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Jul 31

Why we didn’t buy our “dream” home

houseThis weekend Eric and I almost put in a bid on a multi-family home in the suburbs. Everything about the house was perfect. It was a two-unit home with a two-bedroom apartment on the bottom level and a three-bedroom unit on the top. The outside of the house was in great shape (newer siding and windows, paved driveway, 2-car garage), and the inside was in very good shape too (newer appliances, newer heating systems, walls in good shape).

The house had most of what we were looking for in a home. It was an older Victorian with plenty of charming features including built-in bookcases, crown molding and hardwood floors. It was close to the commuter trains and buses and there was even a little yard for the dog with some nice landscaping and flowers.

Everything I’ve told Eric I wanted, minus the white-picket fence right?

The only problem?

The asking price was more than I felt comfortable paying (and would likely go up, thanks to bidding wars).

Eric said we’d be fine making the payments, especially with the rental income we’d be making from the second unit (which is why we’ve been wanting to buy a multi-family home). So we signed the contract and I promptly freaked out and changed my mind before we e-mailed the pdf to our realtor.

Here’s the Background:

For the last 6 months or so, we’ve debated whether we should keep our current condo and rent it out, or sell it and use the money towards a bigger down payment on a multi-family home.

Ultimately, with the soaring prices in our neighborhood we have decided to keep the condo and rent it. Our realtor took at look at our place and said we’d be able to cover our mortgage and condo fees with the rent we’d be collecting. So basically our renters would be paying our mortgage on the condo. Which isn’t a bad deal considering property values in our neighborhood and the likelihood that they will continue to increase.

The irony in this whole story, is that I’d, “convinced” Eric that we should buy a multi-family home so we could pay down the mortgage faster and/or have a lower mortgage payment in the event that I cut back my hours when we have kids (in the future, no wedding bells yet). Now that I’ve got him, “on board” and he’s excited about the idea, I’m putting on the brakes. Go figure!

Why this isn’t the house for us:

While the numbers “work” on the multi-family we liked, this home felt too expensive to me. Once we paid the downpayment and closing costs, we wouldn’t have a very big emergency fund left. Our emergency fund took some pretty big hits this year (first the broken furnace and then the very ill kitties).

Had we not had an emergency fund to cover those emergencies, I probably would have had a panic attack. After working so hard to get myself out of student loan debt, the thought of being in debt again terrifies me. Yes, I know there are far more scary things to be afraid of, but I know how bad I felt when I had that huge debt hanging over my head and I don’t want to go back to that place if our renters bail on us or one of us (god forbid) loses our job. What it all boils down to, is I don’t want to set myself up in a situation where I feel scared about my finances.

What does that mean for a future purchase?

Long story, short, I think I’ll be much more comfortable buying a more modest, smaller and/or less updated home with a smaller mortgage payment. Ideally, I’d like to know that we could cover both mortgages for both properties out of our salaries. If that’s not possible, I’d want a big emergency fund that would cover 3-6 months of both mortgages in the event that one or both of our tenants don’t pay. Hopefully that wouldn’t ever happen, but it’s what will make me comfortable and you can’t put a price on financial security.

Am I nuts for backing out of the “perfect” home for us? Does debt scare you?

Image: Pat Williams

36 comments

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  1. Grayson @ Debt Roundup

    You have to go with your gut. I had a hard time signing some paperwork when we were looking for a house. With the prices, plus HOA fees, taxes, and the like, the payments were more than I wanted. After waiting it out, we were able to find a place we both love and can easily afford.

    1. KK

      I agree Grayson. I think it’s worth the wait to find something that feels more comfortable (emotionally and fiscally) 🙂

  2. Michelle

    Like Grayson said, you need to do what you feel comfortable with. You don’t want to be mad at yourself later because you didn’t listen to yourself.

    1. KK

      I definitely don’t want to make a mistake with that much money involved. I feel good about our decision to wait.

