I know it’s been quiet around Money Boss recently, but that’s because it’s been a busy three weeks in Real Life.
Kim and I spent the latter half of June packing the condo and prepping to move. Last Friday evening, we picked up the keys to our new place. We brought the animals over and spent the night. Then, on Saturday morning, we started a four-day marathon of shifting our household eight miles south.
We’re still not completely unpacked — and probably won’t be for a couple of weeks — but we’ve made good progress. The kitchen, bathroom, bedroom, and living room are all functional (if somewhat cluttered). All of our remaining boxes are staged in the back office (which used to be a garage). The internet is now operational. Mail has begun to arrive. The cats and dog have already learned to love the place. So have we.
After only five nights in the new house, Kim and I do love it — warts and all. And make no mistake: This place has some warts.
Major Repairs Needed
The people who sold us this home are great. They’re interesting and fun — the kind of couple we’d love to hang out with in our spare time. That said, they weren’t responsible homeowners.
“This house shows a pattern of long-term deferred maintenance,” the inspector told us in May. Translation: Needed repairs have been left undone for a long, long time. Based on his inspection report, and based on our own observations after a few days, our best guess is that the previous owners did little (if any) preventive maintenance during the seventeen years they lived here.
Some examples:
- The duct work in the crawlspace was mangled and lying loose. Because the crawlspace has a heavy rodent population, that meant the furnace was pushing polluted air into the house. (We asked for the previous owners to fix this before closing.)
- There have been a variety of plumbing leaks over the years. The kitchen sink still has a minor leak. The toilet and tub had major leaks that we asked to have repaired before we moved in. Also, the subfloor beneath the bathroom had some rotting that needed to be fixed.
- The roof is at the end of its lifespan. The inspector found bare patches and spots where the shingles have lost their integrity. This is a top priority to replace before the Oregon rainy season begins in mid October. (The sellers provided a credit at closing to compensate some of the cost to replace the roof.)
- The siding, too, is in bad shape. According to the home inspector, it has “begun to fail”. It’s feathering in spots. There are isolated patches of dry rot. That said, he believes (as do we) that it can function for a couple more years. We intend to replace it, but not until 2018 or 2019.
- The front and back decks are in the final stages of useful life. They have rotten spots (some of which the sellers cleverly hid beneath flower pots) and all-around weakness. That said, the decks aren’t critical to the function of the house, so they too will have to wait.
- Some of the floors are in bad shape. We didn’t notice this during our previous visits to the house, but the problems were clear when we moved in. The carpets are especially dirty and damaged. (Kim was so disgusted by them that she rented a steam cleaner at eight o’clock the first morning we were here. While I worked on moving stuff over from the condo, she cleaned the carpets.) The hardwood floors are also in rough shape. They’re functional but they have tons of scars and stains from decades of use and abuse.
These are just the major problems we’ve found. There’s lots of minor stuff too. The light over the kitchen sink doesn’t work, for instance. The bathtub hasn’t been caulked. (Really?) The walls need to be painted. We only have keys to one of the three doors. The furnace is thirty years old; it works, but we’d like to replace it before it fails, not after.
I don’t want to sound like I’m complaining. I’m not. We knew about most of this stuff before we bought this place. Kim and I spent a lot of time talking about whether or not we wanted to take on this much work and responsibility. We decided that we did.
This might surprise some long-time readers. In the past, I haven’t been much of a handyman. I’ve shied away from yardwork and home maintenance. But I’m in a different place than I was five or ten years ago. After much discussion, Kim and I agreed that the advantages of this home and its location outweighed the short-term headaches.
For the record, here’s a brief description of the home we bought.
Officially, the house was built in 1948. In reality, it was built a few years before that, but moved to its current location after the catastrophic Vanport flood in 1948.
Officially, the home has a footprint of 950 square feet. In reality, it contains another 300 square feet of unpermitted remodels, giving it a total living space of 1250 square feet. (Our condo had 1550 square feet, so this is about 20% smaller.)
The home itself is quaint. (Or “quirky”, according to our real-estate agent.) To me, it looks and feels like an English cottage. Many of the rooms have low (seven-foot) ceilings. The floors aren’t quite level. It has the same musty smell as the hundred-year-old farmhouse I bought with my ex-wife in 2004. And so on.
The house sits on just over an acre of land. Because the lot is long and narrow, though, it feels like we have more space than we actually do. The upper part of the property — where the house is — has a gentle slope; it has a lawn and there’s some nice landscaping with native plants. The back two-thirds of the property is much steeper, dropping away quickly into a ravine where a seasonal creek flows. The bottom half of the lot is wooded. The upper half is fenced, which means we can let the pets roam freely.
Although our new place is very close to a major Portland suburb, it feels as if it’s in the country. We’re a quarter mile from the nearest housing development. Our location feels isolated.
