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When is LBYM going to far?
Old 01-10-2008, 06:02 AM   #1
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When is LBYM going to far?

I'm thinking about buying a place of my own to stop renting. I want to live below my means( my income is 44K/yr) but is this going to far? I'm single, no kids and plan to stay that wayso it should be enough room. My income is about 4K from being maxed out. The condo is <10 miles from work and most of my family. I think it's good enough and will allow me to continue to save aggressively for FIRE. Any thoughts?

Condo/Townhouse/Co-Op - 1161 GILLINGHAM RD, Neenah, City of, WI, 54956 - Realtor.com
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Old 01-10-2008, 06:48 AM   #2
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Not really sure what you are asking. what do you mean "income is about 4K from being maxed out"? Why do you want to buy versus rent? Are you seeing this as a step up (higher cost) or a step down (lower cost) from where you currently live?
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Old 01-10-2008, 07:21 AM   #3
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Not really sure what you are asking. what do you mean "income is about 4K from being maxed out"? Why do you want to buy versus rent? Are you seeing this as a step up (higher cost) or a step down (lower cost) from where you currently live?
What i'm asking is is buying an almost slum -like $43K condo going too far with LBYM. What I mean by "income is 4K from being maxed out" is that I get paid by the hour and based on the top pay for my department I am only about 4K away from top pay. As far as buying versus renting, my mortgage payment will be about 400/mo. Average rent for a comparable apartment is about 500/mo. I should be able to pay it off quickly and then have very minimal living costs. I'm just wondering if living in a place that is only 1/4 of what I can qualify for is going too far with "LBYM".
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Old 01-10-2008, 07:24 AM   #4
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Originally Posted by aaronc879 View Post
I'm thinking about buying a place of my own to stop renting. I want to live below my means( my income is 44K/yr) but is this going to far? I'm single, no kids and plan to stay that wayso it should be enough room. My income is about 4K from being maxed out. The condo is <10 miles from work and most of my family. I think it's good enough and will allow me to continue to save aggressively for FIRE. Any thoughts?

Condo/Townhouse/Co-Op - 1161 GILLINGHAM RD, Neenah, City of, WI, 54956 - Realtor.com
If it's good enough, and will allow you to continue to save, why not?

By the way, when do you plan to FIRE? You might not want to keep paying condo fees after FIRE. They're sort of like rent, I suppose. So, if it was me I'd pay about twice that for a house instead, if I could find one for that price. Then I'd pay off the house. But I'm in the "pay off the mortgage" camp, and there are equally persuasive arguments for not doing so.

If you plan to FIRE soon, and plan to move elsewhere, selling the condo might not be easy in this market.

Personally I like living <2 miles from work and it saves gas $$$.
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Old 01-10-2008, 07:26 AM   #5
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The place looks well nice. pool, and park. Is the area rural? Poor? Cost wise what are the common fees on top of the small mortgage?

I bet the ice skating on the lake in the area would be fantastic!
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Old 01-10-2008, 07:33 AM   #6
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The condo is <10 miles from work and most of my family. I think it's good enough and will allow me to continue to save aggressively for FIRE. Any thoughts?
As long as it fits your needs, go ahead. It's affordable and close to work for now.
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Old 01-10-2008, 07:34 AM   #7
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If it's good enough, and will allow you to continue to save, why not?

By the way, when do you plan to FIRE? You might not want to keep paying condo fees after FIRE. They're sort of like rent, I suppose. So, if it was me I'd pay about twice that for a house instead, if I could find one for that price. Then I'd pay off the house. But I'm in the "pay off the mortgage" camp, and there are equally persuasive arguments for not doing so.

If you plan to FIRE soon, and plan to move elsewhere, selling the condo might not be easy in this market.

Personally I like living <2 miles from work and it saves gas $$$.
I'm a "young dreamer" 20+ years until FIRE. Condo fees are 110/mo. Property taxes are only 800/year. Some condos in this area have 3x the property taxes at only about $80-100K purchase price so this condo seems like a good deal. I would probably keep this condo for ever and buy an additional one in a warmer climate in retirement and spend half the year in each.
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Old 01-10-2008, 07:39 AM   #8
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If you think it is slum like, will you really be happy there? Looks ok but no way for me to tell what the surrounding area is like.
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Old 01-10-2008, 07:40 AM   #9
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It looks like a nice place to me. Could you elaborate on why you call it a slum? Simply because it's cheap, or because it's actually run-down and in a bad neighborhood? Condo fee doesn't seem bad. However, keep in mind that those fees can go up at an alarming rate. Also, I dunno how true this is, but I heard a statistic a few years back, when I owned a condo, that something like 1/3 of condo associations, over the course of their existence, file for bankruptcy. And when they do that, they have trouble getting insurance, and that makes it harder to get financing, which makes selling one a real pain.