  3. Money Beagle

    Sounds like you made the safest decision given your finances. I’m sure you’ll often wonder what could have been, but I think the comfort of knowing you’re at less risk will keep you satisfied in your choice.

    1. KK

      I think we’ll probably be curious what happened with the bidding, but I feel good about our decision because i know it was the right one for us.

  4. Andrew@LivingRichCheaply

    Like the others mentioned, if you didn’t feel comfortable with it, you probably did the right thing passing up on it. There will be other houses. Buying a house is a very personal and emotional decision sometimes…my wife and I just bought a co-op. We wanted to buy a house but just couldn’t afford it since we wanted to stay in the area where we’ve been living. Just curious and don’t mean to pry, but…why the rush to buy a house? In my humble opinion, I think the condo in BK sounds pretty good. Maybe revisit that when you decide to have kids…well that’s just me…the house thing didn’t really come to mind until we had a baby.

    1. KK

      I don’t think you’re prying, it’s a good question. We’re not in a rush to buy which is why we decided to wait when this house made me feel uncomfortable. We’re in Hoboken and the condo is wonderful, but there are certain things about suburban living that I really miss (having a lawn, having more physical space in the house, having space for family to visit, not worrying about my neighbors getting annoyed when I do exercise dvds, having a private washer and dryer and being able to use it whenever I want etc.).

      I’m originally from rural Maine, but have been living in cities since college. Eric’s job is here so I stayed after grad school. If I had my way we’d move out of the tri-state area completely. So I guess a suburban house will sort of be the compromise since I know we’ll probably be here permanently.

  5. Morgaine

    I think you made the right decision. I think if you would have went through with this it would have made you more worried and stressed. Not worth it for a “dream” home in my opinion. Keep looking, when you find the right one, you’ll know it 🙂

    1. KK

      I think a cheaper dream house is out there for us, we just haven’t found it yet. We’re keeping our options open and are willing to think outside of the box a little. Maybe our next place won’t be a multi-family, or maybe we’ll stay here a little longer and buy a small vacation cabin so I can get my “country fix” on the weekends.

  6. Kassandra

    I really wish more people would listen to their gut instinct or sixth sense as others would call it. This is a big decision with several factors to consider for you and Eric. It’s not fun to feel cash strapped and like you, after working my butt off paying down debts, I have zero interest in putting myself in a potential financial hole. You made the best choice for you. “To thine own self be true” – Shakespeare

    1. KK

      Thanks 🙂 I definitely don’t want to feel like we’re stretched too thin. Day to day life is stressful enough without having to worry about how to pay your mortgage if your tenants don’t pay.

  7. Tonya@Budget and the Beach

    I think if it didn’t feel right it probably wasn’t the right house and the right time to put in a bid. I think you have to listen to your gut on those kinds of things. Hope you do find the perfect house soon though!

    1. KK

      Thanks Tonya. I’m glad we decided not to put in a bid. I actually felt so relieved after we decided not to move forward, which was pretty surprising to me. That’s how I know it wasn’t right.

  8. Mrs. PoP

    Sounds similar to our first home purchase. We put an offer on a triplex (one large unit upstairs with two small units downstairs) and got outbid and didn’t feel comfortable getting into a bidding war when we knew there would be multiple units that could go wrong at once. So we walked away and ended up getting our current house 6 months later and our rental duplex another year after that. Took a little longer, but I think it worked out for the best.

    1. KK

      I think multi-families and duplexes are such a good idea, it’s just been really hard to find affordable rental properties that are in places we’d want to live. There are plenty out there, but not many in the price range we’re comfortable with in the better towns. But we’re OK with waiting until we find a good fit.

  9. E.M.

    I would have freaked out as well, but that’s mostly because I can’t even imagine saving enough for a downpayment right now, let alone parting with that much money! I think it’s great that you recognized you weren’t comfortable paying that much, though. You have to do what feels right, and thinking/planning ahead will help you in the future, I’m sure. I’m the exact same way with worrying, so I don’t blame you for wanting a bigger emergency fund to take on possible repairs. I hope you find the right smaller house soon!

