Car crap

[judecorp]

So the Nissan dude finally got back to me and said that they aren't getting any new cars for the rest of the month and said we'd have to wait. I told him we couldn't wait that long and he said he would get back to me. So I'm starting to think the Versa is a bust. We can try to call a couple of other dealers but no one seems to have them and we can't wait a month for a car. So frustrating. I hope they don't give us a hard time when we go get our deposit back.

We're in the process of househunting and honestly, I don't know how people can afford to buy houses. We're actually looking at cheap houses (for New England) and the monthly payments, with taxes, will be pretty close to what we're paying now, probably. I thought we were moving to SAVE money. Argh. So now Jen will be making less money and we'll have more expenses. Hopefully I won't be taking a pay cut, too, or I'll be working two jobs and the babymaking will go out the window. Phooey.

I'm sure this is just stress talking but right now I just think that I was foolish to think that things were starting to work out. Bleh. We need a car and a place to live, STAT!

p.s. I'm glad that House and SVU are back into new episodes.

Comments

[geniusorafool.livejournal.com]

We're actually looking at cheap houses (for New England) and the monthly payments, with taxes, will be pretty close to what we're paying now, probably.

Ah, so "glass half empty" here. Remember, there are two important differences:

1) You will, most likely, be living in a place with more square footage and acreage.

AND

2) You will OWN your own place instead of paying RENT!

Please don't despair. If you say that you can't make it in Western Mass, it's such a downer for those of us who have committed themselves to making here in Eastern Mass. Put your mind to it and make it happen ;-P~

/end pep talk

[judecorp.livejournal.com]

You make good points.

We have A LOT of square footage right now - about 1600 if you can believe it. Our place is HUGE and wonderful. But yes, a house /should/ have a little more than that unless we buy a shoebox. And the yard is a HUGE plus!

And yes, it's exciting to not pay rent!

I'm not saying we can't make it work. I'm saying that it's going to be tough, which is hard because one of the reasons we wanted to move is to SAVE money. If either one of us had a job that paid a decent wage, maybe it wouldn't be such a big deal.

[skatured.livejournal.com]

You will be saving money...like in a piggy bank. Because ideally you will get that money that you put into it back when you sell it at a later date. Or you can use money against the parts that you own for equity/loan, etc.

SO...you are saving money, just not money that you can see every day.

[judecorp.livejournal.com]

Right. And it's the every day that has me hung up. To move out there, we need additional expenses like a second car and bills we don't usually pay like water and sewer. So to go out there and NOT save rent/mortgage money and STILL have the extra bills, while earning less money? Ouch.

It's great to build up equity and stuff, but how is it helpful if we can't pay our bills? :)

[charlwoo.livejournal.com]

I've been doing a lot of research and thinking about the affordability and availability of real estate for the past year. After all the math is done, I would have to be able to find a place in the Boston area for between $240-280k just to BREAK EVEN on my expenses every month. By that, I mean that I would be throwing away the same amount of money renting as I would owning. I'm building more equity socking money away in a high yield MMA and renting right now! This is an insane real estate market.
Just looking through Craig's List, it looks like a single family home would have to sell for around 200k just to break even on the costs for renting a similar home out in western mass.
Although it's not a buyer's market yet -- it's really a stagnant market, where sellers haven't dropped their prices significantly and the buyers are few and far between -- I think we are due for a major price correction in housing over the next two years. I'm going to delay buying property just a little longer and will wait for prices to fall through the floor.
OTOH, and you've probably already thought about this, you could get something affordable now or soon, by submitting lowball offers or by looking into foreclosures. Foreclosure rates are exploding, and I think we're only going to see more in the next two years as ARMs reset and the economy slides into a recession. If the Fed keeps raising interest rates, especially, we'll see ARM and IO loan holders choke on the payment increases more frequently, causing even more foreclosures to be available. We are living in interesting times.

[judecorp.livejournal.com]

Dude, I would never in a million years consider buying anything in the Boston area. It scares the living bejeezus out of me.

