Home Ownership: A Retrospective and Beyond

Goodbye Castle Doom

My wife and sold our home in early 2015, and we did it mostly to enable us to comfortably quit our jobs.

Although it’s a normal thing for people to downsize, it is most decidedly not typical for professionals in their late thirties to do it.

Most people in our age bracket are reaching the height of their earning potential, and are therefore moving in the opposite direction, discarding starter homes in favor of more costly accommodations.

Despite the recognition that Mrs. Doom and I should have been, according to the intersection of our investment account balances and cultural norms, upgrading from our castle to a full-blown palace, we went the other way, discarding our 1500 sq. foot house in an upscale suburb for a 1200ish apartment in a somewhat less special area.

This post details both the journey taken and the path ahead.

A quick note before we get started in earnest:  

This is not a generic post about how to buy/sell your house or downsize.  If you’re looking for reasonable advice on what to do yourself, consider checking out Mr. Money Mustache’s article on how to sell your house. This post instead simply an extended accounting of a) what we did ourselves b) some financial analysis of how home-ownership actually worked out over the years and c) related odds and ends.

Hey, it wouldn’t be a livingafi post if it didn’t run 6,000+ words and jump around multiple subjects, would it?

Buying Recap

It seems incomplete to talk about selling a place without describing the reasons driving the purchase.  So on that note, if you want to read a bit about it, check out this old post.

The summary reads like this:  My wife and I wanted to have a space to call our own as we built our lives together plus fix a broken commute situation while simultaneously acquiring a bit more space which might allow us to more comfortably raise children.

And so in early 2008, we bought our first and only home together, a 1500ish sq. foot place in the Newton-Needham-Wellesley area (i.e. the suburbs of Boston, MA, US) for the then-seemingly-ridiculous sum of 650K. I was convinced that because of the crazy fancy neighborhood that home prices would not go down over the mid to long term – and I wasn’t wrong.  Location, location, location, or something.

Deciding to Sell

Fast forward seven years to early 2015 and we made a firm commitment to unload our property because a) we realized we couldn’t have children so we had quite a bit of unused space, b) without jobs, there would be no more broken commute problem to fix, and c) we were interested in lowering yearly expenses to pursue early retirement.  Most of the reasons we’d originally had for buying had been blown to pieces as the years passed.

Note:  If you want additional details on point c) — I summarized the financial benefits to downsizing in this ancient post.

But all you really need to know is that it worked out to a 10K/yr or so difference in outflow per person (20K a year as a couple).

To fund that extra 20K a year of living expenses, we’d need to collectively have about 500K of additional assets by way of the 25x rule.  (As a basic rule of thumb, individuals typically need about 25K in investments to cover each 1K of annual spending in retirement.)

I’ll explain it in precise technical terms:  That’s a shit-ton of extra money to earn just to fund living in a particular house in a particular location for no particular reason.

At any rate, we reached the same conclusion that a whole lot of people reach when they’re considering leaving the workforce:  Moving to a more affordable place the safest thing to do financially.

Thankfully, there was absolutely no disagreement on this point between my wife and I. We’d also grown somewhat tired of the relentless upkeep.  So in early 2014 we began making plans to depart.

Prepping for the Sale

We had about a year to pretty things up before listing.  We took this as an opportunity to do some work to make it easier to offload the property.

  • Gave bathrooms a face-lift. We bought two new vanity sets and installed them manually (this is achievable DIY work, trust me), and I also put down new tile in both of the units. Fact:  Tile can generally go on top of tile, so if you have the clearance to do it (based on threshold height, door swing, and whatever else), it’s a fairly easy thing to do.  Just a lot of labor.
  • Bought a new refrigerator to match the rest of our kitchen’s appliances, which had stainless steel finishes.   My general philosophy is to pursue improvements that your average person cares about while ignoring other issues you might personally have with your home that other people may not notice or give a crap about like maybe the somewhat uneven grade of the backyard.  (My wife started watching a lot of HGTV which allowed us to indirectly consult Average American Folks for ideas.  Fact: Everybody needs stainless steel finishes on everything.)
  • I repainted the walls of our foyer and living room, making the color brighter, clean, and more welcoming.  It’s the first room anyone sees when they walk in and I felt it was important to make a good initial impression.
  • We have decent looking furniture (bought used, of course) and used it to stage the rooms.
  • All clutter was removed.  This includes things like books on coffee tables that might reveal your political views or taste in humor to a prospective buyer, resulting in irritation and distracting them from the awesomeness of your home.  In the end, the place ended up looking like gently used hotel accommodations:  Perfect.  You don’t want folks thinking about the people who are moving out while they’re walking through your rooms.  You want them instead imagining themselves living in the space.  Keeping things fairly generic helps this magic to happen in peoples’ heads.
  • Also repainted every single door of every single room, and swapped out ancient 40 year old rusty hardware (hinges and knobs) with brushed nickel.  The cost of this project was about $140 including paint and hardware, and at the end of it our 11 doors looked practically new instead of like they were about to fall off at the slightest touch — seriously, they were that bad, very beaten up.  All hail the deceptive power of paint and shiny metal.
  • We had a small deck that had really suffered over the past 3 winters, so I sanded and re-painted it.   Cosmetically, this work transformed it from looking like an unsafe tear-down to something you might be able to live with for a decade.

That was basically it.  We also hired professional cleaners, for the first time ever.  They came in the week before the open house.  It ran us about $300 and included carpet steaming and window washing so the place looked absolutely immaculate. I was pouring all available energy into working my soon-to-be-ex IT job and the improvements listed above, so we needed a bit of help to finish the house preparation off.  No shame.

I’ll add that some people who want to make sure that their place is in perfect shape before listing reach out to a professional home inspector.  They’ll take a look at your house and come up with a list of liabilities.  Then, in turn, you can take that list and resolve them if you choose.  Doing this can protect you from anything unexpected arising when your buyers perform an inspection of their own.  (People typically demand a reduction in list price if there is significant work to be done on the property.)

Although this is a decent idea, we felt it was unnecessary because I spent the previous 6 years fixing everything in that came up in the home inspection that we had back in 2008 when we bought the place. This turned out to be a great idea, as our 2015 inspection was squeaky-clean.

Another note: It might have been better to do the bathroom improvements a few years earlier than we did.  This would have allowed us my wife to enjoy the new tile and vanities prior to selling.

Agents and Rates

Mr. Money Mustache is a fixer-up master and frugal guru.  He does pretty much all of his work himself, and his wife went to the trouble of becoming an accredited agent so that she can handle RE transactions without direct personal costs.

Neither myself nor my wife were interested in going to this length.  Although I think it’s a great idea, we didn’t seriously pursue this option.

Instead, like most people, we reached out to find someone to guide us through the process.

We decided to interview three different agents — one each from Redfin, Coldwell, and William Raveis.  The reason we engaged Coldwell and William Raveis is because they both had local offices and area-focused expertise, i.e. they knew the local markets.  If you’re selling, I recommend you do the same:  Figure out the top two or three sellers of homes in your area, and call someone from their firm in to talk.

