November Mortgage Update: And hypotheticals

Last month (October):
Years left: 3
P =$1,042.82, I =$171.58, Escrow =$788.73

This month (November):
Years left: 2.75
P =$1,054.86, I =$159.55, Escrow =$788.73

One month’s prepayment savings: $7.90

Man, it sure is nice to be getting paid again.  Beautiful beautiful paycheck.  Bank account numbers are going up instead of down again.  :)

I won’t find out whether or not I’m getting a half-paid sabbatical next year for several months.  However, I may take the year off unpaid *anyway*.  We have an awfully large savings buffer and DH’s company swears they have enough money to stay in business for the next two years even if they earn no more money during that time (and they’ve got grants out and products being made, so hopefully they’ll get more money).  And DH is one of their valued employees.  And he should be able to find new employment even if he loses his job depending on where we do the sabbatical.

There’s a lot of questions about where to go too, but I’ll defer that for a later post.  All of the places, however, have a higher cost of living than where we are right now (which isn’t difficult!)  Think double the cost of daycare, 1.5 to 2x the cost of housing for something much less nice than our current mortgage (even without the prepayment).

The hypotheticals I want to address right now involve the house.

We currently have 3 cats, one of whom still occasionally pees on a comforter or pile of laundry if we leave it out when she’s out and about.

Our house is also a superficial mess.  Yes, the carpet in the kids’ bathroom is gone and the vertical blinds that were in the worst shape have been replaced, but that’s only the tip of the home-repair ice berg.  The kittens literally shredded the master bathroom when they were still kittens.  It will need to have the wallpaper completely removed, patching done, and paint.  The entire house needs to be painted– it’s grungy and chipping in places and occasionally sports two year old art.  There’s a sizable black ink stain in the carpet in DC1’s room that won’t go away with steam cleaning (it, in fact, just gets bigger every time we try).  The deck needs painting.  The screens need to be replaced or patched.  The guest toilet is getting rusty.  And on and on and on.

We are not allowed to rent to students by HOA rules.  (Though we’re fairly sure there’s a group of students living down the street from us, but the HOA board is currently weak.  When strong it has brought lawsuits to such houses and won against them.)

Our house, in theory, if it were in good shape, would rent unfurnished for $2000/mo.  Though one year rentals may drop as low as say, $1600/mo.  (Note, our required mortgage is $2003/mo, though as you can see the escrow and interest are under $1000/mo.)  Storage for our furniture would cost something like $300-500/mo, give or take.

In bad shape, any house in town will rent for $1200/mo, possibly even $1500/mo.  Our house would be a bargain at that price, even with stained carpet.  Though we’d still have to repaint, I think.

We’re not sure if anyplace we go will allow 3 cats.  Two, yes.  We might be able to leave one of the cats at a relative’s place for the year (though the two black kittens are very attached to each other, and we’d be breaking that attachment– it is unlikely that a relative would take the incontinent kitten).

Our utilities range from $50/mo to $800/mo depending on time of year.  Lawn mowing costs $35/mo, plus weeding $50/mo, but only during the growing season.  Our lawn has to meet a certain standard or we get nasty letters from the HOA  threatening to take our house.

Obviously we’ll stop mortgage pre-payment for next year if I go on leave.

So our choices:

1.  Fix everything up, try to get market rate for the house.

2.  Fix some stuff up (painting, but patch instead of replace screens, put a rug over the ink spot etc.), put the house on the market for cheap.  Potentially offer a discount for renting it furnished rather than unfurnished.

3.  Hire someone to house sit.  Here we could either ask that they pay utilities and take care of the lawn or we could pay utilities and pay them to take care of the house and the two kittens.  If we pay them, then we could get the house fixed up while we’re gone rather than this year when we’re both living here and busy.  With infinite money we could even have the kitchen redone (except we don’t have infinite money).

So I don’t know.  We have quite a bit of extra money in savings right now earmarked for home improvement (we’ve only spent ~$3K so far), though some of that may end up going for rent next year depending on what we end up doing.  If we had a lot more money we’d pick option #3 no contest.  But while we could afford that option (without the kitchen remodel), it would potentially drain our non-retirement/non-529 savings (when combined with our living expenses for next year).  

What are your thoughts on the options?  What should we be considering to make the decision?

26 Responses to “November Mortgage Update: And hypotheticals”

  1. zenmoo Says:

    Ah yes, infinite money – that would be lovely. Anyway, when we went away for a year, we dithered about what to do. Our options were:

    1. Rent unfurnished on a year long lease and store or ship our stuff
    2. Rent furnished on a variable, probably shorter but higher value lease.