    1. KK

      Maybe it’s a little paranoid, but I’d rather be a little paranoid then a lot broke 😉 When we bought our condo I was super excited and couldn’t wait to put in a offer, this time I felt a little nervous which is why we waited a few days to make sure we were sure. I’m very glad we did.

  10. Bob at moremoneythanmonth.com

    Very, very wise!! I commend you. If more people had this kind of outlook, the great recession might not have happened.

    Owning a home is a wonderful blessing, but do it wrong and over extend yourself and it can be a nightmare. So many people end up in that trap.

    You’ll get there and when you do you’ll sleep so much better knowing you have a house that you can afford.

    1. KK

      We love our current home and are very pleased with our decision and the price we paid. We want to feel the same way about our next place and if we feel stretched too thin it definitely won’t be a blessing. I think we think about things differently then most people (well, most people who aren’t interested in personal finance that is). Most of the time that’s a good thing 😉

  11. Mrs. Frugalwoods

    I think you made the right decision. If it didn’t feel right, you were wise to back away. I completely understand (and share) your fear of debt!

    1. KK

      I think it’s probably a good thing to have a healthy fear of debt. I think that’s what makes us weirdos (in a very good way!). I always smile when Dave Ramsey says that normal is broke and think to myself, “I’m so weird!”

  12. Laurie @thefrugalfarmer

    I agree with Grayson, KK – you’ve got to go with your gut. There could be SO many reasons why that house didn’t feel right to you, you know? Hang in there: the perfect house will come. 🙂

    1. KK

      Thanks Laurie. I know there’s another one out there. I always hear Dave Ramsey say, “there’s a house on every corner” and I know he’s right. When it’s right it will feel right.

  13. femmefrugality

    You totally did the right thing. That’s such a big purchase, and being a double landlord with a limited EF would not be a fun way to start out if Murphy’s Law follows you around anything like it does me. If it doesn’t feel right, it probably wasn’t meant to be!

    1. KK

      This year has been really Murphy filled, so to speak, so I’m not willing to take any chances. I love not having to worry about money (within reason) and I don’t want to start now.

  14. Kayla @ Shoeaholicnomore

    It is a big decision and since you were not totally comfortable with it, it’s good that you didn’t go through with it.

    1. KK

      Too big (literally and figuratively) of a decision to make when I’m not completely sure it’s right. I still feel good about our decision to wait.

  15. Alicia @ Monster Piggy Bank

    I think you just made a right decision. Emergency funds are very important considering that unexpected things can happen anytime!

    1. KK

      Yup, I’m definitely not waiting for another emergency to happen to find out if we have the money to cover it (if we bought the house that is).

  16. Poor Student

    If I were you, I think I’d take the chance and buy the house, but that might be because I’m more of a risk taker. Given your circumstances though, I think you made the right decision. I think it’s better to wait and find an even more perfect house when your financial situation is better and you’re comfortable paying the mortgage.

    1. KK

      I was definitely on the edge. I think we could have bought it and been fine, but if we did have a big emergency we probably would have been pretty cash strapped and I hate that feeling. So we’ll ride it out a little and see if I change my mind with some more money in savings.

  17. Jayson @ Monster Piggy Bank

    Sometimes, things do not happen the way we expected to do. There are many good houses available out there that might suit your financial capability and family needs. We just have wait and keep on searching. I would have done the same choice as what you did. Buying into the idea of getting the house seems unreasonable.

    1. KK

      I think you’re right. We’ll find another one that’s more perfect or at least more in the price range where I’m comfortable. No need to rush in.

  18. Lisa E. @ Lisa vs. the Loans

    If your gut tells you it isn’t right, then it isn’t right. Perhaps your dream home is still out there!

    1. KK

      I think it probably is, and if not we’ll settle for a non-dream home that has most of what we want in a cheaper price range 🙂

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