Once we realized we weren’t going to be moving back into our home, because it’s still rented, we decided that we would start shopping for a new (used) property. Our thinking was, which ever property we purchased, it would have to be something we could rent out while we are on the road. But again, we would be putting ourselves in the same situation, of being “houseless” when we come back to Texas.
Then we thought we would find a property with a “guest house” so we could use the guest house as a home base while renting out the main house. There aren’t too many “affordable” properties with guest homes on them so that idea is scratched. My next grand idea was to buy some land and start a farmlet. However, this makes no sense to use given our lifestyle. The idea of farm animals was enough for me to try to convince myself it was a good idea. Then we started looking for land to turn into a “tiny house” community so we I could incorporate my farmlet dream into a money making machine. This one is still an option, just not right now.
After searching and searching, we realized that we couldn’t pull the trigger on purchasing another property. Here is why: we don’t want to be house poor. Up to this point, I like to believe we have been lucky in past real estate purchases and do not want to test that luck. Not at this point anyway. There are a two different criteria we consider when purchasing any property.
- Location. This is an obvious one when it comes to purchasing real estate, but it really isn’t something people are willing to really push when they buy their “dream home”. Because of that reason right there, they are looking for the perfect house. We just look for the perfect location.
- Rentability. When we consider purchasing a property we do research to determine what the median rental rate is for the area we are looking. If it doesn’t clear our mortgage (tax/insurance) and generate enough income to cover any expenses that will surface, we do not move forward. While we might not be generating an insane amount of income from the rental properties each month, we do ensure all monthly costs are covered.
Those are the two top criteria we consider when looking for a property. We don’t look at the floors, walls, or crown molding. We don’t look at any property as our “forever” home, whether it is or isn’t, instead we look at them as our ride to “financial freedom” so if that means we have to live next door to tenants, so be it.
Now for the real reason behind this post, after going back and forth and then back and forth again, we have finally landed on a decision as to where we are going to live. I’d like to credit a specific Reddit post I read recently that really helped seal the deal for us and give me the extra push I need to finally make a decision.
Here is it, we are in the process of making the backyard of one of our rental properties accessible for the Airstream. I know what you are thinking, WHAT THE HELL! Well, hear me out. As you know, our decisions are usually financially based so lets look at the numbers:
Option 1: Purchase new “home”.
To keep the numbers somewhat easy, lets say the purchase price is $200,000 (which won’t get us anything in Austin if we follow our number 1 rule.)
Down payment: $40,000
Closing costs: $6,000
Taxes: $4,500
Property insurance: $800
Monthly payment: $1,200
Total upfront cost: $51,300
Continual cost: $1,200/mo mortgage + whatever breaks.
Option 2: Live in the backyard
Driveway installation: $10,000
Electrical work: $500
Fence installation: $4,000
Other misc things: $5,000
Total upfront cost: $19,500
If we were to go with option 1, we would have another property that we could potentially rent out down the road, which is a plus. For the minuses, we would also have to come up with $51,300 to dump into the property and then keep up with a monthly mortgage payment along with anything that might would break down the road. Additionally, we would have to figure out a way to offset the cost of another mortgage once we get back on the road. Also, interest is a nasty little booger. Even if your interest rate is lowish (3.5%), you are still putting a hefty amount of money towards it, especially in the beginning.
If we were to go with option 2, we will be out the initial $20,000, but we would have ZERO reoccurring monthly payments and we could rent out our spot for at least $500 a month once we move on. While we won’t be moving into a “house” per say, we do have an awesome structure that is already in this backyard which would serve as our laundry/living area. Which I am PUMPED about. Here is a good example of what we could do with the space that is already there. We do have concerns as to what our current tenants might think of this new “improvement” but I guess we will cross that bridge when we get there.
While we have made up our mind, I still catch Mr. TCP looking at real estate websites for a house, and dare I say I still do the same thing! I think once we start construction on the backyard, we will be committed and those searches will end, but until then look at what a mere $400,000 can get you in the great city of Austin, TX!
I am sure this will all change tomorrow and we will be to looking at houses….