Aside:  In any project you’re contracting out, from selling your home to renovating your kitchen or getting a fire-pit installed in your backyard, I strongly recommend you call in three different contractors or agents as the case may be.

This will give you an opportunity to pit them against one another in an epic fight to the death compare costs, services, and personalities in detail.

As a seller, you’re typically going to pay both your seller’s agent rates as well as the buyer agent rate, which can be as much as 6% of the value of your home — 3% on both ends.

Nowadays, due to increased competition, most agents will drop down to 2.5%, particularly if they know that you are shopping around.

Redfin agents, though, typically charge only 1.5% on the sale side, and that 1% difference on an 800Kish home is eight thousand freaking dollars.  So I *really* wanted to go with them. 

But we didn’t.

Each agent gave us a neighborhood market analysis and recommended selling price.  Our Redfin agent suggested a starting price of 799K, and it was clear from our conversations that he had little familiarity with our region.  Both of the other agents gave us an 849K price point — an obviously huge difference — and we did achieve this target.

I was curious to understand why our Redfin agent failed so badly.  And what I found was that he was asked by his employer to cover a very large area of Massachusetts, spanning 15 towns or so.  So it’s understandable that he didn’t understand the specifics of our market — he was spread fairly thin over the territory.  Redfin has a much better presence on the West Coast, so I have to assume that they have more agents deployed, which in turn cover smaller areas, which allows them to more accurately price homes in those specific neighborhoods.

But as you can see, they significantly undervalued our home here on the East Coast.  We could have gone with Redfin anyway, of course, and asked the agent to list at 849.  They’ll list at whatever price point you want, after all — it’s your home.  But at this point our confidence in the agent was shattered and we decided we didn’t want him to run our open houses or manage the transaction in any way.

My guess is that if we lived in WA or CA, Redfin would have worked out just fine, because they have so many more employees devoted to those regions, allowing folks to gain expertise in more focused markets.

But again, I’m glad we interviewed three different individuals.  If we’d myopically surveyed that single RF agent, simply based on the percentage cost, we could have potentially missed out on a good amount of earnings on the sale.

To be clear, I’m not recommending one firm over another or dumping on Redfin.  If you’re going to take anything away from this section of the post, it’s that you should take the time to shop around, because the information that each prospective agent provides will help you to make the best possible decision for your particular situation.  And that can vary quite a bit, depending on where you live and the specific folks assigned to your region.

I will also add that we asked our favorite agent to drop to 2%, citing Redfin competition as justification.  They declined — and we went with them anyway.

Eh, no harm in asking.  The internet tells me that sometimes they’ll actually meet this request to drop their rates, depending on the specific market you’re in and how hard-up for business they are.

Timing the Market

You can’t really time the housing market.  Just like the stock market, it’s a complicated beast, tied to a whole lot of variables.  It’s going to go where it wants to go, and that isn’t always where you think it’s going to go.

When we bought in 2008, home values had been dropping across the country for several years already but most analysts still felt prices could still fall a fair amount before bottoming out.  (They were right.)  But we pushed ahead and bought anyway, because it was the right year for us to buy.  To belabor a point, we didn’t try to time the market.  We had non-financial reasons behind wanting to own a home, so we executed our plans and didn’t stress about market predictions.

Then in early 2014, Mrs Doom and I decided to sell our house the following year, in 2015.  And again, we made this plan independent of housing valuations in our area or worrying about whether it was the ‘optimal’ year to sell.

Instead we made a commitment to doing what we could to have the place in good shape to sell in the year we had selected, i.e. to maximize the sale price on our property for that year.  We decided to have things ready to go by mid-March.  This is the very beginning of the buying season, and in our region, it signals the unofficial end of winter.  People start coming out of the woodwork to check out homes.

Thing is, there usually aren’t very many residences available at this time — many people are still recovering from the snow and ice and aren’t ready to list.  This can be advantageous as supply (inventory) will be low — but demand is potentially high.

We managed to list ahead of most comparable homes in our neighborhood — there were only two other places in our town with similar quality and square footage.  And yet our open houses were packed because of the pent-up demand, full of couples with strollers and toddlers dropping goldfish and cheerios all over the place. The crowd created a sense of urgency, resulting in a number of virtually immediate bids:  We received four offers within twenty four hours of the showing.   One was 3K over our 849K asking price and we took it.  Our home was on the market for a grand total of 3 days.

Point is:  Although you can’t time the overall market valuations for the year in which you decide to sell, you certainly can pick the most advantageous month and then prepare like hell for it.  This should help you to get a bid at the higher end of the value spectrum for your soon-to-be-former residence.

The Financial Reckoning

Buckle up.  It’s time to do a full cost evaluation.

We bought the place for 650K in early 2008.  And we sold it for 850K in early 2015.

On the surface, it sounds like we made out like bandits.  Digging a bit deeper, though, it was just OK.

I kept honest records of all of the fixes and improvements we made, and they totaled approximately 70K over that seven year span — a staggering average of over 1K a month.

This includes some work we contracted out (new exterior window and doors, wall insulation, boiler replacement, unsafe tree removal, roof reshingling, major masonry work on the front walkway, a complete home repainting, lots of other stuff, you get the idea…) as well as materials for work we did ourselves over the years.  No matter how cost-conscious you are, the expenses involved in owning a home can be considerable if you’re intent on keeping your property up-to-date, energy efficient, and safe.

But it’s still not that simple.

There’s also inflation to think about.  And the opportunity cost of having a lot of your money tied up in your house instead of the market.  We paid 20% down on the place, which, on 650K, comes out to about 130K.

130K dumped into the S&P in 2008 would be about 210K in today’s dollars, adjusted for inflation, assuming we’d also re-invested the dividends.  So we lost 70K on the opportunity cost of simply holding onto that money.

That 60K of “earnings” isn’t looking so hot now, is it?

In addition, we’re forgetting to include the cost of the real estate transaction itself.  And heating costs.  (Most rents in our area include heat and hot water.)  And a billion other things.

And don’t forget that we spent a little over 5% of the value of our home (850K) to sell it. This works out to a staggering 43K.  (Holy God…)  Plus we paid some amount to buy the thing in closing costs and agent fees.

You get the idea.  There are a lot of variables in play here.

To simplify the rest of this section, I decided to use the NYTimes Rent vs. Buy Calculator to give us a one-shot summary.  This calculator accounts for all the variables mentioned above, and then several more — it’s quite complete.

Also keep in mind that it’s reporting in  2008 dollars because of the way it works:  I plugged in numbers from my past, and it’s showing us the so-called future but using “current” (i.e. still 2008) dollars.



If you want to see my worksheet for specific values I plugged into the calculator, check out this page.  I didn’t want to clutter this post up too much with ugly napkin-math.  I used real values from the time-period in which we owned our home, so this is as accurate an analysis as it gets, folks.

Had we decided to rent, we probably would have secured an entire floor of a house which would have given us a similar square footage to our actual home, and in 2008 this sort of place would have run about 1600-1800, assuming we wanted to live in the same town or general area.   (Similar places go for 2150-2400 in 2015 dollars.)