    We ended up deciding to ship most of our stuff and store the stuff I knew we wouldn’t need (e.g. Baby crib) or really would be sad to lose (wedding photos, antique kitchen table that belonged to my great-grandma) We had a bunch of furniture from our ‘just starting out’ days 10 years ago and set a lot of that free when we moved back. The whole moving process was quite cathartic even though I did end up doing a bit of stress-disposal of possessions. I could probably have kept my running shoes for example.

    We got very lucky in that when we rented, the market was really hot and we got more than we asked for ($625/week for a 3bed/2bath with a very small yard) even though we didn’t really fix any of our “issues’ (think scratched paint on exterior screen doors, a reluctant ignition on the stove, a loose shower head) We just wanted to come out even on the mortgage while we were away and more or less managed that. But we also gained some lovely friends in the people we rented our house too. In a random coincidence, they were from the town we were moving to and the wife’s mother knew one of my husband’s uncles and one of the husbands friends mother has meals on wheels delivered by my mother-in-law.

    I guess the gist of all that is that whatever happens, the odds are that it will probably work ok in the end.

  2. Leah Says:

    $800/month in utilities? Woosh.

    I don’t know anything about renting, so I can’t help there. With the ink stain, I’ll comment that my mom got out an india ink stain I spilled on my carpet. She put a towel down with a heavy weight on top, and she regularly changed out the towel and used some carpet cleaning fluid. Slowly, over time, she pulled the ink up and out of my carpet. At the end, there was only a very faint stain. We knew it was there, but no one noticed when buying the house.

    Good luck in your decision. You have otherwise quite solid savings, so I’d consider whether a year of, say, not paying into the 529s or something would make such a huge difference as to make you compromise on your sabbatical.

  3. Holly@ClubThrifty Says:

    I think it’s funny that the HOA worries about your lawn but not about properties being used as rentals!

    Maybe you could find someone who could do home repairs in exchange for reducing rental costs. I don’t know how you could find such a person, but it might be worth a shot.
    Or rent it out to some college kids as long as you don’t think it would be an issue. You wouldn’t need to fix it up because they probably wouldn’t care anyway.

    • nicoleandmaggie Says:

      It worries about properties being used as rentals too. We’re only allowed to rent to single families, not students. (Technically the rule is no two unrelated people may live in the house.)

      • becca Says:

        Technically, this rule would exclude my family ;-)
        After you finish world peace, you should get the HOA to fix that.

        Also, HOAs that worry about properties being used as rentals for a single year really need to chillax.

        Would you be planning on keeping trash/water/sewer utilities in your name? What about electric? Generally, I wouldn’t think you would do that to rent it out, but since it’s only for only a year it may not be worth the risk of hassle of getting things reestablished if they don’t pay or if there is a billing issue.
        If it were me, I’d do most of the repair work and try to get closer to market rate.
        I’d replace the screens, fix the walls in the bathroom, and paint before leaving (not worry about rusty toilet or more than covering up ink stain though).
        I’d also probably rent it with utilities included (thus the repair of the screens- no point in people using A/C when they’d be happier with a nice breeze because the screens suck). Would you be doing the deck yourselves or hiring out? If you are hiring out, I’d get that done between you and the renters, or once the renters were there.

        Under those circumstances, I’d advertise it at ~$1800/month, furnished or ~$2300/month, unfurnished… but with a slightly larger security deposit if furnished (to cover extra cleaning of stuff and/or possible damage). That gets you near market rate, but also covers costs except for principle on your mortgage (and since the utilities are only $800 part of the year, most months you would actually make some headway on the mortgage principle). It also puts you slightly under market rate for the furnished option, which allows you to be a little picky about who would be in there using your stuff, at least in theory.

        There’s a small chance it’ll need to be repainted *after* the renters leave, but since you are the kind of person who can put up with DC2s artwork, it’s not a certainty it’ll “need” to be done. And the whole “this place is fresh and clean” feeling you get from painting has a pretty big psychological impact.

        I’d also advertise the rate as one that was budgeted to include the lawn/weeding, but offer a discount to the renters if they wanted to take care of that themselves (subject to having it taken out of their security deposit if you get a nasty HOA letter and have to hire someone to do it).

      • nicoleandmaggie Says:

        I think it also discriminates against gay couples. I assume if pushed they would allow people who share a bank account or something to count as related, but maybe not. Most of the HOA in town allow two unrelated people to live together so they don’t have to do funny things about cohabiting.

