Greetings Comfy Crowd,
About two years ago Jan and I did something that may be considered very odd by most of society. We concluded the process that eliminated our debt, downsized our house, and moved our family to a more walkable neighborhood in a rental apartment. All things we wanted to do for some time, but were finally able to do at that point. Here is a breakdown of how we lived before selling the house, how we’re currently doing, and where we are headed.
First, a little background. We are a family of dad, mom, and 4 yr old son. We live in one of the most expensive parts of the country, the Washington, D.C. area (actually ranked the #1 most expensive place to raise a child), and are currently stuck here until Financial Independence (FI) is achieved. Jan stayed home with Joshua since he was born, but is the driver behind this blog, and will have her hands full in the not-too-distant future when we adopt a child from China.
In 2010 we bought a house that we thought would be a good place to raise a child, take advantage of a tax credit, and build up a forced savings through equity. We paid $475K for it, taking out a mortgage for $415K. Over the course of the time we owned the house it required $115K worth of work, half of which I did myself, half of which we had to hire folks to come in and help us out. In order to achieve that, we depleted our savings, and took out a HELOC, which (until the house sale) maxed out at $75K. The house was in a place where we could walk to very little, and had to drive to work or even to the metro (subway). (Although, two years into owning the house, I got a new job that I could walk to [3 miles each way], which helped my health a lot!) My wife and I had, combined, student loans of approximately $70K when we purchased the house.
Doesn’t sound too frugal, does it? Of course not. We did it because we thought that our kid would need a house, that I would love doing the house reconstruction (which I initially did), and that it would give us some roots after having moved about a lot before that.
Despite the debt situation that this choice of home ownership was forcing upon us, we were increasing our net worth by an average of $50K per year on a modest salary. None of this is attributable to home value, as the value of the house went up less than the cost of refurbishing it combined with the cost of selling it. We maxed out our retirement contributions, paid extra on the mortgage, eliminated my student loan (at 6.5% interest it was ridiculous) and lived frugally (although quite well!) everyday in between. (Ideally, we should have been paying off the debt faster and investing less in my 401K and our ROTH IRA's, but we felt good about taking big bites out of everything and were focusing on a balanced approach.)
After three years in the house I was burned out on mowing the lawn, daily upkeep, constantly working on something that broke, and doing the major projects that needed to be done. It was way too big, way too much work, and not in the location we wanted to live (in terms of walking or biking to what we find important). The house had drained us of our will to own it any longer. We longed to return to Chicago, a walkable community, our religious community there, and a car-free lifestyle. Work got in the way of us making this move when we wanted to, but we were still gung-ho to sell the house. Therefore, even though the job would not let me move, we sold the house and looked for as much of what we wanted in Chicago in the DC area.
Therefore, we sold the house, moved into a sufficiently sized 2 bedroom/2 bathroom apartment in a location that is walkable to a grocery store, the metro, library, park, and (free) swimming pool and is much closer to my son’s preschool. In the process, we cut our expenses over $2K a month. Not bad, right!
Even better, though!
With the sale of the house, we paid off the HELOC and the remaining student loans, leaving us DEBT FREE!
Now we are no longer paying interest on any debt, have an emergency fund if it’s needed, and are able to continue maxing out my 401(K), our ROTH’s, and even have a little left over to buy some VanguardTotal Stock Market Index Fund (VTSAX) on a monthly basis. The best part is, this in no way takes away from the opulent living we get to experience every day.
Our apartment is next door to a library from which my son loves to check out tons of books, a public park where he regularly rides his bike, digs in the mud with his excavators, runs around, and plays on a playground. The community has free gas grills, a party room, and a free community pool where we can dip our toes or swim on hot days. Oh, and did I mention, we’re right next door to a Trader Joes, a Whole Foods, and a very infrequently patronized by us Peet’s Coffee?
We were initially concerned that moving out of a house and into an apartment would be too much of a shock for Joshua, but it turns out he loves it. He likes to play in his sandbox on the balcony, stare out at the passing trucks on Leesburg Pike, and walk by the trash dumpsters every time we enter or leave the building (There is a nicer entrance, but he wants to pass the dumpsters, so we pass the dumpsters).
All in all, we’re quite happy to be debt free, not have a money pit sucking our savings dry, and living in a comfortable and walkable community near the things that bring us free joy.
One key component about renting versus owning for us is that we now have wings. We are in the process of adopting a child from China, for which we'll need an additional bedroom. Cool, we'll just move to a townhouse that provides the space we need. We're also in the process of planning a Financial Independence Early Retirement (FIRE) life living outside of the U.S. There is no home to sell or rent out. We simply time this to match up with our financial and school needs, and we're off to Spain, China, Uruguay, or Vietnam when it makes sense for us.
We bought a house because we thought it made sense for our family. After experiencing it for a while, we realized that it didn't make sense for us. Therefore, we changed course, sold the house, got ourselves debt free, and now have the wings we want to go where we want to when we're ready as a family. We don't recommend this path to everyone, but for those who are interested in breaking free of the mortgage chain, we'd be happy to help you out.
Do you own a home you don't want?
Are you renting, and thinking of buying a house?
Is buying a house the right thing for you?
We'd love to hear from you about what you're doing, how it's going, and what choices are right for you.