In summary, the rent v. buy evaluation was not exactly a wash.  We essentially paid somewhere between two and four hundred dollars a month (17K to 34K over the 7 year duration) for the privilege of owning our own property instead of renting.

Pre-Pay the Mortgage or Invest?

We didn’t pre-pay.  Lots of people do, saying it’s worth peace of mind to know you’re getting a guaranteed return.

I don’t agree on this point, though, especially considering the ridiculously low interest environment of late.

So my wife and I made minimum payments on our mortgage, instead investing any remaining money in the stock market.

Here are the relevant values that we’ll use for this exercise.

  • Our mortgage averaged a 3.29 avg interest rate over 7 years.
  • We received about 28% of that interest payment back from the mortgage interest deduction break.  This made the effective interest rate closer to 2.4%.
  • During the time we owned our home, the S&P 500 returned 7.1% inflation adjusted, div reinvested return.

My wife and I are hard-core savers and investors.  After maxing out our 401(k) and IRA contributions, we dumped all remaining money from our paychecks into our taxable retirement accounts.  This typically averaged over 2K a month each — minimum 4K.

So let’s work with that 4K figure.

Pushing 4K/mo into the S&P 500 over those seven years would result in a total of 433K — of which an astonishing 97K (22% !!) would be market return.

On the other hand, pre-paying our mortgage by 4K extra every month would have resulted in a savings of nearly 30K in interest over the same duration.

That difference — 67K — is not exactly chump change.  And the difference between the two options will tend to grow larger a) the longer you stay in the home and b) the more you are investing every month.

It’s even more pronounced if you are neglecting to max out your tax-advantaged retirement accounts each year (18K in 2016) because you prefer to instead have more post-tax money available to pay down your mortgage.  

I’ll be clear on this point: If you are guilty of this decision, you should change your behavior and max your retirement accounts (both 401K and IRA) prior to engaging in any kind of pre-payment activities.  In this case, it’s not even close to a fair fight because of the tax-savings on your investment dollars.

I’m not saying that pre-paying is always a bad idea.  There are some factors that make the decision less cut and dry.  Maybe mortgage rates are very high, or you need a fully paid off residence in retirement because otherwise the thought of the debt will tear you apart on a daily basis, turning you into a sleep-deprived bucket of nerves.

But history tells us that the odds are significantly in your favor that you’ll do better financially with that money working for you in the market instead of being all cooped up in your house.  Would a farmer lock his hardest working children in the barn milking cows when they could instead be throwing their backs into pitching hay?  

Of course not.  And you probably shouldn’t, either.

Was Ownership Worth It?

In a word:  Yes.

We enjoyed our time in the home and it (ownership) gave us an opportunity to learn all sorts of new skills.  Owning can also potentially give you a level of privacy/autonomy that is tough to match in a rental unit. There’s also the wonderful predictability of monthly payments, plus the stability and peace of mind that comes with knowing you don’t have a crazy landlord that can kick you out on a whim or stop by for an unannounced visit.

But on the other hand, in addition to the increased financial cost, we also put hundreds of hours of our lives into upkeep over the years.  If you enjoy this sort of work (we generally did) these hours of activity are another perk — if not, they represent an extra price to owning.

I do find it incredible that even though we did very well with the sale of our home, it still would have been cheaper to rent.  Here I’ll insert a reminder for anyone considering a home purchase to read JLCollinsNH’s excellent Why Your House is a Terrible Investment.

Because it pretty much is.  If you’re going to buy, I strongly recommend you have reasons other than pure (speculative) financial motivations, or you’ll likely wind up bitter by the end of it all.  I can’t tell you how many friends around my age have already lamented the purchase of a home because the dollar side of things went badly.  (One guy lost close to 200K in the housing market crash… it took him years to recover from it, despite being a high earner…  ugggggh..)

The Decision to Become Renters

As you can see from the financial analysis above, there are a large number of sizable up-front costs when making any real estate transaction.  This makes it risky to buy a place if you’re uncertain whether you can stay there an absolute minimum of 5-7 years.  (10+ is better…)   The longer you stay in a place, the less those initial expenses matter as they amortize over the duration.

We knew that we wanted to move closer to my wife’s sister so we could more easily see our nephews.  Thing is, we had — and still have — open questions about our longer-term plans. The new location itself is fine but the main unknown is: Would we prefer to live someone else after the nephews are a bit older?  They’re 11 and 9 right now, and basic rules governing human behavior tell me that they’re not going to care a whole lot about us in another five years when they’re firmly in their teenage years.

Given this bit of uncertainty, and the high probability that we’ll discover powerful reasons to move somewhere else as the years go by, it didn’t make sense to jump right into home ownership again.  I’m sure we’ll own again someday, but this isn’t the right time.

We found a great 3BR unit at $1900/mo with heat and hot water included.  It’s about 1200 sq. feet — an absolute abundance of space for just the two of us — and it’s acceptably updated.  Not super fancy, but not a dump either — somewhere right in between.  And of course there’s no condo fees, landscaping expenses, or other upkeep of any sort required.  We also no longer live in a neighborhood with insanely inflated home prices or rents.

Given the costs involved in keeping our former home, this winds up being a great deal by comparison.

And if/when things change, it’ll be very easy to up-and-move again.

Renting Without a Job

Most renting agencies require ‘proof of employment’ in order to accept you as a tenant.

Although my wife was still working at the time that we signed our lease — meaning: we could have used her employer to satisfy this criteria —  I decided to see what would happen if I told them I was temporarily unemployed.

So I said:  Since I’m not working, I can’t show a paystub.  However, my financial footing is extremely solid.   Can you work with me on this?

This triggered a very different discussion.  The property manager had a separate set of rules to cover scenarios where people weren’t working, were retired, or had irregular income.

They initially asked for proof-of-assets.  I asked what they were looking for and the first response was “everything.”  I took this to mean checking account balances, retirement accounts, and any other investment income or properties we owned.

But there was no way that I was going to simply disclose my full asset sheet. This is a safety/security/privacy issue in my book.

So I turned it around and just asked point-blank: What’s the minimum requirement?  I’ll show you I can meet whatever that is.

They said:  Our policy is you must have 40K in a checking account.   They then added that they’d consider 10% of retirement accounts as liquid.  (This means I could have alternately showed them that I had 400K in a 401(k) account.)  The property manager also said they might make a special case for us if we had unusual income streams.

My wife and I agreed that we didn’t want to share any more details of our financial holdings than absolutely necessary.  So we found ourselves simply transferring that 40K into a checking account, and getting the balances printed out by our bank.

Problem solved.

Point of this is:  If you’ve retired, you can, in most cases, secure an apartment without a current pay-stub.  When apartment complexes say that a pay-stub is a requirement, they’re really just stating their preference.  In truth, alternate paths to acceptance exist.

So engage your prospective landlord head-on, give them some skeletal details about your situation and ask what they need to see.  In most cases you’ll be able to work something out.

What To Do With The Check

Being that we had 20% down on the house (130K), and there was some principal accrued on the mortgage(70K or so), plus the sale price was 200K over the purchase, we ended up getting a fat check.

Holy fucking bleep.

Holy bleeping shit.