Money Matters
Part of the reason I’m willing to take on this project is maturity. I no longer view household chores and yardwork as burdens. They’re simply part of the price you pay to own a home like this. Besides, they’re an opportunity to learn new skills and to make the place our own.
Another reason we’re not stressed is that we’re financially prepared for all of the work.
My condo sold for $530,000. After closing costs, I netted about $501,000. We paid about $442,000 for the new place (net, after closing). That gives us a “profit” of roughly $59,000 to use for upgrades and repairs.
Meanwhile, my monthly expenses should drop drastically due to this move. Counting utilities, I was paying roughly $1750 per month to live in a place I owned outright.
By moving to this house:
- I’ve eliminated our $570/month HOA fee.
- I’ve cut my property taxes in half, from $6000/year to $3000/year. That’s a savings of $250 per month.
- My utilities ought to remain roughly the same (although time will tell). At the condo, the HOA fee included gas and water/sewer. Here, we have a well and septic tank. Plus, we don’t have to pay to heat/light the common areas in the condo.
- I owned the condo. So far, I own 100% of this house. That said, Kim wants to have ownership here too, so she’s going to pay me $500 per month to “vest” into the place.
The bottom line? It looks as if this move will improve my cash flow by $1200-$1300 per month. My net out-of-pocket costs to live here ought to be roughly $500 per month. (Again, this is all theoretical right now. I’ll share actual numbers as they become available.)
Much of that “saved” money will be plowed into the afore-mentioned home repairs and remodeling, at least during the first few years that we live here. After our first big push to get the high-priority jobs finished this summer, we intend to budget for one major project every year. (Next year, for instance, we’ll probably replace the decks.)
And, of course, we intend to budget in some fun stuff.
Budgeting in the Fun Stuff
Aside from the needed repairs, Kim and I have plans to perform some fun upgrades on the property. Although these are obviously lower priority than, say, replacing the roof, we do hope to pursue them sooner rather than later.
For instance, I want to build a writing shed on the back of our lot, where the lawn meets the wooded area. This home office will be a place for me to read and write. If it’s large enough, it’ll also be a spot for Kim to do yoga. I’ve been emailing with Mr. Money Mustache about the shed he built recently. He’s urging me to consider a pre-fab shed, which I’ll look into. Anyhow, the budget for this writing shed will come from the sale of our RV. Whatever I get out of that vehicle I’ll put into the new office space. (When this project is completed, it’ll save me $250/month in office rent.)
Plus, Kim and I both want a hot tub. She and I love spending time outdoors. We both also love baths. Our lot has a wonderful park-like setting, and it seems natural to install a spa so that we can relax outside year-round. We know we have to take care of the roof and floors first, but we do a lot of dreaming about what kind of hot tub we should purchase and where we should place it.
Before we can get to the fun stuff, however, we have to take care of the necessary repairs. Starting now. As soon as I press “publish” on this article, I’ll start calling roofers. It’s time to give this home some of the repairs and improvements that have been neglected for the past two decades!
Why will are the property taxes half of what you were paying? Homes aren’t that different in price.
Great question! The condo was in the Portland city limits in Multnomah county. The new place is outside the city limits in unincorporated Clackamas county. This makes a huge difference. On top of that, Oregon passed a property tax limitation measure in the early 1990s. This limits how quickly taxes can be raised on existing homes. But the condo was built in 2001, which means its taxable value is greater.
In Michigan we have a similar law, but the taxable value resets upon sale of property. Is that the case in Oregon?
No, there’s no reset on sale in Oregon (although that makes more sense, I think).
Congrats JD and Kim! I know I’ll enjoy reading about the processes of making needed repairs and a new chapter of home ownership.
I find there is something about getting home maintenance done (especially when you can deal with it financially) that really feels so good. Knowing you’ll have a new roof (and thus protected contents) will be amazing + it will be nicer aesthetically too. We had a HUGE project in 2016 (discovering that the previous owners of our home built an addition over part of our septic field) that included septic, trees, a deck, a fence. It was a real curve ball and a very expensive one, but it’s done and we’ve got a nicer street facing fence, a brand new deck, a whole new septic system, and peace of mind.
I probably just made the argument for renting, but I wouldn’t trade our home for anything. We love it and love living here. I wish the same for the 2 of you!
The concept of a buyer being responsible for roof repair/replacement is totally foreign to me. I live in Wyoming, and it is ALWAYS the responsibility of a seller in this state to provide an insurable, up-to-code roof. If that isn’t possible, they either submit a claim on their homeowner’s insurance or pay for repair out-of-pocket. We have one of the highest occurrences of terrible hail storms in the country, and roof inspections are mandatory here.