        We would put utilities under their name. It isn’t a big deal to get them back in ours. I don’t think 2300/mo is likely in any universe unless we rent to students. 1800/mo furnished is also unlikely to get people banging at our door.

      • Leigh Says:

        Single families would discriminate against an unmarried couple, no? I’m glad my parents consider us as good as married – it makes family gatherings easier.

        My HOA rules state that I can’t rent out part of my unit, so technically my boyfriend is neither a tenant nor an owner. It’s a tad confusing.

  4. TheologyAndGeometry Says:

    I would only do the very minimum repairs if you decide you want to rent. I don’t think renters care very much about things like scuffs on the walls or spots on the carpet as long as the place is clean (we never did…), and you don’t want to spend a bunch of time and money to fix things up only to find them in need of repair again when you come back.

    • nicoleandmaggie Says:

      We’re in kind of a high end market though given the 3000 sq feet and all. Though we’d hit lower end if we were willing to charge only lower end rent (1200/mo instead of 2000/mo), I suppose.

      • oil_garlic Says:

        Hmm..As a renter, I’ve only moved into places that had new carpeting and repainted walls. Of course I live in a pretty competitive market (L.A.). I have to say that I do care about scuffs on walls and carpets! Unless it was a super nice neighborhood and super low rent, I wouldn’t even consider it (and I would probably repaint the walls myself).

  5. First Gen American Says:

    I’ve always been a big fan of budgeting some amount of time and money annually on home improvement. For example, we used to paint one side of the house every year, and usually one weekend to do it, so that it never looked terrible and it was a good system. However, I had my kids and we stopped doing that for several years and suddenly the whole exterior looked terrible and it was daunting about taking it on.

    If you’re renting, I’d probably do less on the interior, as renters are always hard on properties and if you spend a ton of money and then you have to redo it again when you move back in, it’ll feel like a waste…plus, occasionally you’ll get a good one who’ll actually want to paint the walls (like us when we rented), or a bad one that’ll paint the walls fluorescent yellow without your knowledge and not do a very good job and then you have to repaint it again anyway. Yes, I did have a tenant do that. The paint was everywhere, ceiling trim, drips on the new flooring.

    I guess I’d do a combo of 2 and 3. The place needs to look and feel clean enough so that you attract a good tenant, but I wouldn’t go all crazy and do everything. Exterior painting/deck staining is a maintenance item and should be done as it’s not just an aesthetic concern but can also shorten the life of your deck/siding, etc, so I guess I’d prioritize that above all else. People tend to want to personalize their bedroom spaces the most it seems, so those are the rooms I’d opt not to paint unless it’s really bad. Painting really will give you the most bang for your buck. It’s relatively cheap and you can even do some of it yourself if money is a concern. It’s also one of those things where I don’t think I really go that much slower than a professional, unlike some other tasks like finish work, etc where I’m significantly slower.

    Maybe you can Rent for 10 months ish, and then use the last 2 months to paint, replace flooring, etc, prior to YOU moving back in..and maybe even tackle the kitchen. It is so much easier to do that kind of stuff when the house is empty.

    • nicoleandmaggie Says:

      I think our house is all brick siding on the outside. We do need to stain/seal the deck.

      Magic eraser isn’t getting off DC2’s artwork, so we really do have to paint. Or power-wash or something.

      I don’t think we’d be able to find a tenant for 10 months, at least not at market. I don’t know.

  6. plantingourpennies Says:

    Kindof like your third option, but hopefully better: Are there any visiting faculty or new/adjunct faculty that you might be able to rent to either at cost or at a small loss each month? You get a “housesitter” that through professional connections is unlikely to trash the place and will also be on a similar calendar while not losing too much money on the place. And they get a below market rent and a neighborhood that is likely convenient to their employment. I’ve seen it done where furnishings are left in place for the most part, which removes another headache for you and makes it easier for a visiting faculty.

    • nicoleandmaggie Says:

      There’s a big market for visiting faculty, but some years it’s really easy to rent out a furnished place and some years it’s really hard– it all depends on the supply and demand of houses (who is leaving and who is coming in).

    • chacha1 Says:

      I was wondering the same thing but more specifically tying it to the housesitter/catsitter scenario.

      Meaning, if you are willing to actually pay a housesitter vs getting a renter, why not get a “renter” who pays rent by taking care of the house and yard and cats. It seems like the potential rental income is not a huge motivation, but that house care and cat care are important factors. A trustworthy professional couple who would stay in the house for “free” but actually do the housekeeping, yardwork, and pet care would probably be what I would look for. A new faculty family looking to thoroughly scope out the area before buying or renting might find such a situation enticing.