This forced us to think about what to do with a huge lump sum of cash.

Luckily, there are really only three two completely non-stupid options.

  1. Immediately Putting it to work in your investment vehicles, whatever they may be.
  2. Dollar Cost Averaging (DCA’ing if you’re hip) it over time
  3. Going all in on GOLD!  GOLD, I tells ya!  Prepare for the coming apocalypse!

In our case, investment vehicles = stock and bond markets.  For others it might be a new rental property or dumping funds into your personal business.

I was tempted to DCA it because I still believe market valuations are high.

But I didn’t.  Instead I took a deep breath, consulted my asset allocation, and dumped it all into my index funds — all the while repeating to myself you can’t time the market, you can’t time the market, you can’t time the market.

Because you can’t.  It’s best to simply stick to your previously defined strategy, adding the new cash to your current mix of investments in the same proportions.

I will acknowledge that the all-in approach isn’t the right choice for everyone.   If you’re faced with a similar decision, consider reading Rick Ferri’s guidelines for investing a lump sum.  Or Mr. Money Mustache’s article on the same topic.  They both conclude that it’s generally better to push it all into the market, although there are exceptions to this guidance.

The big caveat is if this lump sum represents a very significant portion of your net worth — Ferri suggests that if it’s over 20%, you should consider pushing it into the market incrementally, perhaps 8% a month over no more than a year.

The three most compelling points that convinced me to ultimately dump everything into the market at once in the market were:

1) 200K (my half of the 400K payout) only represents about 23% of my NW at this point — only very slightly over the 20% mark noted by Ferri and

2) I don’t really need this money any time soon as I had enough for early retirement even without it, making the investing time-horizon for these funds fairly long plus

3) I’m a lazy investor and I don’t want to have to potentially re-evaluate this decision every single month.

Most people experience some amount of anxiety moving large sums of money around because it feels that there is a lot at stake and, as rational as I am most of the time, this emotion shines through for me, too.  So I figured:  Reducing the number of transactions involved in routing these funds into the market should also result in lower levels of personal stress overall.

If you are going to go the DCA route, consider reading this article which makes a strong case for pushing the full lump sum amount into the market over the course of no more than a year.  It’s fairly technical and actually helped to underscore just how little insurance DCA’ing typically provides.

Emotional Aspects of Downsizing

You know, Dr. Doom used to live in a castle... literally.

Doom gets used to somewhat more modest digs.

It’s tough to leave a place when you’ve been there for a while.

It’s even tougher when you have a lot of fond memories stored up, from the chaos of full-scale family gatherings to quiet rainy days spent reading with your SO on the couch.  It’s a well-known truth that people get attached to their homes.

I’ve concluded that having a good reason to depart is fairly important, or you’re going to feel like you’re losing something substantial without anything new coming in to replace it.

We solved this problem by moving closer to my wife’s family.  So although we miss our old place sometimes, we have this wonderful new world around us, one in which we can see the people we care the most about much more often.  It’s been a good trade, and one that we would make again in a heartbeat.

I realized that — somewhat to my surprise — if we moved purely for financial reasons that it wouldn’t have been so great.

The thing is, we lived in that home together for seven years.  It’s the longest I’ve lived anywhere in my life.  I moved every single year in my (unstable) teenage years, then again in college.  Then I moved some more in my 20s as I chased lower rents and higher paying jobs.

So it was this huge relief to finally stop moving every year or two.  And it follows that I came to associate the property with stability, with comfort, and, yes, even bits of my identity.  I worked on the place:  I maintained and improved it.  I poured parts of myself into it.

And I’m saying that last bit literally:    Some of my genetic material is, no doubt, stored away in paint and grout and concrete.

We did the following to ease the transition.

  1. We stopped calling our move “downsizing.”  Downsizing implies moving backward, or losing something.  People typically downsize when they lose their jobs, get sick, or worse; Downsizing is a total fucking downer.  So, instead we began to refer to our change of residence as rightsizing and relocating.  (Yeah, cheesy, I know, but we stuck with this term and it does feel nicer and more accurate.)
  2. We focused on the positives of the move:  Increased proximity to family, zero time required to maintain the property, greater freedom to shift around in the future, and yes, also improved financial flexibility.  And in the case of the financial component, we decided to earmark some of that financial flexibility for an upcoming trip abroad, i.e. we made that savings represent something real instead of a few measly extra coins on top of an already sufficient net worth.
  3. On the subject of positives, I have to say, renting is a lot more convenient than owning. We have less housework to do by half.  I no longer worry about how “old” certain things are and when it might be time to investigate replacing things like our shifty deck in the backyard.  This has been unexpectedly awesome for me — I feared I might miss things like landscaping or having my own lawn, but it’s been completely awesome so far.  Just less to worry about.
  4. The two months prior to the closing date of the house, we said goodbye to our neighborhood.  I took a whole slew of pictures of the home and our surroundings. We ate out at local restaurants and wished the owners well.  We toured the local folk art museum that we couldn’t be bothered to visit prior.

You get the idea.  The farewell tour helped.  But it’s still tough to say goodbye.   There will come a moment in the sale process when moving is no longer some abstract thing and the reality of the situation hits home.

It came for me in the middle of May after I’d completed the final mow of the grass prior to the closing date.  I was all sweaty and lathered up because I push our people-powered mower up a steeply graded back-yard like a champ.  At the end of the job, I found myself sitting on the steps leading to the front door of my house, half-resting, half-staring at the upscale houses of my neighbors — houses with perfectly trimmed lawns and multiple SUVs and owners who were falling over one another to maintain pace with one another.  One of them (a couple close to my age with one child) had recently performed a very public same-street upsize, proudly moving a mere block down in order to secure a place with an extra 2K square feet.

And that’s when the reality of everything really settled in.

It’s over — our time here is really, finally over.  I’ll have to find new streets to run around, I thought. New routes and patterns and new neighbors and new things to do to keep me busy and new adjustments to whatever the hell else that comes along. Things will never be the same.

It came for my wife when we unloaded her circular pine kitchen table on some craigslist buyers, complete with three cottage-y looking chairs standing on spindly white legs.

I bought that for my first apartment fifteen years ago, she said, overcome.

Want to put it in storage? I asked.

No, that’s just stupid, I don’t want to spend money to keep something we don’t need and isn’t worth anything.  Just give me a minute, it’s fine, it’s O.K.

These moments pass.  They can be uncomfortable and difficult — but also beautiful.  It’s a time to momentarily look back, to cherish what you’ve had before again angling your face toward the brightness of the future.

And those nostalgic thoughts spinning around inside of our heads — the ones that said that things will never be the same — well, they turned out to be absolutely true.

Because they’re getting better all the time.


A final shot of us in front of our castle.


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55 Responses to Home Ownership: A Retrospective and Beyond

  1. SexyMom says:

    This link does not work. Love your blog ! Congrats on being FI!

    • livafi says:

      Yep, the link in the email update is broken. It’s a wordpress.com scheduling snafu, sorry about that. (Unfortunately I can’t correct it, either…)
      Thanks for the heads-up, though!

