My wife and I just purchased a house…it is still settling in. I can’t believe I am taking the plunge into home ownership. This is the largest asset we ever purchased, and it most likely will be the largest one for the remainder of our life. Last week, I tried to give an in depth account of the purchase in an article. Some of our frustrations, how we stumbled on our house, and the bidding/acceptance process. At the end of the article, I left a cliff hanger about some of the parts of being a first time homeowner that I am still struggling with.
What is going on? I’m typically a happy-go-lucky, excited guy. Why I am feeling some hesitations with the process? That is the question I continue to ask myself. And the only response that I can tell myself is that this is normal when purchasing such a large asset for the first time. The process happened so fast and there are so many decisions involved, it is easy to pick apart each decision with the benefit of hindsight.
With hindsight, I have some big fears about the process that will continue to be eased with time. The following fears have been at the front of my mind a lot over the last week. Every time my wife and I talk about paint colors, another fear pops up after the conversation. Every time we walk around our new neighborhood and love everything about it, a fear manages to creep its way back in when we return home to our current apartment. This feeling is unnatural for me, and I can’t figure out how to shake it. Even with Lanny’s motivational piece the other day about going for it and doing whatever you need to do to achieve financial freedom, and his motivational pieces always get me motivated to act now, I still have this feeling. Here has what has been on my mind a lot over the last week.
Fear #1 – Watching My Free Cash Flow Vanish – This one is the low hanging fruit right here. For the past three years, I have enjoyed below market rent of $650/month for a very nice apartment in our area. We have been fortunate and I am fully aware of that. The hardest part is going to be trading in the rent for a significantly larger monthly mortgage payment. I’ve very happy with the mortgage/institution we were able to negotiate and believe it is the best possible mortgage, but that doesn’t mean there isn’t a large increase in our current monthly payment. Oh yeah, and don’t forget about the taxes, insurance, and other monthly expenses that also come along with owning a home.
Guess what, reading Lanny’s article about 3 painful housing expenses increases he recently experienced did not help ease my fears, because I am going to have the same experiences going forward. I’ve known the monthly expenses were going to increase when we finally found a home. I wasn’t naïve about that fact, especially given our wish list. But the reality of it all settled in as soon as we were told that our offer was accepted. It went from a “one day into the future event” to a NOW event, and the reality hit me hard. Expenses will jump from $650/month to closer to $2,000/month (an estimate) when all is said and done. Also, we need a new car for my wife, which is another monthly expense to add on top of that. That is a lot of freaking cash, which is a great segue to point number two.
Fear #2 – What Does This Mean for Our Current Goals? – At the end of 2016, I set some aggressive goals for 2017 with the prospect of home ownership looming. I wanted to pay off my wife’s student debt in six months. I wanted to have forward dividend income over $6,250. With the purchase of our home happening so quickly, it makes the prospect of achieving these goals that much harder, that much more difficult. Until my wife finds a new job and increases her earning power accordingly, achieving these goals became that much harder with purchasing a home. After Q2, I may have to take a look and consider re-racking my goals for the period. And of course, I am going to continue working my tail off side hustling and doing what I can to increase my cash flow and still achieve the goals. I’m not going down without fighting and turning over every freaking stone that I can to make every dollar count. But again, this hit me hard as soon as our offer was accepted and the reality set in.
Fear #3 – Did we Overpay? – I mentioned that we offer $9,900 below market value and the offer was accepted without a counter offer. Once I heard that our initial offer was accepted, the thoughts of “Why didn’t I offer lower?” or “Did I pay too much?” came rushing through my head. With interest and a 30 year loan, the cost of overpaying is quite expensive. Despite countless reassurances from our real estate agent and plenty of reminders about the crazy market, bidding wars for other homes in the same neighborhood, I don’t think I’ll ever be able to answer that question. Even worse, without an answer, this question will constantly be up for debate. Only until more homes in the neighborhood are sold (hopefully for a high price per square foot) or my wife and I sell the house one day for a gain, will I maybe have an answer to these questions.
Fear #4 – What if This Isn’t The House of Our Dream? – My wife and I talked about our desire to purchase one home in our life. One house that will fit our future family and will be sufficient going forward. But what if it isn’t the house we thought of? What if we don’t enjoy the neighborhood like we envision? What if we want to move again one day and have to go through this process all over again?
Again, all of these items continue to swirl in my mind. Luckily, these fears were somewhat calmed in an article authored by Mustard Seed Money and his mom. It was a great story talking about their families experiences owning a house, and his mom’s opinion about the whole home ownership process. I left this article feeling a lot better about this decision and everything. I’ve viewed this process as a large, one time transaction. But this transaction isn’t permanent. It is important to remember that the needs of our family may change one day. If they do, then we will adapt. If this doesn’t work out, we can always make a change. I wrote this earlier in 2017, but just like many other, less significant items, nothing about our financial statement is permanent. This was a great, great read at a time when I needed to read something like this.
Fear #5 – I’m Not Exactly a Handy Person – I mentioned that my house will need to be updated, but mostly cosmetic changes at this point. One of the most common things I read about home ownership on personal finance blogs, especially in regards to investment properties, is that the real savings come to those are handy. One day down the road, the changes or problems won’t be purely cosmetic in nature. This isn’t an “if” question, but a “when” question. When the problems arise, if you can cut out the contractor, the cost savings will be huge.
That’s the problem, I’m not exactly a handy person. With this house, I promised myself and wife that I am going to be a student of home ownership. For each problem that arises, I will study Youtube, articles, and whatever else I need to try to educate myself about how to fix a problem or make the cosmetic change myself. My fear is that I will one day have to incur significant expenses if a problem becomes outside of my scope. I know this sounds stupid, but it is something that continues to sit in the back of my mind. I don’t want to incur significant costs when I don’t need to.
Summary
This hasn’t been the easiest article to write, and I’m sorry to all of you that it has a darker tone than almost all the articles written on this blog. I’m sure each of these items are prevalent in most first time homeowners and I’m not the only person to realize these (or similar fears). I know time will heal these fears of home ownership and the trickle down impact, but I still wanted to share them all with you since Lanny and I try to be as transparent as possible on this website. I thought it was important to share that this process wasn’t only filled with the excitement of home ownership.
But I know that I will work through each of these items one by one, and find a way to fit this massive piece into my financial freedom puzzle. It is a challenge, and I’m looking forward to taking on this challenge. With my feet to the fire, I’m expecting some exciting and very interesting ways to generate income to achieve financial freedom. Now, it is on to the next step and going back to the daily battle.
-Bert