[00solstice.livejournal.com]

hondafithondafithondafithondafithondafithondafithondafithondafithondafithondafithondafithondafithondafithondafithondafithondafithondafithondafit! (or vibe)

[judecorp.livejournal.com]

Vibe's too expensive. And the Fit is TOTALLY elusive. We haven't found a dealer who has ONE yet.

[hope-persists.livejournal.com]

sometimes it makes sense to work like just over the border in ct (a half hour away) or still in central/eastern mass, because you can make a lot more money that way. valley job money is not so good :(

[judecorp.livejournal.com]

Well, as a social worker, I don't anticipate making money anywhere I might go. :)

[tool-of-satan.livejournal.com]

You know that you can deduct your property taxes from your federal income tax, and (at the moment, anyway) your mortgage interest as well, right? So, if the mortgage plus property taxes equal your current rent, you ARE saving money, since your income tax goes down. And as noted by others some of what you are paying becomes equity you get back eventually.

[charlwoo.livejournal.com]

Now that's something I didn't originally account for -- that mortgage INTEREST is a tax deduction.
Other expenses of a home include a monthly water bill (over $100 for me) and home maintenance. You also assume some risk if property values decline (likely over the next 2-3 years). Also, your equity is locked up and inaccessible unless you take out a HELOC, which you pay interest on while paying it back. And in Massachusetts, you can deduct 50% of your annual rent up to $3000 for a state income tax deduction. Finally, remember that for any tax break, you are still spending money, you're just not paying tax on that money that you spend. For example, if I spend $1000 from my take-home pay and it's all tax-deductable, that's like I've spend $1000 from my gross paycheck instead of my paycheck after taxes -- if I'm taxed at 33%, I've really spent $666 from my take-home pay instead of $1000.
Here are the factors that I can think of so far in figuring out the break-even point for buying versus renting, no PMI, assuming a 33% federal income tax rate and a 5% state income tax rate. I'm sure I'm missing some expenses on both sides of the equation, any feedback would be much appreciated! All number are annual (for example, water bill would be the total annual water bill).
Mortgage interest + property taxes + water bill + maintenance - (interest * .33) - (property taxes * .33) = rent - (3000 * .05) + moving costs
So, let's take some reasonable (as best as I can tell) numbers and plug them in:

Rent at 1400/month. Move once every two years costing $2000 to move.

Mortgage interest + property taxes + water bill + maintenance - (interest * .33) - (property taxes * .33) = 1400 - (3000 * .05) + 1000
Mortgage interest + property taxes + water bill + maintenance - (interest * .33) - (property taxes * .33) = 16800 - (3000 * .05) + 1000
Mortgage interest + property taxes + water bill + maintenance - (interest * .33) - (property taxes * .33) = 17650

house cost = x
mortgage interest = 5.8% of mortgage (bankrate.com, assuming one can get the lowest rate, compounded annually which might not be the case)
property taxes = $11.73 per $1000 of assessed value (www.northamptonma.gov), assume property is assessed for mortgage - closing costs (~1% of mortgage)
water bill = $100/month (for me at least)
maintenance = 2% of mortgage (estimating for a home that need regular maintenance)

(x * .058) + {[x - (x * .01)]/1000 * 11.73} + 1200 + (x * .02) - [(x * .058) * .33] - ({[x - (x * .01)]/1000 * 11.73} * .33) = 17650

solve for x.

(x * .058) + {[x - (x * .01)]/1000 * 11.73} + (x * .02) - [(x * .058) * .33] - ({[x - (x * .01)]/1000 * 11.73} * .33) = 17650 - 1200
(x * .058) + {[x - (x * .01)]/1000 * 11.73} + (x * .02) - [(x * .058) * .33] - ({[x - (x * .01)]/1000 * 11.73} * .33) = 16450
.058x + {[x - .01x]/1000 * 11.73} + .02x - .33(.058x) - ({[x - .01x]/1000 * 11.73} * .33) = 16450
.078x + {11.73[x - .01x]/1000} - .33(.058x) - ({11.73[x - .01x]/1000} * .33) = 16450
.078x + {[11.73x - .1173x]/1000} - .01914x - ({[11.73x - .1173x]/1000} * .33) = 16450
.05886x + {0.01173x - 0.0001173x} - ({0.01173x - 0.0001173x} * .33) = 16450
.05886x + 0.01173x - 0.0001173x - (0.0038709x - 0.000038709x) = 16450
.05886x + 0.01173x - 0.0001173x - 0.0038709x - 0.000038709x = 16450
0.066563091x=16450
x= 247133.96