  2. Even though you “made out like a bandit” you really didn’t make out like a bandit. Love the way you show how a $200k profit on real estate isn’t really all that much after you consider all the other costs (cost of capital, inflation, higher operating costs, out of pocket upgrades, etc).

    Our house is worth maybe $150k and we paid $108k for it 12 years ago (though we bought from a city surplus auction at $30k under market value). Pretty poor appreciation but it’s cheaper to own here in Raleigh than rent. We paid maybe $800/mo for mortgage+taxes+insurance+maintenance whereas rent would have been $1100-1200-ish. We ended up putting extra $ toward the mortgage each month and paying it off sooner, so it was a little more expensive per month than rent, but we also own the place free and clear now so housing costs drop to a few hundred per month (versus $1200 FMV rental for the same 4 BR house).

    We also enjoyed the stability of not needing to relocate if the property wasn’t well maintained by the landlord. That’s a big plus when you have kids and school to consider.

    In the future, I can see us being renters once the kids are out of the house in 15 years. It would free up $140k or so in today’s dollars for investment purposes, and we can rent a place that’s more reasonably sized and we might not want a yard without kids to play in it. Less maintenance, less hassle, less problems, perhaps slightly more money vs. owning. Once you get to a certain price point, the extra money to rent instead of own isn’t that significant.

    • livafi says:

      >>We ended up putting extra $ toward the mortgage each month and paying it off sooner, so it was a little more expensive per month than rent, but we also own the place free and clear

      I can see the appeal of paying a place off early when the total you owe on a mortgage is pretty low, < 100K. You can crush the debt quickly and then focus on other saving and investing goals. There's value in simplifying your financial picture.

      You make some great points about additional benefits to home ownership if you have children, btw.

      I didn't intend this post to be a condemnation of home ownership, for what it’s worth. We may, and probably will, own again at some point in the future. But if that happens it'll be a much more affordable place.

      Thanks as always for the comment, RoG, it's nice to see you stop by.

      • RootofGood says:

        My pleasure, always a great read when I stop by here. 🙂 Hope you’re enjoying the pace of the early retired life.

        I get the impression that you’re more balanced in your views on homeownership, as in it makes sense in terms of lifestyle and finances in some situations. I’m pretty much of the same mindset and wholeheartedly accept the fact that I’d be renting in many places in the US if we were to move there.

        No reason to artificially limit yourself to the always buy or the always rent camp when you can choose what’s right in a given situation.

      • livafi says:

        >> I get the impression that you’re more balanced in your views on homeownership, as in it makes sense in terms of lifestyle and finances in some situations.

        I think that situations and people are different, and that the dollar side of the decision isn’t the only variable. Some people know they’re going to live in a certain place for 15+ years — they might be better off buying even if the finances are a wash versus renting, if they particularly value having their own space to manipulate. It’s an individual decision and I urge people to carefully look at all sides of the equation.

  3. Awesome analysis Doom. If I ever own, I don’t think it’ll be for a while. I like the flexibility renting gives me and while I’m working a day job I don’t want my free time swallowed up with home maintenance. Plus if I decide to travel for 6 months or a year, I’d rather just put some stuff in storage instead of selling or finding renters. I would also hate having to put my hard earned cash to a down payment which might just keep up with inflation. All my excess cash goes straight into Vanguard right now and I wouldn’t like it any other way 🙂

    • livafi says:

      >>All my excess cash goes straight into Vanguard right now and I wouldn’t like it any other way
      This gets my wholehearted seal of approval, well-done.

  4. I continue to love your blog, Doom – and your write up about home ownership was incredibly detailed and thorough. As an owner of two separate homes, I’m a little less enamored with the idea of home ownership due in very large part to the costs that you mentioned. But, of course this is all situation-based and will be different from person to person. Once my wife and I settle back down from our upcoming full time travels, I may be a renter for the foreseeable future.

    Congratulations once again on reaching FI and joining the early retirement crew. I am planning on joining before the end of 2016 after selling both of our homes and downsizing to an RV.

    Lots of excitement ahead!

    • livafi says:

      >>I am planning on joining before the end of 2016 after selling both of our homes and downsizing to an RV.
      Sounds like a terrific plan and I’m sure you’ll enjoy the final year as you prepare to make the leap. I’m very happy for you, congrats on being so close.

    • OnlyKetchup says:

      Was wondering if you’ve figured out how state taxes will work? Assuming you won’t be spending an extended period of time in any one state.

      • It’ll depend on the state that we intend on domiciling in, which might be Texas. We hope to stay under the line for income taxes throughout the years and not even worry about that. It should work just like any other tax situation, but we’ll be making far, far less money. We think. 🙂

  5. edifi says:

    Thanks! Some good kernels reiterating the soundness of our own decision to sell.

    I hope you consider a 2015 expenses lookback. The details you’ve provided on both your numbers and withdrawal strategy (and play-by-play chats with fidelity) make you the king of transparency, in my book!

    • livafi says:

      The expenses this year are irregular due to the split between owning and renting, but overall they’re in line with last year’s numbers after making adjustments for the different living arrangements.

  6. I have to say I really enjoyed this angle on selling your home and moving on. My wife and I have been in our house for 8 years and just recently started thinking about the future of owning vs. renting due to the whole FI idea.

    I’ve done the same thing – mowing the yard with a push-powered mower and looked around at all the fancy homes thinking that we could find some place cheaper. Somewhere we we’d REALLY want to be and to be able to be more mobile.

    I don’t look forward to the feelings of letting it go, but I know it will happen some day. We love our house but like you, know we won’t (and don’t want to) be there forever. Love the ending though! Life can definitely keep getting better, if you make it!

  7. DMM says:

    re: aversion to the word “downsizing”

    If I were selling my excessively large house I would think of it as an elimination of waste or an increase in efficiency. These more accurately describe the situation anyways. You are very smart to recognize the cognitive effects of stating things negatively.

    Congrats on the successful FI/RE and move.

  8. StockBeard says:

    Love that picture of you and your significant other in front of the Castle.
    We sold our place and moved cross country last year. It always feels like you’re leaving a huge part of your personality with every house you leave. No matter how many times I move, the feeling is always the same!

  9. Seeking FI in Boston says:

    > They said: Our policy is you must have 400K in a checking account. They then added that they’d consider 10% of retirement accounts as liquid. (This means I could have alternately showed them that I had 400K in a 401(k) account.) The property manager also said they might make a special case for us if we had unusual income streams.

    Is that supposed to be “40K in a checking account”?

    Anyway, great post Doom. At some point in the next 5 years the decision to rent vs buy will resurface for my wife and I (when she leaves her postdoc and searches for a professorship position). Reading overviews like this on the finances of it all will certainly help provide better context for that decision when it comes.

    • livafi says:

      Dang, you know, ER must be making me soft in the head. (jk, orders of magnitude typos are easy to make. See: Office Space.) Post updated with the correct amount. And thanks for the comment.

  10. EJ says:

    Great post, Doom. Thoughtful, comprehensive and written in a way that almost anyone can understand. I grew up in the area you’ll soon leave. Great place (for me, anyway), and I still have a mom and sister there and love going back again and again.