I wonder also about his Home Owner’s insurance. Do they review the inspection and insist on the repairs? When we had a bathroom leak, we had our insurance co come take a look and since it was considered a longer term issue than would be covered by insurance, they declined the claim. However, they also insisted that we get it fixed and set a timeline to do so or risk losing our coverage.
I received a ‘letter of cancellation’ from my former insurance company. They had performed a visual inspection from curbside, noting that some shingles had been repaired. They sent a form letter informing me that the roof must be replaced or I would lose coverage (with no contact from my agent who’s office is 5 blocks away).
I did end up replacing the roof but also switched to a different insurance company.
Great project you sound so happy. Good for you. And you could always learn how to do roofing yourself!!!!
I’ve considered it. I helped the roofers replace the roof on my first home in 1993 (and they knocked a bit off the price). But right now, I feel like my time is better spent on other projects around the house that I *know* I can do! 🙂
asphalt shingles on a single story is straightforward. However roof repair/replacement tends to be higher priced if you go with reputable places because their insurance is so high due to the risk of falling off the roof.
This isn’t to say you should or shouldn’t do it, more of just FYI. I don’t have much roofing experience, but I have helped and gotten quotes on a few.
When it is time for the hot tub, look at Artic Spas. They are a touch more expensive but will save you a ton in energy costs….super efficient! Best wishes!
You had me at writing shed!!! *Droooool*
Frugality, as much as it has been a lifelong habit for me, does not have to be the sole basis for every decision in life. My spouse and I moved into a 1925 colonial that had been lived in by an elderly woman for a couple of decades, so there was a lot of deferred maintenance. We went into it with eyes wide open, a detailed inspection report, and with considerable money knocked off the purchase price (we quickly paid off the mortgage). The location allowed me to walk to work and not pay for the expensive parking at my institution; the garden had potential and now feeds us during the summer; the historic elements were intact and only needed restoration and creativity. But the first few years were rugged indeed (Bats! Radon! New roof! Moldy basement! Flowered wallpaper! An endless to-do list!) It felt like everything needed doing at once. Patience and perseverance allowed us to enjoy bringing back to life a house with great bones and considerable charm. We have learned new skills and met some fabulous people whom we hired to complete jobs beyond our capabilities or posing too much danger (I draw the line with electricity). Financially, could we have done better elsewhere? Probably. By my current calculations, when we eventually sell, we won’t get back all we have put into this house (Pace, you rental advocates–of course renting is cheaper!). But that money “lost” adds up to a minor expense for us. As my spouse says, “this house and garden are our sailboat.” Yes, our hobby. That said, we reached FI some time ago and so we are lucky to afford what some die-hard frugal-heads might consider a folly. This choice is not for everyone (especially anyone in debt or stretching to afford the purchase price, or someone who prefers exotic travel to cocooning). But our investment of time, vision and capital has paid off for us. We love the feeling of being rooted here, creating our nest, and being a part of the history of this house. So, J.D. & Kim—the photo of your Cottage is adorable and I hope you will enjoy your new/old home as much as we love ours!
It appears you may have enough profit left over to do the Roof, the studio/office, AND at least the rear deck (if that’s where the new hot tub is going). Congrats on the new home.
Congratulations! I would love to see more pictures of your home in a future post. We’ve been working on our old house for decades and there is still so much more to be done, but it’s truly a happy little home, so it’s been worth it.
I love this. That’s exactly what I and my wife would like to have when our kids will go to college, a small house with a big lot.
Are you going to DYI all the projects?
I have to make note of the coincidence here. We just bought a new townhouse and are using the proceeds from selling our RV to help pay for it. 8^)
Ours is brand new and not quite finished yet, in fact we won’t be able to take possession and move in until the 15th of Aug. In the mean time we’ll just keep moving around the country and living in our RV.
Our new place is two stories, 2250 sqft, 3 bdrm, 3.5 bath. It’s made of concrete and stone and sits up on a hill overlooking the most beautiful city in the world, San Miguel de Allende, Mexico. That’s right, MEXICO! The place only cost us $170k-USD. After selling the RV (~$70k) and a empty RV lot in Titusville, FL ($48k), and selling my sister a quarter interest in the place for $40k (she gets one of the three bedrooms to use when she visits a couple times a year, whether we are there or not), I’m actually only out-of-pocket $12k!!! 8^)
For more about San Miguel try this link:
http://sanmiguelrealestate.com/san-miguel-de-allende/about
or this one (with pictures):
https://internationalliving.com/countries/mexico/san-miguel-de-allende-mexico/
Needless to say, we are ecstatic. 8^)
— jcw3rd
Wow — that’s an amazing story!
(But I’m so distracted by an RV lot that costs $48k! )
Yea, crazy isn’t it. We bought it (the rv lot) two years ago for $42.6K and sold it yesterday for $55K. Crazy!
Good luck! We had a good experience with West Coast Roofing last year – worth a call.