Which means that, with these assumptions, you would be throwing away the same amount of money renting at $1400/month and moving once every other year as you would by taking on a mortgage of $247k. If your mortgage is less than 247k, than you are building equity versus renting at $1400/month.
For me personally, if I were to buy a place, I would also have to factor in the costs of owning a second car as well as gas and vehicle maintenance if I needed a car to commute.

[charlwoo.livejournal.com]

Whups. Ignore this line:
Mortgage interest + property taxes + water bill + maintenance - (interest * .33) - (property taxes * .33) = 1400 - (3000 * .05) + 1000

[judecorp.livejournal.com]

Okay,
1. You are a major nerd with the math. And I love it.
2. I didn't even know you were still out there! Hi!
3. We would be mortgaging less than you say and pay just about that much in rent. So I guess we'd be working out pretty well. Which is comforting.

Thank you. :)

[charlwoo.livejournal.com]

Awesome :)

[judecorp.livejournal.com]

You need a new picture, dude. That wig thing scares the poo out of me. ;)

[judecorp.livejournal.com]

Yes, I know that you can deduct property tax and mortgage interest. In fact, mortgage interest deductions are the single largest Federal welfare programs in the United States! (Go go social work school.) And while I am jazzed about lower income tax, I also know that we have to pay our day-to-days, and that's what scares me... not what might come off the back end at tax time.

I'm sure it will all work out. I'm just SO TIRED of struggling and having us both make together less than most of the people we know make alone.

[smurfbrother.livejournal.com]

Well, you will be saving money, albeit on the back end. You can deduct mortgage interest from income tax, and you're essentially paying yourself rent.

[gimmeapony.livejournal.com]

Yes, and mortgage interest makes up the bulk of your payments for the first manymanymany years of your mortgage and that's ALL tax deductable. So you either are going to get some sweet tax returns, or can have your taxes adjusted so you're getting more per week.

And yea, paying yourself rent. We pay considerably more for our mortgage that we did for rent but it isn't being flushed down the toilet anymore. That's my favorite part (fiscally, anyway).

[judecorp.livejournal.com]

We can't pay more in mortgage than we do in rent. In fact, we have to pay a little less to cover the second car, the increased insurance, and the increased bills. Since Jen has already committed to making about $1K less than she is currently making, I'm scared. Because my salary... eh, it's not great either.

And yeah, it's cool about the tax deductions. I just don't want to be one of those people who ends up getting repo'd. ;)

[judecorp.livejournal.com]

I wish Daedalus would pay me rent.

And I know we would get some back in taxes. I'm just scared that we won't make enough money to pay our bills. (Yikes.)

[keelamonster.livejournal.com]

Everyone up there all said good stuff about tax deductions (which you can adjust in your paycheck so you get more in your check and break even on your taxes or you can just keep paying the same and get a big refund---but why give uncle sam an interest free loan like that?).

Look, though, you're not wasting money by renting, everyone likes to say that you are. But you're paying for a roof over your head. You're paying for a service. It's not wasted money. It could be money better spent owning something, but never kick yourself for renting if you have to for a while. there's something magical about having a place that's YOURS, but there's also something wonderful about not living in a cardboard box on the street.

[judecorp.livejournal.com]

I agree that renting is not wasting money. We pay for a service, not just the service of having a place to live but also not having to worry about things like new heating systems and roof leaks and all of that crap. I don't begrudge renting at all - I just don't want to do it anymore. Because I want a HOUSE. With STAIRS. Because I've never ever ever lived in a house ever. And I deserve it.

If we have to, we can certainly rent. I just don't want to. ;)