      • nicoleandmaggie Says:

        But where does one find a trustworthy professional couple? (Or more likely, a nice Mormon student family with the wife at home and the husband working.) New faculty have a lot better options than taking care of an incontinent cat.

      • chacha1 Says:

        But is she truly clinically incontinent, or is she conveniently incontinent? You mentioned a couple of specific scenaria where she’s peeing in the house. If those scenaria didn’t exist would the behavior persist?

        re: finding a professional and/or trustworthy couple, frankly I dunno except perhaps via your university’s HR department, or whoever is in charge of helping incoming faculty find housing.

      • nicoleandmaggie Says:

        As best the vet can figure out she just prefers to pee on cloth. That means if we leave say, blankets or pillows on the bed. Or clothes on the floor. Or grocery bags on the floor. Or DC1’s backpack. Or occasionally and just randomly, a hardcover library book on the ottoman. Or Dh’s sleeping clothes on anything.

        Before we got the super special sawdust litter she would also pee on any flat surface like the bed or floor, and if we don’t clean the litter every night she still does that.

        Feliway hasn’t worked. Special food hasn’t worked. I can’t remember what else we’ve tried.

  7. Lara Says:

    I am a faculty member on sabbatical for a year at half-pay, so have just been through these calculations. We also moved from a town with lower cost of living to a city with much higher cost, so finding renters for our house was fairly non-negotiable. I’d have preferred to rent the house furnished–possibly to new faculty or responsible grad. students (no HOA restrictions for us)–and find a furnished place in sabbatical-city. This proved unworkable, though, for two reasons: 1) renters in the market for a 3-bed house (in our town) are generally families w/ kids and all the stuff that entails. They want/ expect unfurnished. 2) In sabbatical-city it was nearly impossible to find a furnished place that would take pets, even 1 cat, which is what we have.

    We did eventually find renters for our place, who happen to be friends and colleagues at my university. We came to an agreement to rent the house partially furnished, which allowed them space to move in fully, and allowed us to avoid getting a rental for our excess stuff. We rented at U-Haul and moved into an unfurnished place in sabbatical city. The move was obviously a huge hassle, though the benefit is that we are very comfortable in our temporary home because it is furnished exactly to our liking. The rent we receive pretty much covers our mortgage and is in line with market rates, but maybe a bit below.

    We have been in our house for 10 years and had some deferred maintenance issues that seem similar to what you describe in your post. Some projects seemed pretty much non-negotiable, so we did necessary improvements before we moved. I also felt more social pressure for the house to be in good condition once it became clear that tenants would be friends who are part of our larger social and professional circle.

    Good luck with your arrangements. I was extremely anxious about these arrangements at certain points last year, but in the end it worked out. I found that I had to be flexible. For us learning the realities of the rental market in sabbatical city really influenced our choices for renting our own home.

    • nicoleandmaggie Says:

      Yeah, I’m worried about these things. I don’t know if it will work out or not! And I’m not looking forward to the thought of leaving the house in showable condition from March to whenever we move out (or find tenants).

  8. J Liedl Says:

    Never went anywhere on a sabbatical. My father, who was a prof, never took a sabbatical. I’ve taken three now but we’ve never been able to relocate due to the scary complexities of managing multiple pets and Autistic Youngest. Hereabouts, there’s a healthy underground network of faculty rentals shopped around among the university, two colleges and professional community. Asking someone who’s recently moved into town how they found their place might tie you into a service or a Facebook group that helped them!

    Good luck with all of that!

  9. Shannon Says:

    We rented our house at a reduced rate to an incoming faculty member who had three cats which made it difficult for her to find a rental. Part of the deal was taking care of our two cats, which meant 5 cats for the year. However, we worked out a way to sequester our two cats in one part of the house and hers in the other. Since our house was bigger than she needed, we stored much of our furniture in one of the bedrooms. Didn’t have to pay for storage that way. We took a bit of a hit on the rental, but the house and cats were taken care of which was a big relief for us.

  10. Renting out our house is a PITA | Grumpy Rumblings (of the formerly untenured) Says:

    […] We’re in a seller’s market right now, so the realtor says he could sell our house in a month, which is probably true.  But then when we came back in a year we’d have to *buy* a house and I seriously doubt it will be a buyers market at that point.   So yes, we could take this opportunity to downsize and to move into a better elementary district, but all the time spent buying and selling and buying (or renting and buying) sounds like a nightmare to me.  So we’re just going to try to rent out the house. […]

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