    But it seems that there are more really good places to live than there used to be, in part because dozens of cities that have gotten far more interesting and dynamic. The “creative class,” and all that. It’s kind of like the recent restaurant phenomenon: You can find yourself in a not particularly “cool” city of 50,000 or so, and the place is overrun by dozens of great places to eat with cuisines that circle the globe. It’s a good time to get out there and find a community that makes you feel at home — whether you buy or rent!

    • livafi says:

      It *is* a great area. We were within shouting distance of Owen’s Poultry Farm, if you know where that is. And we’ll surely be back from time to time
      >>You can find yourself in a not particularly “cool” city of 50,000 or so, and the place is overrun by dozens of great places to eat with cuisines that circle the globe.
      Right, very insightful. Although it’s very difficult mentally to move, the finances themselves are pretty easy to work out and there are an abundance of terrific places to live that are affordable and have a lot to offer in terms of lifestyle. Type “best places to retire” into google and you’ll find a load of compilation sites that evaluate local offerings that contribute to QOL as well as detail COLAs. As I mentioned in the post, we’ll most likely move again in another 4-7 years when there’s no longer such a strong family pull to remain in the area.

      • EJ says:

        Doom: This is too funny. Owen’s Poultry Farm! When I was a kid in the 1970s, Owen’s was still a working farm, complete with sheep, not to mention chickens. They kept the petting farm going for a long time because so many moms (for the most part) brought their kids there. My mom now lives in Needham, and whenever I take a walk there, I end up at Owen’s. It still has a stuck-in-the-’50s vibe, and you gotta love that.

  11. Doom! This comment may be nonsensical as I have imbibed a significant quantity of wine!

    I have music, wine, a fire, and life is good in all caps FIRE. I did the opposite of you. I paid off my house instead of maxing out tax advantaged vehicles. It was (sorta) stupid but also strategic. I was a big chicken and couldn’t bring myself to invest with a mortgage over my head. After extinguishing it, I became far more aggressive than I would have expected, 100% equities. And this was 2009 so I made out like a bandit. My mortgage rate was also 6% so the guaranteed return was pretty good.

    I still think about downsizing. I cold probably cash out 30k and still have a fully owned residence. But what a flipping hassle. I’m a lazy bastard and the hourly rate just isn’t high enough.

    Ok, it’s ill advised but I’ma pour one more glass. Salud!@

    • Leigh says:

      This comment actually really resonates with me. I’ve been aggressively paying off my condo’s mortgage…but after maxing out my tax advantaged accounts. I’ve also been keeping a relatively high fixed income amount for my age (30%; age 27) despite having a $134,000 mortgage on a condo valued in the high $400k range. You’ve made me reconsider my high fixed income allocation of my investments with how much of my net worth is in my condo.

      To Doom: I enjoyed your buy vs rent analysis. I’ve redone mine several times since I bought and buying seems to always come out ahead. I bought a two bedroom 1200 sqft condo for around $360k in mid 2012 when I was renting a one bedroom apartment for around $1800/month. My monthly cost including mortgage is pretty close to that and I seem to spend about $2-3k/year on general home maintenance, repairs, and services. To top it off, my boyfriend moved in a year ago and since we keep separate finances, the condo is all mine and he pays for other things that reduced my expenses in other categories and my condo has appreciated in value up to around $450-480k or so. Renting a similar apartment would easily run about $3k+ now so buying seems to still be a slam dunk in this case.

      • livafi says:

        @Leigh, I love that you’ve done the math for your own situation. It’s wonderful that you understand how to run the numbers so that you make decisions that work out best for you personally. As I mentioned in my response to RoG, I didn’t intend this post to dissuade people from buying homes or make an argument that it’s always better to rent than buy – it’s not.
        Thanks for putting your own story out there as a counterpoint and additional data for folks to consider.

    • livafi says:

      Definitely not nonsensical – I was a little disappointed at the degree of rationality in the post after you set expectations of ludicrousy. At 6% I would have paid off my mortgage first, too. My average rate was 3.29 (lower after factoring in the tax deduction on interest) which made it seem much less risky to dump money into the market instead of my home.

      I wouldn’t downsize in your situation either. You don’t have a driver for it, other than money. I hinted at this in my post: There’s got to be a better reason to move than just the money. There’s value in having your own place and staying there indefinitely. We moved because we wanted to relocate, which made us look at the picture differently. The question wasn’t: Do we want to sell? But rather: Do we want to buy again right away? And the answer to the second part was a no, for now.

      And god, do I relate to being a lazy bastard. Sometimes I think that the main reason I’m into computers and engineering is because we are paid to automate things — to reduce slack in systems, to put an end to churn and make things easier to do in general.

      For me, FI was, in many ways, an extension of the urge to be more efficient, albeit in this case with my own dollars.

      Cheers, holmes.

  12. okits says:

    Appreciated your clear-eyed view on the actual financial outcome of your house sale (it’s not as simple as $850k – $650k = $200k profit.) Recently had to fend off my mother saying “you should be thinking of buying a house”. For our location and situation, a horrible idea. There are lots of factors to consider and it’s irritating that maintenance, RE agent fees, and opportunity cost are invisible to most people.

    Very astute observation that a major life change is ideally made to move *towards* something you really want (even then, it can still be as uncomfortable as hell.) As rational as some people are (or try to be), we are still thoughtful beings with perceptions, emotions, and memories. If you’re going to go against the crowd, you’ll need your own internal system of support and reassurance that you’re doing the right thing.

    Merry Christmas, Doom family. 🙂

  13. First, I loved the pic of the happ couple at the end. She’s a looker and you’re a lucky man 😉

    Secondly, I bought a house at the end of 2009 and sold mid-2014. I think I made £5k on the sale but when I think about all the work I put into the place I guess I may have come out a little down on the deal. I now rent as I’ve returned to education for a career change and I’m much happier in a smaller place that someone else has to maintain 😉

    Oh, I did get my initial deposit back so I’ve invested that to get me to FI… eventually. Don,t see me buying again but you never know what the future holds

  14. liberty53 says:

    Another great post!

    We went through the same process in 2014 and were only a few towns over in Lexington. We realized the carrying costs of our house were tremendous and also wanted to unlock our home equity. Achieving FIRE and being house-poor were incompatible.

    Our returns on the house were a little better since we went the tear-down route – tearing down an old cape 10 years ago and putting up a traditional colonial with more market appeal. Since Lexington was a hot market we did a FSBO by using Zillow’s make-me-move feature.

    Our strategy was to perform geographic arbitrage by purchasing a smaller house in an adjacent zip code that seemed to have a more realistic real-estate market than the one we left. We parked ourselves in an apartment waiting to pounce on that next house. Alas, the real-estate infection spread to those neighboring towns and we are quickly getting priced out of those markets.

    I must admit though I am loving the freedom from thinking about house upkeep. Many people might enjoy filling paper bags with leaves, but I would rather just look at them. We also sailed through that unbelievable Boston winter last year without having to lift a finger. We are fortunate the we haven’t had any crazy (edgy?) apartment neighbors and the experience has been pretty positive.

