hate moving too :) I’m really glad my husband turned out to like this place because I really like it and never want to move! So many people deal with the separately owned condo by buying a bigger place together, so the way we’re doing it is certainly a bit stressful to sort out legally, but will be far cheaper in the long run.

  1. “(I’m unsure what exactly the requirements are to qualify for the married exemption over the single one, however.)”

    I don’t know if this was maybe tongue in cheek, but isn’t the only requirement that you be married?

    From http://www.nolo.com/legal-encyclopedia/the-250000500000-home-sale-tax-exclusion.html :

    There are certain additional requirements you must meet to qualify for the $500,000 exclusion. Namely, you must be able to show that all of the following are true:
    -you are married and file a joint return for the year
    -either you or your spouse meets the ownership test
    -both you and your spouse meet the use test, and
    -during the 2-year period ending on the date of the sale, neither you or your spouse excluded gain from the sale of another home.

    Nevertheless, the only reason to utilize it would be if you wanted to downsize / move to somewhere with less expensive properties so that you can throw the extra equity into your portfolio. It sounds like it would be difficult for you two to live in a smaller space since you were looking for something bigger – and with it being a convenient spot as well as such a small percentage of your income, why bother?

    As far as it being separate property, you can certainly modify the deed if you would feel it better about it being dual owned.

    • Thanks TJ. I hadn’t done the research simply because it wasn’t necessary yet – we’re still quite a ways from even the single exemption and also have zero plans to sell or move, as I described in the post. I was unsure whether we both needed to meet the ownership test – it looks like we simply both need to meet the use test, which we already have as my husband has lived here for two years this month.

  2. I think one of they best things about owning a home is always having that place to go back to. Knowing where you will rest your head at night is peace of mind.. even when you have to UBER to a different neighborhood for dinner.

    There are things I don’t particularly care for regarding my home.. However, it’s bought.. and will be paid for by the end of 2018. The transactional cost alone from buying and selling on the average of around 5-$10K each home is enough to tell me I don’t want to buy 4 or 5 different homes in my life time.. Buy 1 and make it work. Later on after a couple decades.. I’m considering buying another one, but for the specific purpose of having a more suitable home for later in life and retirement..

    You do have a smaller ish home as mine is 2200 sq ft and its full of just my stuff. I am a huge gear junkie in adventure sports so having that space was essential for me. But If you cut my house in half… I’m sure I could get creative.

    • Homes must be cheaper in your neck of the woods as it would cost me far more than that in transaction costs – about 30 grand based on my purchase price and even more based on today’s valuations. 2200 sqft is huge!! I thought 1200 sqft was huge when i bought this place by myself. Congrats that it will be paid off by the end of 2018 though – that’s only two years away now!!

  3. I do my pro/con list on our current location weekly, some weeks, when the neighbors are particularly annoying. There are things I do love about it now, but the equation changes when we step outside :)

    I love that your housing to income ratio is so incredibly low – that’s awesome. I didn’t know what our ratio was, I hadn’t thought about it, really, but I’m happily surprised to find that it’s actually somewhere 10% so that’s a nice thought to take into 2017 budgeting.

    • Weekly? That’s a bit too often ;) 10% is pretty good! Ours is between 6-10% if we only take into account my husband’s income (since I’m currently unemployed), which is still pretty good. Our combined income in 2016 though was more than the purchase price of the condo, though less than its current value.

  4. I love your last sentence and couldn’t agree more.

    Our housing ratio is a bit frightening tbh, especially if it’s only on one income. But as I told T (after he commented that he couldn’t believe what rents on similar houses nearby are) I’d rather pay a shitload in mortgage than a shitload in rent. That shitload in mortgage is more than rent on the exact equivalent would be, but that premium is worth it to me to have 1) pets 2) stability of tenure 3) some stability of cost 4) everything else that comes with ownership.

    Always amazes me how huge your properties are in the US – we are 80-90 square metres with 3 bedrooms which is well under 1000 feet by the looks of it.

    The main drag in my suburb/neighbourhood (2 min away on wheels) is not that flash – a crappy mall and some sad shops. But it’s perking up – there’s an amazing Malaysian place and a great new pub/casual eatery, among all the other options. And there are great options for meat, produce, fish etc. And not much further along is a giant huge road with lots of fast food etc and big retailers and supermarkets. One lot of shops has an amazing bakery, another great Indian food, another great sushi/Japanese and all are 1-5 mins drive. Great pizza can be had a couple of suburbs over. Just need a great ramen joint closer…

    Better schools and a bit better walkability would be great, but beggars can’t be choosers. Bus and train are still very accessible, the pony club is 5 mins away and it’s nice to walk by horses any time. We have forest paths and cycle ways in both directions, a dog agility park … can’t complain. We are in a lower socio economic area I guess you could say but I don’t feel unsafe, and literally just up the hill, same road, you get to the newer million dollar McMansions just a minute away. It’s interesting, being right on that boundary, basically.

    • Ownership certainly has its perks! I really enjoy your thoughts on homeownership. Your housing ratio might be frightening now, but assuming that you stay there for a while, it should hopefully get better with time. My housing costs have been pretty stable these last 4.5 years, far more than rent has been in this area.

      Whoa 3 bedrooms in < 1000 sqft? That sounds so tiny… We would actually prefer the same square footage that we have but with an extra bedroom drawn into the layout somewhere. It would provide a bit more personal space. We ended up portioning off a bit of the living room to provide one person with that space.

      It's really fun watching new restaurants and such pop up every few months or so and as ones come and go. I'm sure your neighborhood will evolve over time – perhaps the schools will be better by the time you care about that anyways.

      • I would say the average NZ 3bedroom house is 100 square metres, give or take – especially in the entry level bracket, and older houses, 80-90 sq m is pretty common. That’s just over 1000 square feet according to Google. Our houses definitely run small in comparison to the US. We’ve stayed in a LOT of people’s homes throughout North America and were totally wowed in every case by the size – kitchens, bathrooms and especially bedrooms. We have one double bedroom and 2 singles. You can barely turn around in the bathroom! Houses built in the last, oh, couple decades are typically bigger and more McMansion-y, like 50-100% more floor area (albeit on smaller land parcels mostly) but first home buyers can’t afford those kinds of houses.

        • I’m guessing to a certain extent the large homes you stayed in in North America are also newer builds because I’ve seen a lot of older houses that are smaller here too. There are two bedroom condos down the street from me that are closer to 65 sq m which seem tiny to me. Three bedrooms, even at a smaller square footage size, seems nice though – you get a bit more division of rooms at the very least.

  5. I still comb listings all the time but never find anything that overall I prefer in my price range. The brick cladding, large fenced section and own driveway are hard to find. Would love a garage though!

    • My husband would love a garage to store his bicycles over our inside one parking spot inside a condo parking garage that isn’t always the most secure. But moving just for that would be very expensive. Instead, he found secure bicycle storage elsewhere and rents a spot for it for < $50/month.

  6. I have been in my house for the last 12 years and I think we are going to probably move in the next 3-4 years. Isn’t it amazing how the things that we think are important when we first buy a place change over time.

    BTW…I have definitely been where you are with the furniture tetris. I owned the house that we live in before my wife and I got married. So she definitely had some different decorating ideas which caused us to rearrange a bunch of furniture over time.

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