For inspiration for your writing shed – check out A Place of My Own: The Architecture of Daydreams by Michael Pollan. An interesting journey of his dream of creating his own place to write in the backyard. It is a fun read.
When you get to roofing—if you are doing asphalt tiles, ask about the 50-year tiles. For very little extra money, you get a thicker tile and one that will probably outlast us all. Also consult with gutter-guys in advance of having the roof installed (we didn’t and learned from our mistake). In a rainy clime, your gutters are just as essential as your roof and you need to pay attention to getting the water as far away from the foundation as possible. Good luck!
Congrats on your new place!
How do you anticipate this will impact your newer foray into biking more often?
J.D., based on how much work you have ahead of you, is this a case of buying “the worst house on the best block” and having a lot of upside for forced appreciation? It seems like there should be some room there with all the major improvements you’re going to make.
Yes, exactly. We’ve bought the worst home on the block. (But it’s a very nice block.) This is the opposite of my last two homes. When Kris and I bought our hundred-year-old farmhouse, we bought the best home in the neighborhood. When I bought my condo, I bought the best unit in the building. This time, I wanted to follow my own advice. There are lots of amazing homes around us (like multi-million dollar places). Ours is a humble cottage with lots of potential. Plus, the deferred maintenance drove the price down. We feel like a few years of work will allow us to really make this property shine. We’re looking forward to it!
I’m happy for you.
But I’m annoyed because you made me remember that I have a ton of work to do on my house!
Good luck with your project! I’m lucky to have a partner who is very handy. We renovated a house in DC ourselves (we had to hire a few people, mainly to pull the required permits), and replaced the electric, plumbing, HVAC, kitchen, and all the walls. I’m amazed at the number of fixes he’s been able to do just by googling the problem. Having the confidence that you can follow instructions goes a long way! We were lucky enough to buy a real fixer upper in an up and coming neighborhood. Between the work we’ve done and the improvements in the neighborhood, it’s created a lot of equity for us. It’s also affordable on one salary, giving us the ability to save a lot of money. We also have the flexibility to seriously consider leaving our jobs when we’re not happy. It hasn’t gotten to that point yet, but it feels good not to be stuck where I am!
Congratulations, J.D. and Kim! I’ve enjoyed reading about your journey to sell your condo and purchase this place, and hope you will continue sharing updates/experiences with us as you continue through the process.
Kudos to you both for taking on a “challenge” – I really respect your balanced view of the tradeoff between getting the best financial deal vs. finding a place which checks all the boxes for you personally. So many in the FI community have laser focus on the former but miss that achieving the later is whats really important in the long run.
Please keep the posts coming!
Your post makes me feel better about all the work we had to do when we moved into our farmhouse, :). Looking forward to seeing some posts about projects.
Congratulations. Oh man, that’s a lot of DIY. I’d be willing to tackle it, but Mrs. RB40 probably would veto it. It’s awesome that Kim is up for some DIY.
I went to clean the roof at our rental yesterday and I was scared $*&#less. The roof was steep and somewhat slippery. I didn’t finish the job and will need to hire someone to do it later..
Sounds like you have a good start on your punch list. Before you get started on the roof, have a good look UP into the surrounding trees (or better yet, make the small investment in an arborist’s inspection). You want to do any cleanup – or surgery, if required – ahead of the roof work if possible (because accidents happen) and certainly before the winds pick up in late fall.
I’m so excited for you both and look forward to the progress reports. You really seem to have done your homework and it’s great that you’ll be saving so much compared to the condo.
Buying a fixer upper eats up a ton of time! But why not do it if you have the skills, interest, and time? Mrs. Hammocker and I have acquired some rental properties that take elbow grease. We are glad we put in the time because we now have good cash flow! Congrats on improving your cash flow by over $1k per month.
Yikes, that is a fortune to pay for an old house that needs so much work. Are housing costs that crazy in Portland?
Yes, housing costs are that crazy in Portland. We actually feel like we got a good deal on this place considering how much land it has. But yes, it does need a lot of work too. We have high hopes that by putting some time, money, and energy into this place, its value will appreciate significantly over the next decade. (Plus, this area looks to be one of the next “hot” areas in the region.)
Congratulations on your new home! I think a smart move at this stage in your life. And love you leaving that high HOA fee behind. Regarding your eventual hot tub, a few thoughts from someone who owns one in the Northwest.
Bigger is not better. Consider a 2-4 person. And I don’t use my jets. I like soaking. My next tub will be smaller with minimum jets. Thanks for all your great writing.
Congratulations on the house! Before you buy the hot tub read my post I did on the cost to own and maintain a hot tub. It’s very thorough and something that will be a very interest to you before you buy. I love my hot tub but do know there are ongoing maintenance costs.
If, like me, you were curious about Sam’s hot tub article, here it is.