    As we visit open houses now and run the rent-vs-buy calculator it’s much harder for me to accept that we would potentially pay more over the long term for the joy of maintenance and repairs, while being locked into a specific location. This is especially true since we have just changed our status to FIRE.

  15. This is a topic we talk about constantly in our household because we–unlike you two–stand to lose (way more than) $200,000 on a completely ill-timed purchase (May 2007) of a brand new-construction condo (never buy new construction condos!) which ended up having water infiltration issues (still un-fixed).

    One of these days, we’ll be able to–hopefully–look back on this mistake and laugh, but between exorbitant yearly special assessments and the staggering loss in home value, we daily wonder how we would already be retired if we’d just rented instead since 2007. Yes, we read James Collins and MMM on the topic–but way too late…

    Thanks for the post. We discovered your blog via an ERE tweet and have been reading voraciously since. Keep up the great work!

  16. Maus says:

    Great rent vs buy analysis. I wish I ‘d had it three years ago. I moved from a rental in a busy neighborhood with loud folks to purchasing too much house in a very nice, quiet neighborhood. And I learned over the course of the last two years that I HATE maintenance and upkeep. I’ll miss this place, but I’m selling next year even if I don’t break even. I’ve learned that the solution to a noisy rental is finding a quiet one. It will be nice to throw the savings into investments once again.

  17. jlcollinsnh says:

    Over the last few months I’ve had several folks highly recommend your blog and so have been poking around some.

    Great stuff, and this post is a fine example. Well done!

    And not just because of the link, although that is very much appreciated. 😉

    We’ve been back to the renting life going on three years now and love the lower cost, greater freedom and less work dynamic.

    Let it snow!

    • livafi says:

      JL – great to see you stop by, really enjoy your blog and thoughtful analysis on multiple topics. Thanks for all of your contributions to the community.

  18. Team CF says:

    We love your section of “Financial Reckoning”, seems that you did a lot better than us. After reading the posts by MMM and Mr. Collins, we also did a quick look at our former living situation and we were shocked at the amounts we found. We also ended up selling our property (for personal reasons, not financial), but barely broke even on the actual cost, let alone the missed opportunity cost and inflation correction.

    Funny thing is thou, we did enjoy the house and we will buy again but a lot smaller (more space does not equal more happiness). The extremely low interest rates make buying worth it here in the Netherlands, compared to renting which is relatively expensive due to high demand. However, this time we will buy with as little down payment as possible and the ability to turn the house into an investment (rather than an expense) in a few years (we favour a mixed portolio of index funds, dividend stocks and real estate). Once financially independent, we may actually rent instead of own, as it does appear to be financially a favourable option. The Go Curry Cracker option also sounds very appealing.

    Thanks again for the great read!

  19. Brian says:

    Really like this blog, and this post in particular. My wife and I are in the midst of deciding whether to move to enable ER. This post is in line with the vague outlines of what I’ve been thinking lately. Our situation is that we cannot afford to stay in our house and quit our jobs. To quit and just kick back on my sofa, living in my current house, I figure we’d need to work 3 more years. Based on my calculations, to ER in the next 6 months, we’d have to sell the house and move to a much more affordable housing market. We have a few ideas on where, and luckily we are not tied to our current area by family or other considerations. After 9 years living and working here, most of my social contacts are at work. All of these things counsel towards just picking an affordable city or town we think we might like, and just renting there for 6 months or so. Try the place out, and move on if it doesn’t seem right. There will be moving costs if we decide we don’t like it, but moving costs go way up if we buy something and decide we don’t like it. We could move back east to be nearer to family, but part of my ER fantasy is to spend time in these mountains out here that I keep hearing about…

    Thanks for the useful insights, not to least of which is the “renting without a job” section. My only experience with that was renting an apartment in grad school more than 12 years ago. I was paying for school with savings and scholarships (and also maxing out the low-interest Federal loans because why not). At first the apartment management company insisted that I had to show income or take out larger student loans. In the end, I had to jump through a few hoops to show I had money to pay for the rent, but it worked out fine.

    • livafi says:

      There’s clearly a lot to consider in your situation. Moving specifically to enable ER is a tough choice, but it seems like from your thought process that you’ve got a good head on your shoulders and are working toward the right decision for you and your family.
      >>There will be moving costs if we decide we don’t like it, but moving costs go way up if we buy something and decide we don’t like it.
      Yep, renting before you buy in a new location is highly recommended for exactly this reason.
      Best –

  20. You’ve made me reconsider my plan to pay down mortgage. Will likely shift to taxable vanguard account for extra $$$ in the New Year. Thanks!

    • livafi says:

      You could always consider hedging this decision too, i.e. use 1/2 of extra funds to pay down and 1/2 into Vanguard, which would give you some peace-of-mind pre-pay while exposing you to potential market upside.

  21. eamann888 says:

    Nice opening photo. Those Ninja Gaiden cut scenes were so good at the time

  22. David says:

    This is an interesting question I’ve been thinking about as well. Rents are pricy in the area we live and our mortgage is currently about $15k or under $100 a month (house worth about $370-380k) I know we could rent our place for about $1800/month ($1500 after all taxes and insurance are paid) It seems that if we sold and took the $360k and applied the 4% rule we would be at $1200 a month. Most of the maintenance items have been done on the house already so they should be low going forward. Sometimes mentally it’s nice knowing you only have a few hundred dollars in fixed housing costs as opposed to $1900 a month rent (I know that if renting you have all your house equity in the market, but the equity is still making me money whether it’s in the house or market) While the equity is still in the house isn’t it like it’s paying me $1500 a month as that is the difference between rent and my current housing expenses? I can now either invest that money or view it as $1500 less that I need to make each month, getting me closer to FI. What are your thoughts?

    • livafi says:

      If I’m reading your comment correctly, you a) have an affordable home, b) have a great mortgage rate and reasonable monthly payment and c) like the place — it’s well maintained and it seems from your comment you’re happy there.
      In your situation I probably wouldn’t move out of my house just to put the equity into the market.
      >>While the equity is still in the house isn’t it like it’s paying me $1500 a month
      I’m not sure how that’s possible on a 360K house. Let’s simplify the math and just say it’s worth 360 and it’s a paid off home. If you had a mortgage on the place for the full amount at 4%, you’d be paying 1200/mo and getting some of that back via the mortgage interest deduction. We could call it 1000. That’s effectively the amount your house is directly paying you monthly — it’s the interest rate on your mortgage times the principal divided by twelve.

      The remainder of home ownership costs don’t go away: Taxes, maintenance, any HVAC or landscaping costs that might otherwise be included in rent and so on. History says your home also will not appreciate as quickly as the market tends to rise, so you have money tied up in an asset instead of potentially working harder for you in the market.

      Indirectly you may be saving additional money if rents are high in your area.

      >>If we sold and took the $360k and applied the 4% rule we would be at $1200 a month.

      Look, although you might do better with your home equity in the market, I simply would never move out of a place I was happy living in order to create a chance to increase net worth a little bit faster. I’ll re-state a few conclusions from the post:
      1) Even though the total cost of home ownership was slightly higher than renting for us, we would do it again, i.e. those small ‘costs’ were worth the benefit of owning and
      2) Moves made for 100% financial reasons with no other drivers are not always the greatest thing to do (unless, of course, the financial evaluation is incredibly lopsided one way or the other, e.g. you are moving away from a 4000/mo mortgage to a 2000/mo rental, etc.)