I bought my condo in 1994 and the fee was $120 per month. When I sold in 2004, it was up to something like $239
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Old 01-10-2008, 07:42 AM   #10
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I'm a "young dreamer" 20+ years until FIRE. Condo fees are 110/mo. Property taxes are only 800/year. Some condos in this area have 3x the property taxes at only about $80-100K purchase price so this condo seems like a good deal. I would probably keep this condo for ever and buy an additional one in a warmer climate in retirement and spend half the year in each.

Think of the condo as an expensive car! Pay it off quickly.
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Old 01-10-2008, 07:43 AM   #11
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If you think it is slum like, will you really be happy there? Looks ok but no way for me to tell what the surrounding area is like.
I guess the area really isn't that bad. The price just makes me feel like i'm buying an inferior place but maybe i'm just getting a good deal.
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Old 01-10-2008, 07:43 AM   #12
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I've never been a fan of condos. Too much depends on others: condo association, other condo owners (or worse, renters), etc. And appreciation tends to be limited somewhat. I agree with W2R. If you want to buy something, buy a house. Or even better, buy something where you can live in part of it and rent out the rest. Think duplex, quad, or bigger. YOu could start with a duplex needing life support and fix it up. Then trade up and start again. Being single with all that extra time on your hands, you could pump up your balance sheet significantly over time. Maybe your could even RE.
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Old 01-10-2008, 07:46 AM   #13
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Think of the condo as an expensive car! Pay it off quickly.
Keep in mind I only make $44k/year and I max out my 401k. That only leaves me with about $1500 take home pay every 4 weeks. I plan to get a 15 year mortgage with bi-weekly payments so at most it'll take 13 years to pay off. I'll probably pay it off sooner but I want to make sure I max the 401k.
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Old 01-10-2008, 07:46 AM   #14
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Neehah WI

Take a look Here..Neenah, Wisconsin (WI) Detailed Profile - relocation, real estate, travel, jobs, hospitals, schools, crime, news, sex offenders

Looks nice on paper!
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Old 01-10-2008, 07:56 AM   #15
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What about something like this?

http://www.realtor.com/realestate/ne...56-1085495284/

Now that looks nice to me, and no condo fees or worries. You could probably talk the guy down to $85K or lower, if your area is suffering from market slump like many. You could pay it off in 10 years and use that as a down payment on a house twice as expensive. Then in 20 years, sell that, buy your two condos and pocket the difference. Well, that strategy is not everyone's cup of tea but it appeals to me.
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Old 01-10-2008, 07:57 AM   #16
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Me Like that idea!
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Old 01-10-2008, 08:02 AM   #17
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What about something like this?

Single Family Home - 938 GAIL AVE, Neenah, City of, WI, 54956 - Realtor.com

Now that looks nice to me, and no condo fees or worries. You could probably talk the guy down to $85K or lower, if your area is suffering from market slump like many. You could pay it off in 10 years and use that as a down payment on a house twice as expensive. Then in 20 years, sell that, buy your two condos and pocket the difference. Well, that strategy is not everyone's cup of tea but it appeals to me.
I don't like debt. Not even "good" mortgage debt. It's hard for me to even take on $43K let alone more than twice that amount. I work in manufacturing which has had a lot of job loss in this area lately. If I lost my job my income would likely go from $43k to about $22K and that's if I could find anything at all. In my department 6 out of 20 people were fired last year.
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Old 01-10-2008, 08:04 AM   #18
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For me LBYM does not, and should never mean, making yourself unhappy to reach a financial goal. Going out to dinner less, not buying expensive gadgets you don't need, not buying an expensive car every few years. These are the types of things that I try to achieve. At the same time, you must always remember that this is YOUR life, the only one you have. So while saving for retirement is certainly important, you do not want to live so meagerly that you feel like a slave to it. This is a personal choice and limit for each person. What one person would call squalor, another might call luxury, that is for each one of us to decide.
I once had some friends that wanted to go to Vagas for a weekend and not buy a hotel room. They planned on just roaming around for 3 days, and then crash if they needed to, out at a hotel pool on their lounge chairs. Back in my college days, that might have been OK... but at the age I was then, I did not condider that to be fun in anyway whatsoever. There is a point where you can "cheap" yourself into not enjoying life anymore, and that was over my limit.
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Old 01-10-2008, 08:05 AM   #19
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There is nothing wrong with buying less than you can afford .I've done it my whole life and it has helped me reach FI easily.
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Old 01-10-2008, 09:32 AM   #20
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First you have to be comfortable in it. But also:

What is the condo association's reserve look like (do they have enough/plan to cover new roofing, paving, etc). This is very important or you could be subjec to special assessments that could be quite steep. You call it "slumlike" does that mean it hasn't been maintained? That would be a big red flag.

Can you walk at night or leave your car in the parking lot without worry?

For the complex, what is the owner occupied versus rented ratio? (owner occupied is better for many reasons).

What is the average age of current residents?

Do you have access to grocery or other desired amenities (that is location in addition to family).

Can you make interior changes without permission of the board?

Cheap is not necessarily bad, but you need to understand what your $$ is getting you - sometimes it is not a good deal, other times it is a real bargain.
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