      >>Sometimes mentally it’s nice..
      Enjoy thinking things through. It seems like you’re very close to that financial break even line with either decision which says to me you should probably choose the lifestyle arrangement that works better for you.

      • David says:

        Thanks for an awesome reply. Your right, we are quite comfortable in our house and the expenses of living here are very low. The reason I say that it basically pays us $1500 a month is that rents in our area would be around $1900 and it costs us about $400 for us to live in our house (including mortgage payment, insurance, utitilites and future maintenance) so the difference is about $1500 more in our pockets that we can put directly into the market.
        The one thing that might change our decision is that we eventually want to move to an area that has better weather (winters here are long and cold) In that case, I am debating whether to keep my house (by then it will be mortgage free) and rent it out for $1800-1900 a month or sell it and invest the proceeds and rent in an area that is cheaper with better weather. I am hoping by then to be semi-FI and only need to work a little, which will make it easier to make the move (why is it all the nice weather places in the world have less work opportunities than all the cold, northern areas?)
        Keeping the house feels like the safer thing to do as aren’t house prices suppose to be stable? 🙂 We live in Canada, which didn’t really have the same housing correction as the US. Prices here have remained steady. Although selling it would free us both equity and worry about your house in the hands of renters. Did you ever think about renting your house and making that dividend-like income off of it? I know that is what Frugalwoods are planning to do…rent their current house for a decent amount and use that towards monthly expenses.
        By the way, how is your introduction into ‘retirement’ going? How was the first year of your drawdown plan. I enjoyed your 5 part articles on doing that. I have always thought that accumulating a nest egg is easier than knowing how to responsibly draw it down.
        Thanks again.

      • livafi says:

        Yep, based on your analysis it’s cheaper to continue to own than it would be to switch to renting. These sorts of things are very market-specific.
        >>(why is it all the nice weather places in the world have less work opportunities than all the cold, northern areas?)
        No idea. Maybe people who live in crappy climates don’t mind working as much because it’s uncomfortable outside more often? If I lived in San Diego or something, I would pretty much never want to sit inside a cube.

        We never seriously considered renting our house out. Honestly we wanted to be done with home ownership and I’ve never been interested in being a landlord. Just personal preference.

        >>rent it out for $1800-1900 a month or sell it and invest the proceeds and rent in an area that is cheaper with better weather.
        Sounds like a reasonable plan. I’m not the best resource to talk to when it comes to rentals, though – I have zero experience as a landlord. That being said, my opinion is that as long as you thoroughly do your research (read: you are prepared) and you like the idea of holding onto the property, it can be a great approach.

        >>I have always thought that accumulating a nest egg is easier than knowing how to responsibly draw it down.

        You’re right about this. There’s both the practical aspects of drawing down (controlling tax expenses, budgeting for recurring “1-time” costs, etc) as well as the emotional (you’re no longer watching your pile of money grow, which can feel a little strange after so many years of accumulating.)

        I’m working on a financial summary post which will address pieces of this.

  23. lhamo says:

    Great post, as always!

    I’m just a sample size of n=1, but I was surprised at how comfortable prospective landlords in Seattle (an extremely hot rental market) were last summer with the news that I did not have a steady income. I just explained to them that my son and I were relocating from overseas so that he could participate in a special academic program at the university. That plus some old references from my former academic advisors and a willingness to show proof of assets was sufficient for everybody. I didn’t even have to show the assets – just referencing them was enough. I did have to give them checks to cover the cost of credit checking in most cases, but they were also willing to hold those until I heard back from my top choice apartment about whether or not my application was accepted. It is probably illegal, but most landlords and managers seemed to value the opportunity to chat a bit — gave them a sense of who I was and what I would be like as a tenant, and vice versa. I actually walked away from the one place that seemed more “corporate” in its style. Had other landlords eagerly calling me back to make sure I didn’t want the place before they offered it to somebody else.

    Still leaning toward buying our next place as I have a daughter who will be in junior high/high school and I don’t want to deal with the rent being jacked up or the house being sold out from underneath us. But if it weren’t for the kid factor I’d be more likely to consider renting. It has been good for this transition year for me and my son.

    • livafi says:

      Thanks for posting this as another experience re: Renting without a Job. It’s nice to hear how straightforward the process was for you. I have seen on forums some trepidation from users who are considering retiring when it comes to renting… “But, but how will I show proof of income?” Again, the answer is that most individuals and organizations don’t actually need it and you can work with them.
      >>Still leaning toward buying our next place as I have a daughter who will be in junior high/high school and I don’t want to deal with the rent being jacked up or the house being sold out from underneath us.
      Makes perfect sense to me. Kids definitely change the decision making process.

  24. OnlyKetchup says:

    Great analysis and you linked a lot of other good articles. We’re buying now, but when we FIRE I think we’ll be renting at least while we travel and figure out where we might want to settle down. Luckily I bought in 2010 at the bottom of the market so we at least won’t lose any money when we sell and hopefully come out far ahead. My only regret is refinancing to a 15 year mortgage before I had FIRE plans. Not a huge impact, just a bit less to throw at Vanguard each month.

    • livafi says:

      >>We’re buying now, but when we FIRE I think we’ll be renting at least while we travel and figure out where we might want to settle down.
      Completely understand – this was pretty much our situation. Awesome that you bought low and expect to earn some money on the sale — nice work. Don’t worry about the refi, you are a veteran super-saver and the slight bit of money you’re paying into your 15 year instead of throwing into the market will not change your overall picture all that much.

  25. Chris says:

    Probably one of the best blog posts I have had the privilege of reading in a very long time. The pace of your content, the breakdown of the topics and the way you explained the subject matter. As for the topic in itself, I uprooted and moved across the country and bought a more affordable home in an affordable community but now I keep wondering if “rightsizing” again or renting isn’t the wise thing to do although I only owe $250k on my mortgage with a 1200 monthly payment. I just think of taking the proceeds of the sale and investing for a return yearly and then shaving a couple hundred dollars a month off my monthly housing expenses as we all know like you stated above, the mortgage payment is a small portion of the ownership pie. I look forward to now following your blog as I found it via 1500days whom Ive been following for 2 years. Best Regards, Merry Christmas and Happy New Year.

  26. The MC says:

    Nice write up, thanks for sharing. I was interested to hear about your experience with Redfin and glad you went extra deep to find out why it was not a good experience for you.

    We used Redfin as first time buyers in California, and were very happy with them (the rebate they pay you back as buyers helped); I’d been considering them if/when we sell. The heavy presence on the West Coast might make he difference in our experiences.

  27. It’s crazy how attached one can get to their home! My fiance and I are still in our twenties yet I feel attached to this home we bought two years ago! It makes no sense because it’s not near our families but it’s pretty 🙂
    Thanks for the tips on comparing agents. I think we will have a different experience with listing price since we’re not in a hot market.

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